By Robert Carbery
With the meteoric rise of online retail in the age of Amazon, consumers have continued to opt more for shopping on the Internet in their pajamas as opposed to running out and getting their shopping done in person. The malls hit their heyday in the 1990s and the U.S. has definitely overbuilt the amount of retail needed per person.
The American mall is now fighting for its life.
A typical large mall in the mid-1990s entailed 142 stores spanning about 1.2 million square feet, according to a Wall Street Journal analysis on 458 malls across the states. Many retailers have diminished dramatically in size while some have vanished entirely.
The average number of stores per mall have changed dramatically over recent years as the Retail Apocalypse continues apace.
Borders has shuttered its doors, filing for Chapter 11 bankruptcy protection in 2011 and liquidating 226 of its over 500 stores in the U.S. Borders proceeded with closing its remaining 399 retail stores with the last of them closing in September 2011. Barnes & Noble ended up acquiring Borders’ trademarks and customer list.
Anchor stores’ closing over recent years have accelerated the American mall’s steep decline. Thousands of anchor stores have closed and disappeared. From Macy’s to J.C. Penney to Sears, large department stores are closing down in major metropolitans nationwide. Other anchor stores such as Montgomery Ward & Co., Gottschalks, Goody’s Family Clothing, and Caldor have also struggled and filed for bankruptcy or no longer exist.
Eating places within malls have suffered as well during the precipitous rise in online retail. Sbarro Pizza closed 155 of its 400 restaurants in North America in order to cut costs, citing the steep drop in mall traffic for its financial troubles. Mrs. Fields Cookies has closed many of its locations in malls. Ruby Tuesday has shut down over 137 of its restaurants as it grapples with increasing competition.
In electronics, the brick and mortar store has not handled the jump in online shopping well. RadioShack filed for bankruptcy protection a couple years ago and shut down more than 2,000 stores in 2015. The Texas-based company again filed for bankruptcy protection this year after teaming up with Sprint and has stated it will be closing about 200 more of its remaining 1,300 stores.
Many malls are considering redevelopment opportunities as occupied retail space continues to disappear from the nation’s malls. While many malls are dying, others are changing the way they can continue to exist. The malls built out up until 2000 or so consisted of about half apparel companies. Today, this number is falling closer to 30%, according to a few mall owners.
Still, with all of this negative news surrounding American shopping malls, France-based Unibail-Rodamco purchased Westfield Corp., the country’s largest owner of luxury shopping malls, for $15.7 billion.
This is indeed a massive bet on U.S. retail, at a time when Amazon has upended the American shopping scene. The pain seems to be much less severe in Europe, mostly due to the slower rise of online shopping in some countries across the Atlantic. Online retail sales accounted for almost 14% of sales in 2016 in the U.S. while Europe only hit 8%, per the Center for Retail Research. But this still varies widely from country to country from as high as 16.8% in the U.K. versus only 3% in Italy.
However, since Europe has not gone overboard in building retail space in its commercial areas as the U.S. has, they have been left with much less of a surplus of retail space. American brands have been far too dependent in recent decades on selling its products to multi-floor department stores such as Macy’s and Sears, two retailers shuttering its stores and slashing its staff.
Unibail’s malls enjoy 95% occupancy rates and revenue of $786 million, up 4.1% year-over-year. Retail tenants in Unibail’s centers have also reported sales of more than 2.7% this year through May. Unibail has always tried to stay ahead of the constant shifts and trends in retail. It hosted the first Apple store in Europe at one of its malls in Paris almost a decade ago. More recently, it also leased a space to Tesla in malls in both Sweden and France.
Will American retail enjoy some kind of renaissance in the years to come? Or will it continue to die a long slow death? Whatever happens, it is in need of an ultimate upheaval, which is what we are witnessing at this current moment.
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By Robert Carbery