Traditional mall anchors fading away
PHILADELPHIA —The American middle class is disappearing, and with it, the mall anchor store.
The middle-of-the-road shopper, neither low-end nor high-end, who in recent years has become elusive for shopping malls, is the reason why Macy’s, Sears, and JCPenney are shutting stores.
The number of households living below the poverty level has doubled since 2008, according to the U.S. Department of Agriculture’s Food Stamp Program. With that, disposable income has decreased.
Off-price chain retailers like Ross Dress for Less, Marshalls and T.J. Maxx, and high-volume, low-price, trendy upstarts such as H&M and Forever 21 are growing.
Department stores that are the traditional mall anchors tend to have higher prices, and shoppers are looking for the best deals at the lowest prices.
The enclosed shopping mall, as we know it, also is at a crisis point, what with those challenges and increasing online competition.
“The structural pressures facing malls should show no signs of abating,” said retail analyst Simeon Siegel, of Nomura Securities International. That doesn’t mean all department-store anchors should close.
“Stores provide an experience that e-commerce cannot, so the challenge becomes figuring out the right balance,” Siegel said. “But generally speaking, I believe the growth of e-commerce is going to reduce profitability. For better or worse, it is the new norm.”
Brutal: That new norm has been nothing less than brutal on the former mall stars, whose glow continues to dim nationwide.
Sears has closed 152 mall stores since 2007. JCPenney closed 40 locations in 2015 alone.
Meanwhile, Macy’s plans to close up to 40 stores early this year.
“This is a continuation of a struggle,” said Keith Jelinek, senior managing director for the retail and consumer division at FTI Consulting. “And what we’re going to see in 2016 is a strong market for integration with mergers, especially in the regional markets.”
Fifteen years ago, Jelinek said, there were 20 department-store brands anchoring U.S. malls; now, there are eight. That’s the result of industry consolidation.
Howard Davidowitz, a retail consultant in New York, said the closing of mall anchors isn’t likely to end and that imperiled retail chains are trying to control their destinies.
“Department stores are currently working on expanding in new outlet-center formats, off-price divisions, and off-the-mall concepts and smaller urban store formats,” he said.
“People are shopping off the malls at Walmart, Dollar General, Target, T.J. Maxx, Ross, Burlington Coat,” he said. “Those are the guys doing the business.”