Korsgaard's Commentary

Shopping Malls are not Doomed – merely Changing

Whenever I pass through Northern Virginia, given the chance, I make a point to stop in at Tyson’s Corner before pressing on with my journey. To those who have never been there, stopping at a shopping mall may seem strange – those who have understand why. Tyson’s Corner is the largest Shopping Mall in the Virginia/Maryland/DC area, 2.5 million square feet in size not counting the nearby Tyson’s Galleria and Fairfax Square, and big enough to warrant placement on interstate signs throughout the DC and Northern Virginia.
tysons-corner-mallThe mall draws at least 55,000 people daily, making it a superb place to people watch, and has over 300 stores ranging from LL Bean and American Girl to Microsoft and the Tesla car, as well as restaurants ranging from a sushi bar on the bottom floor to two food courts and a string of upscale restaurants, as well as one of the biggest IMAX screens in the country.
la_Madeleine_in_Tysons_CornerNeedless to say, it is a fantastic place to kill some time – on this particular visit, I popped in some of the newer stores and enjoyed a marvelous brunch at the recently opened French Restaurant La Madeleine, where the croissants alone were so good it gave me an experience straight out of Ratatouille, let alone the rest of the food that left myself and the friends I’d gone with talking about it for hours, even after we’d left the mall. Ever since my first visit to the mall back on a date in 2011, there’s always been something new and exciting to see or do there, all but cementing Tyson’s Corner as a regular road stop for me.

Of course, while there we noticed Tyson’s Corner will get even better in the coming months – in addition to being the latest stop on the Washington Metro’s Silver Line as it inches towards Dulles Airport, a few new shopping centers, office parks, upscale apartments and hotels are being built-in the vicinity, all but ensuring that Tyson’s Corner will be on the map for years to come, and ensuring plenty of new things for me to see on future visits.La Madeleine Bakery Cafe on Urbanspoon

I bring this up for a reason you see. Last month, I wrote about the current decline and imminent death of one of the local malls here in Richmond, Virginia Center Commons. I pointed out the reasons for such, and that many malls in the coming years may come to share the same fate. This is an established fact for the future of the retail industry as a whole – unlike a score of articles floating around various papers, magazines, websites and news outlets currently, I did not claim that we are witnessing the death of the shopping mall. Nor would I, for reasons I will go over shortly.

It’s easy to see why some might think this – following World War II, thanks to the growth of Interstates, the suburbs and the post-war economic boom, there was a veritable explosion in the American retail industry, best manifested in the form of the shopping mall. Thousands of these would be built in the following decades, finally peaking in the early 2000s, with over 47,835 shopping centers in the USA, over 1,500 of which are classified as the now iconic shopping mall, whose food courts, anchor stores and milling crowds become the veritable face of the American retail industry.

Until the recession hit however, many people ignored one key fact that I mentioned in passing in the above paragraph – that the number of shopping malls and shopping centers, growing almost exponentially for decades, peaked in the early 2000s – even before the economic crash in 2007-08, new retail growth had slowed to a standstill, most notably by the somewhat stunning fact that only one indoor shopping mall was built-in the 2000s. The boom-times has ceased and stagnation set in – with the start of the still-ongoing recession in 2008, that stagnation had become a snowballing decline, one that has already claimed once familiar retail standbys like Borders, Circuit City, Tower Records, CompUSA and Blockbuster, and now has its sights on stumbling giants like JCPenney and Sears. Those iconic strip malls and shopping centers are now iconic for a different reason – for half-vacant store fronts and regularly appearing closures and for sale signs. Malls, once the symbol of American’s commercial strength, have now become the face of the nation’s economic malaise.
emptymallWith that in mind, it’s somewhat understandable that many onlookers are claiming the shopping mall may die off entirely. Indeed, it’s beyond debate that the worst is yet to come for the retail industry. Like Virginia Center Commons, hundreds of malls are anchored or filled by chain stores whose futures are themselves are uncertain – if Sears or JCPenneys tanks, let alone both, it’s no stretch to say literally hundreds of shopping malls anchored by one or both may find themselves on the rocks. Online shopping continues to grow and boom, and promises to put an ever larger squeeze on physical retail as consumers seek out the better deals and wider selections made possible by the Internet. Topped off by issues ranging from rising fuel and travel costs, people moving from the suburbs to the city once more, to wage stagnation and the rising cost of living, and the future of many malls is grim indeed.

dixiesquaremallPerhaps the biggest reason for the incoming decline of many malls, and the death of many others is that as a whole, the American retail industry has two growing realities to face in the coming years. The first is that for the last four decades, there has been an almost non-stop growth to retail in the United States, resulting in a market that even in the best of times was over-saturated – seas of strip malls with chain stores that have other locations literally just a few streets from each other seemed absurd prior to the recession, and now, centralizing to the more profitable locations and closing the less successful ones is a market reality. The second is that our mall centered retail industry is operating on an obsolete business model – not only is money for many people tighter now than ever, especially for people among the key retail consumer groups like young workers and middle class families, but technology is changing both the way people shop and the way people do business.

All of this promises rough years ahead for the retail industry, and especially shopping malls. The most optimistic estimates say that 10% of large shopping malls won’t even make it to the end of the decade, with most experts agreeing that’s overly optimistic, with the real number to be much higher. Already, there are over 200 malls larger than 250,000 square feet have a vacancy rate of 35% or higher, and both numbers promise to climb higher in the next few years. By 2020, it’s fact that many strip malls and shopping malls will be vacant and closed, many more industry staples will go the way of Borders and Circuit City, and the industry as a whole will continue to have to adapt to the new marketplace realities.

Yet once the dust settles, though reduced in number and faced with adapting to a number of new realties, the shopping mall will survive. Unlike many people who have looked at this trend, I don’t believe that the decline of malls and retail with result in their death, no more than the rise of the retail industry killed off the mom and pop store. Much like the mom and pop stores that represented American commercialism prior to the rise of the shopping mall, shopping malls will still exist even after people have trumpeted their death throes for decades. After all, we still have mom and pop stores today, even after the rise of the modern retail industry many people claimed killed them off. In fact one could argue the mom and pop stores today are doing better because of the fact they weathered a societal shift that claimed so many of their compatriots – the surviving mom and pop stores survived an economic baptism by fire, and most were made better for it, and more capable of surviving for years to come.

I imagine the future will see a similar fate befall the retail industry, and in some ways, it already is. To give an example, when Borders closed largely due to pressure from online book sales, the two remaining major bookstore chains, Barnes and Noble and Booksamillion began adapting to avoid the same fate. They condensed their stores to areas that could support and sustain them, began selling more than just books, established a toehold in both online sales and digital sales, and in the case of Booksamillion, has even dipped its toes in secondhand sales in the used book market. When one book retailer failed, the two surviving chains adapted themselves to better survive a more hostile market climate – the market changed, so they changed.

I imagine that for shopping malls, the coming years will see much of the same. Yes, there will be shopping centers and malls that close down, likely hundreds of them across the country. Eventually though, just like the meteoric growth of the last few decades, the rapid decline of the coming decade will itself stabilize. Once the dust settles however, the malls and shopping centers left will have a greater claim over a less saturated market.

As far as traditional shopping malls go, the best bets for survival are malls like Tysons Corner, malls that are themselves destinations, not just merely places to shop. Food courts will change from fast food to more unique fare, anchor stores will swap out department stores for more unique tenants, with ever-increasing variety and uniqueness among smaller stores. Whereas shopping malls once found their strength in similarity, in the future, uniqueness will be the biggest draw, and where many malls will find their best options for keeping people coming back and keeping the doors open.
futureofmallsIn fact, some of the more desperate malls may find their salvation in that uniqueness, maybe as far as ditching retail almost entirely – we could see some malls basically reinvent themselves along the lines of European city squares, shifting from shopping centers to community centers, playing host to concerts or community colleges or countless other combinations. As the bigger malls and online shopping become the main ways to shop, many other remaining malls may recenter themselves around the one aspect that’s always been a shopping mall’s biggest asset, the social one. What malls are still around in a decade or two may not be places to go shop, but to catch a concert with your friends or pick your kids up from daycare.

There at least lies the exciting part for me, and why I and many others eye the decline of shopping malls with growing interest. Yes, there is the decline and death of hundreds of malls around the country – but also the coming rebirth, rebranding and revitalization of hundreds of others, and watching those malls reinvent themselves, and all the shapes they come to take is as exciting as watching the struggling malls shutter their doors is disheartening.

The dire straits that many malls find themselves in comes from the fact we built so many big box retailers to sell dozens of things and centered on selling them that many people tend to forget that malls were just as much about the human element as they were the commercial one. As the big boxes shutter as people increasingly turn to machines and computer screens for their shopping needs, the malls that survive into the future will be the ones that best return to the basics – to bring people in, not just to sell them something, but for the sake of bringing them in at all.

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