Mall Owners Facing Up to Facts
By George Anderson
Drive past malls today and you’ll see sights that no one would have predicted even a few short years ago. Stores such as Best Buy, Home Depot and Target have become the anchors that drive consumer traffic to malls.
Traditional department stores, on the other hand, have focused on the high-end of the business to increase the average ring and profits even as overall sales slow.
Paco Underhill, president of Envirosell, told The Washington Times, “Most mall owners have woken up to the fact that the department store industry isn’t the traffic driver in 2006 that it was when many malls opened.”
“The higher end the shopping mall is, the higher end the department store is, the less the department store is depended on for traffic,” he said.
According to Mr. Underhill, the economics for department stores has changed. He cited Neiman Marcus as an example. One of its stores could get by on as few as 10 shoppers who spent $50,000 on a shopping trip. While this expenditure would seem ludicrous at the typical supermarket or other lower ring businesses, it is not out of the realm of possibility for Neiman Marcus.
Interestingly, while many department store chains such as J.C. Penney and Sears are looking at stand-alone locations to help them increase consumer traffic and bottom line performance, others are looking at malls as a means to increase their reach.
The reason chains such as Bed, Bath and Beyond and Linens & Things have done well in mall settings, according to Cynthia Cohen, president of Strategic Mindshare, “is that the demand for some of these category killers is still unfulfilled in many neighborhoods.”
Conversely, said Mr. Cohen, “You would not say that the demand for department stores is unfulfilled.”
Moderator’s Comment: What factors do you believe are driving traditional mall stores to stand-alone locations while retailers that have focused on stand-alone
sites are now moving into malls? Of the two trends, which side (stand-alone to mall or mall to stand-alone) do you see benefiting most from the switch? –
George Anderson – Moderator