Your Local Mall Is Dying, and Back-to-School Shopping Won't Save It
PORTLAND, Ore. ( MainStreet) Call it Back To School, B2S or some other little moniker indicating an end-of-summer retail holiday: It's just another reason not to go to the mall.
Once a necessary end-of-summer stop packed with clothes, food courts, arcades and expendable income, the giant indoor mall just keeps limping toward its demise. ShopperTrak, whose entire purpose is to gauge retail foot traffic, says the number of folks who passed through indoor malls last year dropped 15% from the year before and has been falling steadily.
The National Retail Federation has tried to be somewhat optimistic. The retail industry group notes that the $26.5 billion consumers are expected to spend on back to back-to-school items for kindergarteners through high school seniors is down from last year, but that spending per student is up to $669 from $634. Altogether, school and college shoppers are expected to spend roughly $75 billion before the school year starts.
At the National Retail Federation convention in New York in January, Rick Caruso chief executive of real estate company Caruso Affiliated basically told retailers that consumers aren't going to be shy about taking their money anywhere other than a staid, dying indoor mall.
"Within 10 to 15 years, the typical U.S. mall, unless it is completely reinvented, will be a historical anachronism a 60-year aberration that no longer meets the public's needs, the retailers' needs or the community's needs," he told his convention audience.
As analysis firm Green Street Advisor said two years ago, 10% of the roughly 1,000 large malls in the U.S. will fail by 2022. A report from Co-Star found that there are more than 200 malls with more than 250,000 square feet that have vacancy rates of 35% or higher, a "clear marker for shopping center distress." Even Simon Property Group , a giant mall developer, just spun off a whole bunch of underperforming malls into another company called Washington Prime Group . Those properties include relics including the Lima Mall in Lima, Ohio (built in 1965), and Chataqua Mall in Lakewood, N.Y. (built in 1971).
Blame the Internet if you'd like, but that's ignoring the bigger problem. According to the NRF, Internet sales reached 6% of total retail spending in the fourth quarter of 2013. That's nearly doubling their share from 2006, but still small in the scheme of things. More than 33% of back-to-school shoppers and 45% of college shoppers plan to do some portion of their shopping online, but that's still smaller than the percentage heading to clothing stores (54%), discount stores (64%) and department stores (59%).
Tim Worstall at Forbes noted last year that online sales should diminish physical store space by roughly the same percentage as they grow. Daniel Hurwitz, president and chief of mall operator DDR, put it even more bluntly: "I don't think we're overbuilt, I think we're under-demolished."