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Venture capitalist Benedict Evans recently published a post on his blog called, Ten Year Futures. If you haven’t already noticed, I really enjoy this sort of curiosity and line of thinking. Here is an excerpt where he talks about retail being at a tipping point:
“First, ecommerce, having grown more or less in a straight line for the past twenty years, is starting to reach the point that broad classes of retailer have real trouble. It’s useful to compare physical retail with newspapers, which face many of the same problems: a fixed cost base with falling revenues, the near-disappearance of a physical distribution advantage, and above all, unbundling and disaggregation. Everything bad that the internet did to media is probably going to happen to retailers. The tipping point might now be approaching, particularly in the US, where the situation is worsened by the fact that there is far more retail square footage per capita than in any other developed market. And when the store closes and you turn to shopping online (or are simply forced to, if enough physical retail goes away), you don’t buy all the same things, any more than you read all the same things when you took your media consumption online. When we went from a corner store to a department store, and then from a department store to big box retail, we didn’t all buy exactly the same things but in different places - we bought different things. If you go from buying soap powder in Wal-Mart based on brand and eye-level placement to telling Alexa ‘I need more soap’, some of your buying will look different.”
I’ve said this many times before, but the way the above excerpt ends is yet another remind that one has to look deeper beyond the obvious change(s). Yes, ecommerce is growing and impacting physical retail. But what other changes might ensue because of this shift?
A lot of shopping malls are dying. You’ve probably heard this before. But how bad is it and what exactly is happening?
Well, a new report by CoStar (heard through the New York Times) found that nearly 20% of the 1,200 malls in the US are presently in trouble. “Trouble” is defined as a mall with a vacancy rate of 10% or more.
But what’s perhaps most disconcerting about this number is that, as recently as 2006, only about 5% of the malls in America would have been pegged as being “in trouble.” Here’s a chart from the New York Times (I’d love to see this same graph with a longer time horizon):
But not all malls are dying. The general sentiment seems to be that the high-end A malls are and will continue to thrive, and that it’s only the B and C malls that are dying:
Tom Simmons, who oversees the mid-Atlantic shopping center division of Kimco, another real estate giant, is more blunt. “There are B and C malls in tertiary markets that are dinosaurs and will likely die,” he said, but “A malls are doing well.” (NY Times)
So why is this happening? Some think it’s because the US is over-retailed. And some think it’s because of rising income inequality – which would explain why the high-end malls continue to thrive. But the experts seem to agree that it’s not the result of more people shopping online:
One factor many shoppers blame for the decline of malls — online shopping — is having only a small effect, experts say. Less than 10 percent of retail sales take place online, and those sales tend to hit big-box stores harder, rather than the fashion chains and other specialty retailers in enclosed malls. (NY Times)
I wrote a post 2 months ago where where I argued that big box stores will be the most impacted by online shopping (which is why so many of them now sell groceries). But I don’t believe that they are the only retailers that will be affected. Quite the opposite: Every retailer is or eventually will be impacted by the internet.
This threat is real.
Millennials have no hesitations about buying things online and, in many cases, they would prefer to do so. It has already been well documented that we (I’m a Millennial) don’t like driving as much as previous generations. So what makes you think we’d enjoy the process of driving to a mall?
But the other factor at play, I think, is that malls are no longer the “public space” of young people. Their position as a kind of cultural institution is waning. At the same time, more and more people are craving uniqueness. They like independent shops, not malls that all look and feel the same. And as these young people become old people, we might find that even the A malls start becoming impacted.
I don’t believe, for a second, that retail nodes within cities will ever disappear. But I think our attention would be better spent figuring out what the mall of the 21st century will be, as opposed to hiring PR firms to try and spin doctor our way out of this dead mall phenomenon.
Image: Flickr
Venture capitalist Benedict Evans recently published a post on his blog called, Ten Year Futures. If you haven’t already noticed, I really enjoy this sort of curiosity and line of thinking. Here is an excerpt where he talks about retail being at a tipping point:
“First, ecommerce, having grown more or less in a straight line for the past twenty years, is starting to reach the point that broad classes of retailer have real trouble. It’s useful to compare physical retail with newspapers, which face many of the same problems: a fixed cost base with falling revenues, the near-disappearance of a physical distribution advantage, and above all, unbundling and disaggregation. Everything bad that the internet did to media is probably going to happen to retailers. The tipping point might now be approaching, particularly in the US, where the situation is worsened by the fact that there is far more retail square footage per capita than in any other developed market. And when the store closes and you turn to shopping online (or are simply forced to, if enough physical retail goes away), you don’t buy all the same things, any more than you read all the same things when you took your media consumption online. When we went from a corner store to a department store, and then from a department store to big box retail, we didn’t all buy exactly the same things but in different places - we bought different things. If you go from buying soap powder in Wal-Mart based on brand and eye-level placement to telling Alexa ‘I need more soap’, some of your buying will look different.”
I’ve said this many times before, but the way the above excerpt ends is yet another remind that one has to look deeper beyond the obvious change(s). Yes, ecommerce is growing and impacting physical retail. But what other changes might ensue because of this shift?
A lot of shopping malls are dying. You’ve probably heard this before. But how bad is it and what exactly is happening?
Well, a new report by CoStar (heard through the New York Times) found that nearly 20% of the 1,200 malls in the US are presently in trouble. “Trouble” is defined as a mall with a vacancy rate of 10% or more.
But what’s perhaps most disconcerting about this number is that, as recently as 2006, only about 5% of the malls in America would have been pegged as being “in trouble.” Here’s a chart from the New York Times (I’d love to see this same graph with a longer time horizon):
But not all malls are dying. The general sentiment seems to be that the high-end A malls are and will continue to thrive, and that it’s only the B and C malls that are dying:
Tom Simmons, who oversees the mid-Atlantic shopping center division of Kimco, another real estate giant, is more blunt. “There are B and C malls in tertiary markets that are dinosaurs and will likely die,” he said, but “A malls are doing well.” (NY Times)
So why is this happening? Some think it’s because the US is over-retailed. And some think it’s because of rising income inequality – which would explain why the high-end malls continue to thrive. But the experts seem to agree that it’s not the result of more people shopping online:
One factor many shoppers blame for the decline of malls — online shopping — is having only a small effect, experts say. Less than 10 percent of retail sales take place online, and those sales tend to hit big-box stores harder, rather than the fashion chains and other specialty retailers in enclosed malls. (NY Times)
I wrote a post 2 months ago where where I argued that big box stores will be the most impacted by online shopping (which is why so many of them now sell groceries). But I don’t believe that they are the only retailers that will be affected. Quite the opposite: Every retailer is or eventually will be impacted by the internet.
This threat is real.
Millennials have no hesitations about buying things online and, in many cases, they would prefer to do so. It has already been well documented that we (I’m a Millennial) don’t like driving as much as previous generations. So what makes you think we’d enjoy the process of driving to a mall?
But the other factor at play, I think, is that malls are no longer the “public space” of young people. Their position as a kind of cultural institution is waning. At the same time, more and more people are craving uniqueness. They like independent shops, not malls that all look and feel the same. And as these young people become old people, we might find that even the A malls start becoming impacted.
I don’t believe, for a second, that retail nodes within cities will ever disappear. But I think our attention would be better spent figuring out what the mall of the 21st century will be, as opposed to hiring PR firms to try and spin doctor our way out of this dead mall phenomenon.
Image: Flickr
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