As department stores and specialty shops struggle, malls must offer more diverse nonretail uses to reinvent themselves, writes Managing Director Deborah Weinswig
NEW YORK (September 6, 2017) – With department stores struggling, specialty store closing and retail bankruptcies on the rise, the traditional regional mall format must be reconceived, reconfigured and diversified to appeal to consumers, who continue to support physical retail, reports “Deep Dive: The Mall is Not Dead, Part 2 – The Mall Is In Need of Transformation.” The report is the second in a series focusing on the state of the U.S. mall, published today by the global think tank FGRT (Fung Global Retail & Technology).
The good news is that consumers are still shopping: retail sales were up 4.5 percent year over year in April and more than 90 percent of purchases are still made in physical stores, writes FGRT Managing Director Deborah Weinswig. But the conventional mall no longer reflects the way consumers live and shop, as they now shop multiple channels and look to social media influencers, mobile devices and computers to help in their purchase decision-making.
“Today, we go to the mall for more than just shopping; we go for dining, entertainment, fitness, health, information, classes, services and more. As consumer habits shift, our expectations about the mall’s purpose are changing,” Weinswig writes. “We expect retail to continue to be a big part of the shopping mall, but experiences and technology will grow to play a more prominent, if not leading, role at some mall properties.”
In Part 1 of the series, Weinswig reported that at least 30 percent of the malls in the U.S. should be closed. E-commerce remains a powerful competitive force, and consumers now want products with greater differentiation than is typically found in traditional shopping centers. Consolidation in the department store sector has resulted in less specialization in merchandise mixes, and consumers have turned to fast-fashion retailers and off-price stores such as TJX Cos., whose total sales now exceed those of omnipresent mall anchor Macy’s. Combined revenues for the seven top department stores (Macy’s, Sears, Kohl’s, JCPenney, Nordstrom, Dillard’s and Neiman Marcus) fell by more than $5.8 billion from 2015 to 2016. But the number of stores in the fast-fashion sector rose from 1,762 in 2000 to 12,270 in 2017, according to FGRT calculations, while the number of off-price stores grew from 1,902 to 6,308 over the same period. The number of luxury/accessible luxury brand stores grew from 649 in 2000 to 3,507 in 2017.
“Without a point of view, the department stores are getting lost in today’s world of specialization, customization, personalization, fast fashion and off-price,” Weinswig writes.
Certain specialty store categories, including women’s apparel and teen fashion are saturated, and now are beginning to decline. And even the currently booming athleisure trend may be on the downswing.
“We believe this category will begin to experience a slowdown. As we have seen with many other previously popular categories, the athletic space is becoming oversaturated with undifferentiated product offerings,” Weinswig writes. “Therefore, we predict that consumers will continue to seek niche brands that offer specialized products.”
As a result, the mall is in a state of transition, moving from a focus on apparel to one based more on experiences. Nonretail and nonrestaurant tenants occupy approximately 13.3 percent of regional mall space today, up from 10.5 percent in 2012. In super-regional malls (800,000 square feet and more), that percentage rose from 10.5 percent to 10.8 percent over the same period.
“Despite the doomsayers, we believe that the mall format is still relevant and that it can continue to thrive,” Weinswig notes. “What has worked in the past, though, will not work in the future.”
The full report can be found here. Part 1 of the series, released November 7, 2016, discusses the evolution of the shopping center into the enclosed mall from the 1950s forward. Part 3 of the series, which will focus on the future of the mall format, will be issued this fall.
Recent reports issued by FGRT include: “Deep Dive: Chanel Shifts in US Beauty Retailing-Sephora, Ulta and Amazon Carving Greater Share”; “Deep Dive: The US Retail Revolution Solution” and the “Retail X Factor” series. FGRT’s reports and analyses can be found at www.FGRT.com and www.deborahweinswig.com. Subscribe here to receive Deborah Weinswig’s daily news and analysis on retail, fashion and technology.
FGRT (Fung Global Retail & Technology) is a think tank whose research team, based in New York, London and Hong Kong, follows emerging retail and tech trends, specializing in the ways retail and technology intersect, and in building collaborative communities.
The team, led by Deborah Weinswig, former top Wall Street and retail tech analyst and startup advisor, publishes ongoing thematic and global market research on topics such as the Internet of Things, digital payments, omnichannel retail, luxury and fashion trends, and disruptive technologies. More information can be found at www.FGRT.com.