E-commerce will make the shopping mall a retail wasteland

E-commerce will make the shopping mall a retail wasteland

Summary: There is a sickness in brick and mortar retail, and we need to understand what is causing it.

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Last year, in a previous Great Debate, I proposed that online sales within 10 years would devastate the balance of brick and mortar retail, citing the huge increase in online sales during the 2011 holiday season as a catalyst for continuing growth.

The holiday shopping season of 2012 proved to be even more of a watershed event than 2011. A report released by ComScore at the end of December last year said that holiday shoppers spent nearly $38.7 billion online between November 1 and December 21 of 2012, a 16 percent increase over the same time period one year ago. 

Not surprisingly, all of this is happening during a very fragile economy, because shoppers are much more easily able to find deals online than in brick and mortar, as well as take advantage of free shipping, thus eliminating the crowding and the hassle of dealing with large retail establishments.

And what is more of a hassle than going to a modern shopping mall, which are located in extremely dense urban and suburban areas of the country, where there are also increasingly stressed and overworked Americans who are overextended on hours trying to make ends meet and to care for their families?

Why should they take up their valuable time sitting in traffic to get to the malls and to shop, when they could simply be doing it from the comfort of their own homes, or during lunch breaks on their own smartphones and tablet devices?

An entire website has now been devoted to"Dead Malls", ones which started out losing major anchor department stores, and then primary retail spaces until even the secondary stores could not survive on their own. 

Recent figures indicate that retail space in over 200 shopping malls across the United States are suffering 35 percent vacancy rates or higher. Not surprisingly, the largest retailers in the country are also the ones with the largest amount of mall exposure as well, and are seeing their sales decline significantly as a result of this overall slowdown in mall shopping.

What's killing the malls? It's a combination of a weak economy, the increasing consumer preference for shopping online, and the high cost to retailers of having to rent retail space in a large shopping mall with ever declining foot traffic. 

This is a trend that I personally don't see reversing anytime soon.

My wife and I shop in-person for durable goods about 20 percent of the time. Much of the types of things that we purchase online include consumer electronics, small appliances, specialty clothing as well as large items such as home furnishings and cooking supplies (spices & seasonings as well as kitchen items).

There is the obvious food shopping as well as buying very personalized items such as clothing and shoes, which I feel still for the most part requires an initial in-store experience. 

I would also add any other business that requires hands-on consultation, such as a hardware store (Home Depot, Lowes) where finding a particular part or item needs the assistance of an employee. 

However, this is changing more and more, as once a particular style or brand of product is tried on, a higher of level of confidence in the brand will allow for successive purchases of the product online. 

For example, I may try on a certain style and brand of shirt on at a Big & Tall store in person, but if I want to buy more colors of that same item, we'll go through that company's online portal instead. The same could be said for shoes. 

I also see a future where confidence in online retail return policies are so strong and have such good customer service overall that in-store initial visits to have that warm and fuzzy feeling with a product purchase will not be necessary for the majority of durable good purchases. Certainly, Amazon has been able to build up their business this way.

In the battle of clicks versus bricks, retail must transform or die (2011) 

Retail in 2021: When clicks have buried bricks (2011)

Twenty years ago, the only way you could find certain types of stores were at malls. Malls had the necessary foot traffic for store specialization and it was the only way that most department stores could continue to thrive, when many of them moved away from a free-standing store model in the 1970s and became "anchors" in malls instead. 

Additionally, consolidation of the department store industry during that time period substantially reduced the real estate footprint of these companies. 

e-Commerce has hurt the shopping mall because you no longer need to go to a mall to get specialized goods.

The challenges of suburban sprawl, worsening automotive traffic, rising fuel prices and the increased difficulty of time management in modern families (many of which now need to be dual-income to make ends meet, let alone the single parent families that have to struggle with the same problems) have made going to the mall a planned activity which nobody has as much time for anymore. 

It is much easier from the comfort of your own desk or even from your smartphone or tablet to type out a search phrase and click "buy" than have to undergo a mall excursion. 

There are still people who go to the mall, however. In many cases, this is not so much as a shopping trip with a planned purchase objective but an entertainment activity, which could include going to a movie (another industry which is in extreme danger from online activity) and a meal and to "Window Shop" for goods that may end up being purchased online. 

Malls also have been traditionally popular areas for socialization and gathering for the younger generation, but the status of the mall as primary social outlet outside the school is changing given the downturn in the economy.

Small businesses are already taking advantage of this shift in buying behavior because they have the personalization and the specialization to compete with the larger companies in areas in which those larger firms are weaker or cannot stock specialized items that aren't volume sellers.

However, many of these smaller businesses are able to do this by having both a physical retail presence and also a strong online presence, and in many cases can situate themselves in less desirable and less expensive retail store space because of their area of specialization and can bolster their sales with online orders.

If we're talking about big box retailers like Macy's, Sears, Wal-Mart, Target and Best Buy, I think that there will always be a need in certain geographical areas depending on actual population density for physical retail presence. 

However, that being said, I am sure all of these large companies are strategically re-evaluating their real estate footprint and determining whether or not it makes sense to service an area with multiple stores or just simply one or two, and what sort of inventory makes sense to keep in a store versus sell in their online stores for home delivery or in-store pickup.

Some of these large companies may eliminate a large amount of retail brick and mortar infrastructure, much of it in malls. Certainly if you look at certain brands from a historical perspective like Sears Roebuck & Co, the company started out doing business and did so successfully for decades as primarily mail-order. 

It would not surprise me to see a company like Sears return to its roots within the next several years. I think the key is to have very good telephone and email support and have a quick response time, and for the customer to know that they can reach a human being to answer their questions or resolve their issues.

With all of these changes occuring in retail, the mall as it exists today will have to transform into something else completely in order to survive. 

The "stores" will have to become more like showrooms for their online presences and less oriented towards keeping inventory and obviously they will need to be price competitive with the purely online stores. 

There will need to be more specialization in the retail outlets and also more entertainment venues, and the parking and logistics of moving about the malls themselves needs to be dealt with better so that a mall visit doesn't immediately become a multi-hour time sink. 

Additionally, as more people start to work flexible hours instead of the traditional 9 to 5 eight hour day, staffing and hours of operation may need to be adjusted.

The same e-commerce technology that is destroying the mall could help keep it alive, however. Just as Amazon has its own app for searching for desired goods, the local shopping mall may need an app that can federate the data from all of the retail stores and present a list of goods that can be bought at the mall that fit the search criterion. 

But at the same time, if the prices of these goods are not competitive with what exists online, there will be be few takers. So malls will have to offer things that cannot be purchased online, such as exclusive items in the stores as well as magnet entertainment and dining venues.

Mobile technology is also having a huge impact on brick and mortar retail, and the front lines where much of this is happening is at the mall. Amazon recently reported that roughly eight percent of their total sales are being generated by mobile devices, and I expect this trend to continue upwards. 

You can also expect that shoppers will be increasingly using search and barcode scanning applications on their smartphones when they shop in brick and mortar and at the mall to do spot price checks on items and determine whether or not the product can be better purchased elsewhere. 

I myself am guilty of doing this every time I go to a brick and mortar store and are considering a purchase.

There is also the issue of e-commerce having clear advantages in their use of social networking technology and their use of customer loyalty programs over the mall and other forms of brick and mortar.

Malls as well as stores that have mall retail locations may be able to use the same outreach techniques that e-commerce based stores use to retain customer loyalty, but that will have to be combined with the same kind of loyalty and rewards programs as well, something that they may not be equipped to do as individual stores.

As alliances of stores within malls or perhaps as affiliated mall management companies, such outreach techniques might be possible, although this may be difficult to engineer.

So what kind of stores will survive the culling of the Mall?

Automobile dealerships, while requiring less locations than before due to heavy online presence of the car manufacturers, will still need showroom space. 

Dining and Food stores will still be needed even if retail shifts most of its activity to online purchases. Furniture and large appliance stores are probably also safe, as are home improvement stores such as Home Depot and Lowes. 

And as I mentioned before, any business that offers highly specialized products will continue to thrive provided that they maintain a balance between retail and e-commerce operations.

Still, there is a sickness in brick and mortar retail, and we need to understand what is causing it. The economy as a whole and scarcity of disposable income is a contributor, but the economy also has side effects, such as causing people to work more hours and seek additional avenues of income.

It is also breaking up families that now have to face single parenting scenarios which make a planned mall excursion during normal business hours as well as on the nights and weekends that much more difficult. Fuel prices are also making people think twice about getting in the car and going to the Mall.

All of these will increase retail vacancies and make e-commerce that much more attractive an alternative to traditional brick and mortar shopping.

Despite my largely telecommuter lifestyle, I still love to get out of the house. But my time has value, as it does to many people.

Shopping is a necessity, but it is not necessarily an enjoyable activity at all times. That we all have less time to spend on tasks outside our revenue generation responsibilities and spend whatever we have left with our families (and our diversions) has no doubt impacted the bottom line of the shopping mall.

Will the Shopping Mall become extinct as e-commerce becomes the more dominant form of retail? Talk Back and Let Me Know.

Topics: E-Commerce, Mobile OS, Smartphones, Tablets

About

Jason Perlow, Sr. Technology Editor at ZDNet, is a technologist with over two decades of experience integrating large heterogeneous multi-vendor computing environments in Fortune 500 companies. Jason is currently a Partner Technology Strategist with Microsoft Corp. His expressed views do not necessarily represent those of his employer.

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Talkback

72 comments
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  • Consider the source...

    People enjoy shopping...but not IT people. Let's be honest, IT people are pretty much morbidly obese and socially stunted. I mean, come on, there are a lot of girls at the mall! and IT guys don't do well in that setting.
    shoutout
    • I can't decide....

      whether your post is nasty or funny.

      Actually, it made me laugh, so it must be funny with a bit of a nasty streak.

      Well done.
      D.T.Long
      • Wow

        Love my job, since I've been bringing in $5600… I sit at home, music playing while I work in front of my new iMac that I got now that I'm making it online(Click on menu Home)
        ......http://goo.gl/REhvq

        Happy New Year!
        StephenPhillip
    • there are plenty women in IT

      software and harfware alike, and I do not see the obesity rates for IT to be different from other professions. Unless you live on a different planet from me.

      The whole post is prejust and unfair.

      Please keep your biases to yourself.
      ForeverSPb
    • RE: I hear

      They are fat because they eat whole pizzas and bags of potato chips at 3AM. But they see more beautiful women then the rest of the population. Just can't feel them because those women are all online
      edkollin
      • I am not morbidly obese,

        I am pleasingly plump! Although, I admit, I really need to meet a girl who's name doesn't end in .jpg.
        mlashinsky@...
    • Too left brained

      The poor IT people just don't get it.

      A) Since the majority of mall stores cater to woman, his whole piece falls on it's face. Not only do woman like to shop, they HAVE to shop as they need to try on a bunch of items to find the right items. Plus they need the whole interactive bonding with the store and merchandise. And they don't buy the same things over and over like IT bears.

      B) People are impulsive. It's never going to change that many people simply don't have the impulse control to wait 3 hellish days for what they want now!

      C) People are willing to pay more to support the store. Haven't you heard that Barnes and Noble is not out of business yet? Weren't they the most logical and 1st ones to go belly up?
      ScottTrader
      • Oh really?

        I'm a woman, not an IT professional, and I hate shopping and malls with the fire of a thousand suns. Haven't been to one of those places in years.

        I'd much rather check out multiple reviews and ratings (or just buy multiple duplicates of something I already own and like) online and have it delivered to my door than burn gas and time getting someplace, then trudge around a store looking at stuff that might or might not be worth my money. I rarely purchase anything on impulse. And I can think of exactly one brick-and-mortar store I'll pay a little bit extra to support; any others there may have been have disappointed me by discontinuing the items I used to buy there or jacking up the prices beyond what I'm willing to pay.

        And my fifteen-year-old-daughter hates shopping as much as I do, if not more--the possible exception being GameStop, which in our town is not located in a mall.

        How about not assuming you know all about women and how we prefer to shop?
        Ginevra
  • Malls are for females

    I am married to a woman. She likes going to a mall. Me? I could never go to a mall and be happy about it. If I join here, I take a book and sit on one of the benches the local mall has for husbands and boyfriends to sit on and wait for their womenfolk.

    Jason Perlow, you need a sex change to truly understand The Lure of the Mall (coming soon to a mall movie theater near you).
    robin@...
    • and I am married to a man

      and I do not like the malls. and your point is?
      ForeverSPb
    • Are you male though?

      You didn't specify.
      Beast Of Bodmin
      • stupid tablet

        the above was meant as a reply to robin@...
        Beast Of Bodmin
    • What lure?

      I AM a woman. Can't stand the places. I do love to spend hours browsing Amazon and NewEgg, though.
      Ginevra
  • 3 things

    state & local taxes + real estate + retail employee wages.
    The first can be fixed with laws but the latter can not.
    LlNUX Geek
    • retail wages

      Retail wage factor doesnt seem to be killing apple stores. Seems you need to reevaluate your assumptions.

      I would think what is more of a killer, is greedy localities that charge businesses taxes based on inventory sitting in a store doing nothing, rather than simply to be content with revenue from sales tax.
      For
      Phil Brown
    • And parking charges (in the UK)

      30 years ago parking in my local city centre was free with a commitment from the local authority that there would never be parking charges. I used to enjoy going to the mall but parking charges were introduced for the majority of available parking for Monday-Friday then the free spaces disappeared and Saturdays and Sundays became chargeable then the fees went up and I, for one, stopped going. By the way, I'm an IT male who enjoys shopping, although it does depend what for and whether I'm on my own and can shop the places I want at my own speed. I shall be sad to see the malls become office blocks; I see a few strategic malls remaining but they'll no longer be local for the bulk of the population.
      JohnOfStony
  • Sears can't do anything right

    They decided to dismantle their legacy catalog operations just in time for the rise of the internet, leaving them to start over.. JCPenney kept the catalog business, but their stores are dying. Seems like we need to go back to the old 70's concept of the 'Catalog Showroom" where you looked, touched, and decided...Then you went upfront, paid, and got your stuff from the warehouse door on the side. Only now you could be ordering and paying on your smartphone as you walk over to that door...
    NotMSUser
    • JCPenney

      It's no wonder their stores are dying, and if they're not careful their online business will go down the drain too. They've been yanking their old-school customers around with sales on merchandise they don't keep in stock, or backorder and then cancel, and abandoning them by discontinuing old standbys. From what I hear, they've failed miserably at attracting a younger crowd. And their shipping charges are outrageous. I used to buy from them faithfully, but now I've been driven to Amazon.
      Ginevra
      • That kind of activity has killed many stores in the past.

        Not just JCP. Even Sears isn't a fraction of the store it used to be. They've forgotten what it was that made them so popular in the first place.
        Vulpinemac
    • Maybe you remember the old Speigel

      That used to be my Christmas wish book; hundreds of pages of just about everything with at least a hundred pages of toys alone (I was a kid, after all). Take a look at the company now. Just like JCP, Miller's, Loveman's and so many others they're so focused on fashion that they ignore almost 2/3rds of their old market.

      Remember when JCP used to carry cameras? They dropped that department back in the '80s. How many other anchor stores have a camera department now? Instead, you find large selections of cheap cameras in Best Buy, Walmart*, Target, with maybe one or two high-end cameras. TVs? Won't find them at JCP; you might not find them at Sears either. Everything that made these stores big is gone--relying on fashion over function and dying as a result. Specialty stores are killing them BECAUSE they've lost their "Department Store" mindset.
      Vulpinemac