Are Traditional Malls a Way of the Past?

AreTraditionalMalls a Wayof the Past?

Bartholomew Harte | bartholomewharte.net

As an increased number of consumers in the

American economy slowly stray away from

shopping at traditional malls, this trend poses a

direct threat to department stores such as

Macys or Bloomingdales, while also causing

stores such as Gap or J. Crew to reinvent their

business model.

While Americans are dining out more and

purchasing more automobiles, these spending

habits are in no means where these funds are

making headway. Within the last year, a huge

portion of where Americans are starting to

allocate funds to internet giants such as

Amazon and eBay.

During the last year alone, increased spending

at online merchants such as Amazon

increased to around 11 percent. At the same

time, retail stores such as Macys, Kohls, and

Nordstrom reported stark drop-offs in revenue.

Since shoppers are now more inclined to find

the best sales or bargains online, its no

surprise that this is reducing profit for retail

stores in traditional malls.

As a response to this, retailers have responded by

closing down stores that fail to increase company

revenue. Sparking unemployment for millions of

people, this has continued to leave more

shopping malls, plazas and stores

empty. According to various U.S. government

studies, in 2000, for every dollar spent in physical

stores, just 30 cents were spent on internet related

purchases. At this point within the eCommerce

market, online category makes up nearly 70 cents

for every dollar spent at general merchandise

stores.

According to recent studies delving deeper

into consumers psyche during the shopping

process, impulse buys make up 45 percent of

store purchases, which is around twenty

percent more than online purchases. To

illustrate, only 23 percent online purchases

are categorized as impulse buys. In response

to retail and other department stores

dwindling revenue, some stores have come

up with other plans to increase profitability.

J.C. Penneys chief executive, Marvin

Ellison, had recently told investors and

the rest of the industry the company

would switch its business focus to selling

items other than clothing. In order to

bring back older parts of JC Penneys

business, the retailer intends to expand

services like beauty salons and sell major

appliances to boost revenue.

The chief executive also makes note of the

fact customers are no longer spending

heavily on clothing goods, and if they are,

these shoppers tend to visit discount stores

such as Amazon or TJ Maxx. We look at

what customers are spending, Ellison said.

Its entertainment, its experiences, its home

beautification.

These salient factors which have shoppers

placing more emphasis on spending for the

experience, is not a necessarily a new trend,

but has been accelerating in the past few

years. Although unclear, it will be interesting

to see how traditional department and retail

stores will continue to incentivize their

products in a space that is no longer the

norm.