The rise of online shopping and changing attitudes among millennials are some of the chief reasons that a third of American shopping malls may close in the near future, says a retail analyst.
On the heels of department store behemoth Macy’s reporting of a 7.4 percent plunge in revenue for the first quarter of 2016, financial consultant and retail analyst Jan Kniffen told CNBC that falling sales at anchor stores like Macy’s and JCPenney likely spell doom for a good portion of shopping malls.
If you look into the future, not that far,” he said on the business program Squawk Box, “we’ve got 1,100 enclosed malls in America. We probably need 700.”
Even among the malls that survive the coming years, Kniffen predicts that only about 250 will thrive while the rest struggle to keep their doors open.
Currently, the U.S. has an estimated 48 square feet of retail space per citizen — by far the most on the planet. By comparison, the U.K. — who comes in at number two — has roughly half the retail space per person.
The bottom line, according to Kniffen, is that America is “the most over-stored place in the world.”
Macy’s poor earnings report comes after a dismal holiday shopping season for the retailer — so bad, in fact, that the company cut 4,800 jobs almost immediately after Christmas.
But Macy’s — the nation’s largest department store chain — is far from alone in its profit woes.
Kmart, once one of America’s largest retailers, has seen its sales drop a devastating 67 percent since 2000. At that time, Kmart had nearly 2,200 stores nationwide. Now it has less than 1,000.
Gap, another staple of the American shopping mall, announced in late April that it would be shuttering 175 stores after sales dropped an additional 3 percent in March — marking the 23rd straight month without revenue growth.
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Sadly, the list goes on — across multiple sectors of the retail economy.
But with shopping malls specifically, the disappearance of anchor stores means bad news for all, even those stores that are turning a profit. This is because anchor stores like Macy’s bring in heavy foot traffic. And to get to the department stores, shoppers have to walk by, and possibly patronize, outlets they may not have otherwise.
One of the main culprits behind the steady decline of brick-and-mortar department stores is the Internet. More and more, people are going online to satisfy their shopping needs.
But there other major determining factors as well, such as the changing ideas among young people about owning “things.” A 2014 report sponsored by event management company, Eventbrite, outlined a growing trend with millennials — they value experiences over objects.
“For this group,” says the report, “happiness isn’t as focused on possessions or career status. Living a meaningful, happy life is about creating, sharing and capturing memories earned through experiences that span the spectrum of life’s opportunities.”
For these reasons, among others, many analysts are predicting that shopping malls — once an icon of a robust American economy — may soon be a thing of the past.
As BBC’s Jonathan Glancey observed:
The mall became a place to hang out as well as to shop, a central part of contemporary U.S. culture and a model for the rest of a world keen on emulating an American way of life.
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