Lifestyle Malls May Replace Traditional Format

I  grew up a baby boomer in the Midwest. 

My hometown of approximately 35,000 people had a vibrant Main Street, which housed regional retailers like Marshall Fields and many family-owned specialty stores. Fifty-six years ago an outdoor mall sprang up off the interstate, followed 16 years later by an enclosed mall anchored by Montgomery Ward, J.W. Knapp (replaced by J.C. Penny) and Elder-Beerman. Like many other Midwest towns, the central business district in mine subsequently cratered. For the next few decades, the enclosed mall became a de facto community center: a place to shop, eat, hang out (perhaps you’ve heard the term “mallrats”), avoid the winter cold and get a bit of exercise walking around. But that was then and this is now. Like traditional full-price malls across the country, it continues to struggle.

According to the International Council of Shopping Centers, there are 115,429 shopping centers in the U.S. The ICSC classifies centers into 10 types with the bulk (96%) being strip/convenience or neighborhood centers. The enclosed mall in my hometown would be considered a regional mall. There are 597 of those and 625 super-regional malls. Having recently visited a number of these traditional malls, I am struck by the same sad story. Many are becoming ghost towns with low occupancy, light traffic, skeletal staffs and declining sales. They are so cookie-cutter (the same architecture, brands and dated feel) that I almost can’t tell where I am. Experts forecast that as many as 50% of these malls will fail in the next 20 years. Their fortunes are very much tied to their anchor department stores, which have become uneconomical. Once the anchors leave, you have a so-called “dead mall.”

Many factors have contributed to the decline of the traditional mall. Notable among these was the recession that swelled the ranks of value shoppers and drove them toward big box-dominated power centers (2,240 in number) and toward outlet malls (365 in number). Under financial pressure, department store retailers developed discount concepts (e.g., Nordstrom Rack, Saks OFF 5th, etc.) and located those new stores elsewhere. The simultaneous growth of online channels (about 8% of total retail sales) has taken another chunk of the traditional mall’s business. Some malls were also hammered by the declining fortunes of their trade areas and many have simply failed to jive with the tastes of the millennial generation.

Lawrence A. Crosby

Lawrence A. Crosby is the retired dean of the Drucker School of Management. He is the chief data scientist at the KH Moon Center for a Functioning Society, a part of the Drucker Institute at Claremont Graduate University.