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Moving to the Mall: How the Death of Department Stores Could Benefit Small Retailers

Shopping Center Anchor Trends

Once a staple of suburban life, America’s malls are going through a sea change. A recent rash of department store closures, including many Macy’s, J.C. Penney and Sears locations, is making news. However, although more than 300 department stores are slated to close this year, this is just the latest wave in a trend that’s been going on for years. What does the decline of department stores and the transformation of malls mean for small, independent retailers?

The mall isn’t disappearing — but it is undergoing a major makeover. The national Retail Federation’s Stores magazine predicts that while “B-grade malls” will struggle and C- and D-grade malls will disappear, large malls that are well positioned will thrive. They will, however, look substantially different.

Shopping Center Anchor Trends

Instead of the traditional department-store-anchor model, malls are replacing department stores with specialized retailers, entertainment venues, service businesses and restaurants. “Mixed-use” is the catchphrase of mall operators today, and tomorrow’s malls are likely to be even more diverse, with everything from condominiums to medical buildings and commercial office space incorporated into the mix.

What’s taking over the empty department store spaces?

Destination restaurants: Forget about food courts with greasy corndogs and stale soft pretzels. Today’s most successful malls are adding restaurants ranging from casual to upscale that attract groups of customers who often stay and shop.

Supermarkets: Big-box discounters like Costco and Sam’s Club have been moving into malls for a while now, and regular grocery stores are starting to follow suit. The move appeals to consumers’ desire for convenience — why not buy shoes, groceries and a TV set in one trip?

Entertainment venues: Movie theaters, bowling alleys, arcades and other entertainment businesses catering to everyone from families to upscale singles are rapidly making malls destination points.

Specialized chains: Shoppers no longer want a one-size-fits-all department store; instead, they are gravitating toward larger but still specialized chains, such as Dick’s Sporting Goods or PetSmart.

Is your retail store located in a mall — or are you hoping to take advantage of a local mall’s makeover to get a space? When deciding whether to go, stay or move, the most important factor for a small retailer is whether a mall attracts enough of your target customers. Here are some other points to consider.

  • Is an anchor department store in your mall or your area planning to close? If so, consider whether you can capture some of their former customers. Assess the retailer’s customer base and how closely it matches yours, as well as where the next-nearest location of that retailer is. Customers whose favorite store closes won’t necessarily switch loyalties. One study found that after a Kmart closed, many of its regular shoppers were so loyal, they willingly drove twice as far to a Kmart in another town.
  • What kind of mix does the mall have? Malls with department store anchors are no longer your best bet. Instead, look for malls with a thriving mix of different businesses. For example, shopping centers that include condominiums or office buildings often incorporate smaller “boutique” stores, similar to traditional Main Street retailers, to cater to residents and workers.
  • How well are mall tenants doing? More than ever, small retailers in malls will need to watch the fortunes of their larger neighbors. If a formally reliable anchor store in your mall is starting to struggle, be prepared to make some changes yourself.

[“Source-smallbiztrends”]

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Loknath Das

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