Regional shopping malls, the stars of retail real estate in the eighties, have long been losing share since the arrival of supercenters and power centers. And with the economic downturn, regionals are only expected to lose more ground.
According to a survey conducted by TNS Retail Forward, about 30 percent of primarily household shoppers now visit a regional mall on a monthly basis, down a whopping 4 percentage points from just three years ago. The leading traffic driver by a wide margin is the power center, with 60 percent of shoppers visiting monthly. That's followed by strip malls with supermarket anchors, at 49 percent; and online shopping sites, 42 percent.
Of the retail formats, only power centers, strip malls with supermarkets and e-commerce captured a larger share of monthly shoppers in 2008. With tough economic times and rising food prices, consumers are gravitating more to retailers such as Walmart and Target at power centers for value, according to TNS Retail Forward. At the same time, with gas prices also surging, convenience has become more important to consumers. And with Walmart and Target adding food to their mix, power centers are only increasing their one-stop appeal.
By comparison, regional malls are not only lacking one-stop shopping, but are selling too many discretionary items.
"With the economy, consumers are focusing a lot of their spending on needs rather than wants," Mary Brett Whitfield, SVP of soft goods at TNS Retail Forward, told RetailWire. "And a lot of what's at the mall, particularly a lot of apparel, is more in the wants category. So that's what's exacerbating the trend that we've seen in the last year or so."
On the positive side, regional malls are still attracting many younger consumers. Fifty-one percent of respondents between the ages of 18 to 24 said they visit a regional mall monthly, and 39 percent between the ages of 25 to 34.
But what's also affecting traffic is the consolidation and considerable loss of market share in apparel at department stores - the traditional anchors driving traffic to the mall.
Some regionals have redeveloped their formats by partnering with an upscale or more unique retailer than found at the traditional mall. Some hybrids combine elements of enclosed malls with open-air shopping popularized by lifestyle centers. In a few cases, a Walmart or Target has replaced a defunct department store as an anchor. But a glut of retail space across the shopping mall market is expected to limit real estate opportunities for stores reliant on the regional mall.
"Any retailer dependant on mall locations for a significant part of their growth needs to be thinking about how they're going to grow going forward because there are very few, if any, regional malls in the pipeline," said Ms. Brett Whitfield.
Discussion Question: Do you see regional malls continuing to struggle with weak traffic? How should they redevelop themselves to improve traffic? What's a smart strategy for the many apparel and other specialty stores reliant on regional malls?