Shopping Malls Try Gimmicks to Fend Off Their Inevitable Death At Hands of Online Commerce

The Indianapolis Business Journal has an interesting article on how shopping malls are trying desperately to survive as online commerce increasingly takes over:

Malls are fighting for shoppers with one thing their web rivals can’t offer: parking lots.

With customer traffic sagging, U.S. retail landlords like Indianapolis-based Simon Property Group Inc. are using their sprawling concrete lots to host events such as carnivals, concerts and food-truck festivals. They’re aiming to lure visitors with experiences that can’t be replicated online—and then get them inside the properties to spend some money.

“Events draw people to come to the shopping center,” said Craig Herkimer, whose company, KevaWorks Inc., is working with big landlords including GGP Inc. and Simon to produce outdoor events. “They generate revenue for the owner and offer a chance for cross-promotion, so they can try and drive more customers into the stores.”

Mall owners across the country are grappling with store closings and declining rents. Retail property values are down 3 percent in past six months, as all other types of commercial real estate showed gains, according to the Moody’s/Real Capital Analytics indexes. A Bloomberg gauge of publicly traded mall landlords has tumbled 15 percent in the past year through Thursday, the worst performance among U.S. real estate investment trusts.

Amazon.com Inc. and other internet retailers continue to grow, while department stores including Sears Holdings Corp. and Macy’s Inc. have been closing hundreds of locations. Payless Inc., the discount shoe seller, is among the latest to announce a massive shuttering—of 400 stores—as part of a bankruptcy plan.

The article notes that the United States is home to approximately 1,100 malls.  The structure that is the mall, as well as the large parking lots surrounding the building, consume a considerable amount of real estate.  When those malls fail, they become extremely difficult to repurpose.  They often end up being a blight on the neighborhood for years.

Photo of Simon Shopping Mall

It would appear that in searching for gimmicks to drive foot traffic to the retail stores, mall owners are fighting a losing battle.   With the exception of certain consumer items, consumers prefer the convenience of shopping from the convenience of their homes.  That is a niche that Amazon has cornered, although even that company faces growing competition when it comes to online retail.

But as one looks to the future of retail, one wonders if even the Amazon model might be outdated.  The Amazon approach right now is for wholesalers and manufacturers to ship goods to the company which it then stores in incredibly large "fulfillment centers."  Then when a customer orders the item from the Amazon website, it gets shipped once again, this time to the customer.  Amazon became popular because it enhanced customer convenience by eliminating the need to visit a brick and mortar store to shop.  But the Amazon retail approach, which requires considerable overhead, doesn't provide much in the way of cost savings to the consumer.  Eventually Amazon may be replaced with a web-based shopping approach that links customers with wholesalers and manufacturers so that items may be purchased directly, saving consumers a substantial amount of money while cutting out brick-and-mortar online retailers such as Amazon.