We knew this day was coming. I mean, didn’t we? OK, while the growing rise in e-commerce has long put the fate of big box and mall retail at risk, the timing and overall impact has been (somewhat) in question. No longer. Brokerage firm Credit Suisse said in April it expects possibly more than 8,600 retail store closures to occur in 2017. From big players such as Macy’s and JC Penney announcing store closures, to mall stalwarts such as Bebe and more recently, Gymboree, announcing a complete brick-and-mortar shutdown, projections are quickly becoming a reality. How did we get here?
The convenience of online shopping, and the rise of fast/free shipping.
We’ll start with the obvious. Online shopping is simply too easy, and thanks to Amazon, more and more product categories are quickly becoming commoditized. While this is good for consumers, it’s driving margins down for retailers, in addition to the overall reduction in sales that many are seeing. As more and more consumers have decided that tasks like shopping for groceries is too cumbersome, the trend is spending less time in physical retail locations, not more. And perhaps the most powerful nail in the brick and mortar coffin has been the expansion of programs like Amazon’s Prime, which helped usher in a new expectation that online delivery will be fast and possibly free, two of the remaining benefits that in-store shopping still maintained.
The rise of lifestyle malls, and the era of “consumer experience”.
But what about the “experience” of shopping? Online shopping can’t replicate the instant gratification of selecting merchandise in person, or shopping with friends, right? That is certainly true, particularly for segments of the population. It’s debatable what the long-term success of the so-called “lifestyle” malls that have popped up will be, typically found in urban centers or affluent suburbs. Are they truly a mall replacement, or simply a way to extend the life of a dying business model? Only time will tell. But what is obvious is that we’re in an era of consumer experience that has changed the expectations game. Shopping malls served as places to congregate a number of complementary retailers in one place; the internet negated that advantage years ago. While online shopping may always lack a tactile aspect to it, it has already changed the dynamic, and that’s even before new technologies like 3D printing and virtual reality have broken into the mainstream.
The mall isn’t cool anymore.
While overlooked as a reason for its demise, I often wonder whether the mall has also been a victim of a culture that no longer worships at its doorstep. Sure, there are still retailers doing quite well, particularly at the high end; one only has to walk past any Apple store to realize this. Commercialism is still very much alive and well. But for the legions of “average” retail brands, the mall just doesn’t have the same cachet. Years ago, stores like Best Buy and the now-defunct Circuit City were the “in” place to see new electronics. Not long before that, I can recall frequently stopping into stores like Suncoast to check out new movie and music releases. Now, Apple rules the electronics universe, and if you’re looking for movies or music, you can browse Netflix or iTunes at home from your couch.
Regardless of how we got here, it’s clear a retail transformation is well underway. Amazon and Whole Foods? Wal-Mart and Bonobos? Mergers that seemed incomprehensible just a few short years ago are the new normal. It’s going to be an interesting few years.