The Retail Apocalypse - demise of big retailers and shopping malls

[Stevicus]

https://theweek.com/feature/briefing/1003385/the-retail-apocalypse

Big retailers and malls were already struggling when the pandemic hit. Now they're shuttering stores at alarming rates. Here's everything you need to know:

Why is retail in such trouble?

A decade ago, consumers began turning in larger numbers to Amazon and other online retailers. The steep, nationwide drop in sales for brick-and-mortar stores has been accelerating in recent years, but the pandemic put their decline into overdrive. Major retailers closed 12,000 stores in 2020, after an already devastating 2019, when more than 9,300 stores closed. Another 80,000 stores — 9 percent of the nation's total — will close in this "retail apocalypse" over the next five years as e-commerce sales grow, predicts a report from financial services company UBS. More than 60 major retailers filed for bankruptcy last year, including Brooks Brothers, J. Crew, Guitar Center, and Pier 1; other recent bankruptcies include Sears, Lucky Brand, Forever 21, and Circuit City. In 2019, Payless shut down all of its 2,100 stores, and a year earlier Toys R Us closed all of its 735 stores. Bed Bath & Beyond is in the midst of eliminating 200 stores, and Victoria's Secret has shuttered dozens. Department stores have been particularly hard-hit.


What's happened to department stores?

The entire sector has been devastated as consumers have lost the habit of shopping and browsing in person. It's "just a format that does not work anymore," said Chris Kuiper, an analyst at CFRA Research. "People don't want to wade through a four-story megastore to find a couple of items." Roughly 40 percent of the nation's department stores have closed since 2016, including every Lord & Taylor store and nearly all Sears and Kmart stores. Neiman Marcus and J.C. Penney have filed for bankruptcy; Macy's has shuttered dozens of stores and will close 125 more by 2023. No end to the carnage is in sight: Roughly half of all remaining mall-based department stores will close by the end of 2021, predicts the real estate research firm Green Street Advisors. That will have a devastating impact on the nation's malls.

They were already in a state of decline when the pandemic hit.

Shopping malls are trying to survive but struggling.

How are malls doing?

A growing number of malls are either dead or on life support. Hundreds have closed over the past decade, and Coresight Research estimated last year that a quarter of the roughly 1,000 remaining will close in the next three to five years. "The whole business model has just unraveled," said Neil Saunders of the consultancy GlobalData Retail. Without department stores as anchors, foot traffic has plummeted. "The department store genre has been taking the great American shopping mall down with it," said Mark Cohen, director of retail studies at Columbia Business School. Mall developers have tried to revive their fortunes by bringing in "experiential retailers," including gyms, movie theaters, and restaurants — but those businesses hit a brick wall during the pandemic. In addition to lost jobs, dead malls have an outsize impact on communities where they've gone from a tax-generating "social space" to "an eyesore," said Vicki Howard, author of From Main Street to Mall. "It's quite a big economic and social and cultural phenomenon." And online shopping and the pandemic are not the only causes.

One factor was that there was a retail surplus in the U.S., so a decline was inevitable anyway.

What are the other factors?

Even before the pandemic, the U.S. had 40 percent more shopping space per capita than Canada and 10 times more than Germany. Industry analysts widely agreed that this retail surplus was unsustainable. Department stores have been hurt by the shrinking of the middle class that made up their client base, while discounters who cater to lower-income consumers, such as TJ Maxx and Dollar General, have actually seen growth. The demise of many retailers — including Nieman Marcus, J.Crew, and Toys R Us — has been hastened by their acquisition by private-equity firms such as Bain Capital and KKR that suck up their revenues and saddle them with debilitating debt. A 2019 report by the nonprofit United for Respect tallied nearly 600,000 retail jobs lost over 10 years at companies owned by private-equity firms.

Do stores and malls have any chance of surviving?

The consumer trends behind the shift aren't going to turn around, so stores and malls are trying to adapt. Many retailers are increasing their focus on online sales and looking for new ways to bring in customers. Kohl's is opening Sephora beauty shops in 200 locations this fall. Bloomingdale's and Macy's are moving toward smaller stores; this month a "Bloomies" store opens in Fairfax, Virginia, that will offer a "highly curated, ever-evolving" selection, personal shoppers, and a Cuban-themed restaurant. Malls are diversifying as well, incorporating grocery stores and office and residential space and increasingly leaning on "experiential" offerings such as ice rinks and climbing walls. The massive $5 billion American Dream mall, touted as the future of retail when it opened in New Jersey in 2019, boasts an indoor ski slope, a water park, and a roller coaster. But three of its intended retail anchors — Barneys New York, Lord & Taylor, and Century 21 — went out of business during the pandemic. Kurt Hagen, an executive with mall owner Triple Five, said "it would have been much better if American Dream had burned down or a hurricane had hit it."

Converting malls into Amazon hubs

The shopping mall's demise has led to a dilemma in communities across the nation: what to do with millions of square feet of abandoned retail space. Some former retail outlets have become medical offices, community colleges, COVID vaccination centers, senior residences, and even public schools. In Burlington, Vermont, a high school temporarily shifted students to a former Macy's, where teens take elevators to classes. "It's weird but cool at the same time," said Moses Doe, a freshman. A former Sears in an Idaho Falls mall is becoming a charter school; director Michelle Ball notes that the mall's remaining businesses "could get more traffic because of it." And in an ironic twist, a growing number of stores are being repurposed by the very e-commerce giant that helped doom them. Amazon turned some 25 shopping malls into distribution warehouses between 2016 and 2109, according to a Coresight Research analysis. Over the past eight months, Amazon has begun setting up distribution centers in former malls in Baton Rouge, Knoxville, and Worcester, Massachusetts.

I have to admit I hardly ever go into shopping malls. It was a big deal when I was a kid; kind of like the mall in Fast Times At Ridgemont High.

But I guess malls are dying. They're going the way of drive-in theaters and 8-track tape players.

 

[Viker]

https://theweek.com/feature/briefing/1003385/the-retail-apocalypse



They were already in a state of decline when the pandemic hit.

Shopping malls are trying to survive but struggling.



One factor was that there was a retail surplus in the U.S., so a decline was inevitable anyway.





I have to admit I hardly ever go into shopping malls. It was a big deal when I was a kid; kind of like the mall in Fast Times At Ridgemont High.

But I guess malls are dying. They're going the way of drive-in theaters and 8-track tape players.

If you had told me at 14 that shopping malls, drive-ins and cassette players would go extinct in the future I would have said, "No way, dude....bogus!".

 

[JustGeorge]

https://theweek.com/feature/briefing/1003385/the-retail-apocalypse



They were already in a state of decline when the pandemic hit.

Shopping malls are trying to survive but struggling.



One factor was that there was a retail surplus in the U.S., so a decline was inevitable anyway.





I have to admit I hardly ever go into shopping malls. It was a big deal when I was a kid; kind of like the mall in Fast Times At Ridgemont High.

But I guess malls are dying. They're going the way of drive-in theaters and 8-track tape players.

Living in an area that gets unreasonably cold in the winter, I don't understand why strip malls have become more popular... who wants to go outside 10 times when its -5 F?

 

[Shadow Wolf]

Living in an area that gets unreasonably cold in the winter, I don't understand why strip malls have become more popular... who wants to go outside 10 times when its -5 F?

Definitely. It's ok and dandy and fine here. The MidWest? That's just a pain and torture.
And, I'm apparently weird because I like browsing in store.

 

[JustGeorge]

Definitely. It's ok and dandy and fine here. The MidWest? That's just a pain and torture.
And, I'm apparently weird because I like browsing in store.

I'd love to browse in a store, if I could ever find a store that sold stuff I was interested in...

 

[Brickjectivity]

But I guess malls are dying. They're going the way of drive-in theaters and 8-track tape players.

I saw a shopping mall die in the 1990's. As renters left, they didn't replace them. It became a ghost mall, very spooky place, and that pleasant mall music echoed eerily, highlighting the tapping of my lonely heels in the dead, dead mall. I've been expecting many of them to die, both because there are too many and because of the rent pressure. Stores pay a lot per square foot, which means prices are always higher in malls. It eliminates a lot of potential business.

Survival of the fittest. Their price schedule was always going to be a risk, and they assumed the economy would always be good. It hasn't been.

 

[JustGeorge]

I saw a shopping mall die in the 1990's. As renters left, they didn't replace them. It became a ghost mall, very spooky place, and that pleasant mall music echoed eerily, highlighting the tapping of my lonely heels in the dead, dead mall. I've been expecting many of them to die, both because there are too many and because of the rent pressure. Stores pay a lot per square foot, which means prices are always higher in malls. It eliminates a lot of potential business.

Survival of the fittest. Their price schedule was always going to be a risk, and they assumed the economy would always be good. It hasn't been.

I often wonder why companies come in, buy the old malls up while they're still doing reasonably well, raise rent phenomenally, let the shops leave and continue to operate with one or two stores. How does that make them money?

 

[Shadow Wolf]

I'd love to browse in a store, if I could ever find a store that sold stuff I was interested in...

I like to just look sometimes.

 

[Shadow Wolf]

I saw a shopping mall die in the 1990's. As renters left, they didn't replace them. It became a ghost mall, very spooky place, and that pleasant mall music echoed eerily, highlighting the tapping of my lonely heels in the dead, dead mall.

Reminds me of a mall in Indiana I grew up near. It was vibrant, pretty marble floors, water fountains, sky lights and plants, but it emptied out basically became a pretty ghost mall stripped down to the bones, with eventually only a few stores left.

 

[Revoltingest]

Living in an area that gets unreasonably cold in the winter, I don't understand why strip malls have become more popular... who wants to go outside 10 times when its -5 F?

Strip malls have big advantages over malls.
- Cheaper to build & operate, so rents are less per square foot.
- Parking is right there.
- Smaller stores are more survivable than "big box" stores.

 

[InChrist]

Living in an area that gets unreasonably cold in the winter, I don't understand why strip malls have become more popular... who wants to go outside 10 times when its -5 F?

Malls do make sense in areas with cold weather and snow.

 

[SigurdReginson]

I feel like malls are kind of like cathedrals built in honor of some kind of American idea of wealth and power that never aged gracefully and now only stands as a stark reminder of greed gone rampant.

I'm glad they are dying, but it is a weird thing to see unfold. I actually watch some videos on YouTube of people breaking into these old malls that have been long since abandoned, and it's fascinating to look at the architecture and planning that went into these places and how they decayed and became delapidated over time.

There's a town nearby with a dead mall that I used to go to often as a kid. The only things in it now are craft stores, pawn shops, lock smiths, and churches. It's days are numbered, for sure, and have been for decades.

 

[Jeremiah Ames]

https://theweek.com/feature/briefing/1003385/the-retail-apocalypse



They were already in a state of decline when the pandemic hit.

Shopping malls are trying to survive but struggling.



One factor was that there was a retail surplus in the U.S., so a decline was inevitable anyway.





I have to admit I hardly ever go into shopping malls. It was a big deal when I was a kid; kind of like the mall in Fast Times At Ridgemont High.

But I guess malls are dying. They're going the way of drive-in theaters and 8-track tape players.

Hate to say it, but time to buy more Amazon.

 

[Twilight Hue]

I often wonder why companies come in, buy the old malls up while they're still doing reasonably well, raise rent phenomenally, let the shops leave and continue to operate with one or two stores. How does that make them money?

I think thats when the secret government entities take over and move in the aliens.

 

[We Never Know]

https://theweek.com/feature/briefing/1003385/the-retail-apocalypse



They were already in a state of decline when the pandemic hit.

Shopping malls are trying to survive but struggling.



One factor was that there was a retail surplus in the U.S., so a decline was inevitable anyway.





I have to admit I hardly ever go into shopping malls. It was a big deal when I was a kid; kind of like the mall in Fast Times At Ridgemont High.

But I guess malls are dying. They're going the way of drive-in theaters and 8-track tape players.

That's true. A good number of business's where already experiencing trouble.
In a sense covid was a blessing for them to get government money to carry them or pocket as they closed their doors.

 

[Stevicus]

Living in an area that gets unreasonably cold in the winter, I don't understand why strip malls have become more popular... who wants to go outside 10 times when its -5 F?

I remember when I was a kid, even before shopping malls, we were living in upstate NY. We went Christmas shopping on this major street which had a lot of stores up and down the block. There were decorations everywhere and loudspeakers playing Christmas carols, even though it was cold and snowy outside. Still, it had kind of a festive atmosphere. It just wasn't the same when we moved to Tucson.

 

[We Never Know]

I remember when I was a kid, even before shopping malls, we were living in upstate NY. We went Christmas shopping on this major street which had a lot of stores up and down the block. There were decorations everywhere and loudspeakers playing Christmas carols, even though it was cold and snowy outside. Still, it had kind of a festive atmosphere. It just wasn't the same when we moved to Tucson.

Even small towns used to do that(some still do) but many places don't do it much any more because of political correctness.
Merry Christmas has turned into Happy Holidays. Some christmas scene's are seen as offensive. Etc.
Things sure have changed since I was a youngster.

 

[Shaul]

I often wonder why companies come in, buy the old malls up while they're still doing reasonably well, raise rent phenomenally, let the shops leave and continue to operate with one or two stores. How does that make them money?

Tax write offs and crony deals from local politicians. Duh.

 

[Revoltingest]

Tax write offs and crony deals from local politicians. Duh.

There's no such thing in commercial real estate as
tax "write offs" for lost rent. It's simply income never
received.
Analogy time....
If you quit your job to have no income, that would
be just as much a "tax write off". But it's the fast
track to financial ruin.

Kramer explains....

 

[JustGeorge]

Malls do make sense in areas with cold weather and snow.

They certainly do. Its the ones that have all the stores lined up, but no doors in between that confuse me.

Maybe that would be the easy answer; just put a door in between all the stores.

Tax write offs and crony deals from local politicians. Duh.

Duh, of course. Why didn't I think of that...