Between 20% and 25% of the nation’s shopping malls will close in the next five years, according to a new report from Credit Suisse that predicts e-commerce will continue to pull shoppers away from bricks-and-mortar retailers.
I have remarked before that when I was young, a shopping mall’s revenue came from its stores, but today, the revenue seems to be in the food court.
The brick-and-mortar grocery industry is still expanding (at least in our area), and restaurants seem to be doing well. I wonder at what point Amazon fill find a way to go after those businesses.
On a recent flight, I sat next to a sales executive for a major meat supplier. We struck up a conversation and he was describing how he asks his supermarket customers the one thing they’re more worried about.
Answer: Amazon.
I live across the street from a mini mall with big grocery and drug store. I already skip the drug store (a CVS), because I can have pretty much anything they sell shipped to me next day for less from Amazon. Sometimes a lot less! An electric shaver, for example, cost me 30% less on Amazon.
A once popular mall in Austin, which had many upscale stores, went downhill and eventually closed as Austin’s population shifted westward, away from it. But two new, upscale malls arose in the areas of population growth, and both seem to be doing well. This may, however, be an artifact of Austin’s rapid population growth.
I expect the trend toward online shopping eventually to kill the newer malls. And as they decline, their regress will mimic that of the older mall: They will become more attractive to the “hangout” crowd, which will drive away upscale shoppers and upscale stores. The downward spiral will continue until they die.
We, who are in our 70s, are devoted to online shopping. We only go outside our home to buy groceries that my wife prefers to inspect before buying (e.g., meat and produce), services that we cannot or prefer not to perform for ourselves (e.g., haircuts, auto maintenance, medical care), and the occasional sundry that must be purchased in a store. The generations coming along behind us will be even more devoted to online shopping, and the array of things that can be done online will grow (e.g., online doctor appointments and diagnostic tools will become commonplace.)
There’s a related facet of the story. Shopping malls were successful for a long time because, in part, they were a shinier, climate-controlled version of the “downtown” shopping experience that older Americans remember fondly. But that America and those Americans are dying out. So, too, will the attachment to “real” shopping, as opposed the the “virtual” kind.
Austin has “The Domain”, which is arguably an evolution of the older mall formula. Wikipedia accurately labels it a “high-density business, retail, and residential center”. It feels like a high end outdoor mall with integrated residential space and office space.
It was developed and operated by the largest mall operator in the nation, the Simon Property Group.
OK, I am going to take a bit of a contra position here. I ordered some stuff on Amazon. 2 orders, maybe 10 items, total cost of $85. Much of it was very discounted. 1 item was from 3rd party seller, other 9 or so items from Amazon. Came in 7 different deliveries. How much did shipping and handling cost for each delivery? My guess is around $7. So shipping and handling costs were around $49 for an $85 purchase. Item from 3rd party was most expensive at say $20 (and least discounted) so I can see how they made money. But Amazon got $65 from me and likely paid about $42 in shipping and handling.
My point is not that Amazon does not make money selling stuff, everyone know that. My point is they cannot make money with their business model selling stuff.
At some point, maybe in I would think the market figures this out and forces Amazon to focus on where they make money (cloud computing) and get out of other things, or price it where it is profitable (which will greatly reduce volume).
I’ve noted this before. One Sunday I’m sitting here and the post office vehicle drives down the drive and the carrier hands me a small box. It was one small single-serving bag of Chex Mix from a larger order I had placed, which came in pieces over about 5 days.
Prime-eligible items are usually not the lowest priced. Amazon seems to be offsetting some of the shipping costs by increasing prices on those items. There’s even a silly class-action lawsuit about it:
https://www.law360.com/articles/561185/amazon-seeks-to-end-suit-over-hidden-amazon-prime-costs
There was a period when Amazon was losing a lot of money, but that hasn’t been the case for a long time now. And Amazon certainly doesn’t know it can’t make money selling stuff — they’re pushing hard to add same-day and one-day delivery in more and more places.
Coincidentally, this morning I received an email from Amazon re: my Prime membership benefits (copied verbatim, with some blank lines removed).
Note:
“Amazon Restaurants: Delivery from popular local restaurants in one hour or less. No menu markups. Available in select cities.”
**********************************************************************
Dear Prime member,
You are receiving this email because your membership has been updated in the past year, and we want to ensure you are aware of these important changes.
Here’s what’s new with Prime shopping, delivery and digital benefits:
SHOPPING
Alexa Voice Deals: Shop with Alexa and receive an additional discount on select deals.
Prime Rewards Visa Signature Card: Eligible Prime members earn 5% Back at Amazon.com, 2% Back at restaurants, gas stations and drugstores, and 1% Back on all other purchases.
Virtual Dash Buttons: Shortcuts to quickly find and reorder products on Amazon’s mobile app and website. Available for tens of millions of items that ship with Prime.
Wickedly Prime: A new line of distinctive food and beverages, available exclusively to Amazon Prime members.
DELIVERY
Same-Day Delivery: Now available in over 1,000 cities and towns nationwide, including Austin, Minneapolis and San Antonio.
One-Day Shipping: Now available in more than 3,500 cities and towns nationwide, including Bakersfield, Corpus Christi, Jacksonville, Las Vegas, Madison and Oklahoma City.
No-Rush Shipping Rewards: Earn rewards when you choose FREE No-Rush Shipping for future purchases from Prime Now, Prime Pantry, Subscribe & Save and more.
Prime Now: FREE 2-hour delivery now available in Orlando, Virginia Beach, Richmond and Washington DC, plus 25 other cities nationwide.
Amazon Restaurants: Delivery from popular local restaurants in one hour or less. No menu markups. Available in select cities.
DIGITAL
Prime Music: Over one million more songs and thousands of new playlists and stations have been added to your unlimited music streaming access.
Amazon Music Unlimited: $2/month discount for Prime members on an Amazon Music Unlimited subscription, with access to tens of millions of songs.
Audible Channels: Unlimited listening to comedy, news and original audio series through Audible.
Prime Reading: Unlimited reading of over a thousand books, current issue magazines, comics and Kindle Singles on any device – including your phone, tablet or Kindle.
For more information about these new Prime benefits, go here.
Did you find this Prime benefits update helpful? Let us know.
Take advantage of all your Prime benefits. Subscribe to the Prime newsletter to keep up-to-date on what’s new.
Amazon is the Sears or Montgomery Ward of the internet. The big suburban department stores looked pretty unbeatable when malls were young. Eventually consumers will migrate to specialty sites which will manage to beat Amazon in some way – selection, presentation, distribution (Wayfair), retail stores, etc. It’s very hard to beat hundreds of determined, focused competitors if Amazon is competing against all of them at once.
” the revenue seems to be in the food court.”
That would seem to be more related to the trait across time for people in urban areas.
This is from a description of the horse and buggy culture of 1900 in ‘The Big Change’, (F.A. Lewis, 1952):
“On summer evenings, along the tree-lined streets of innumerable American towns, families sitting on their front porches would watch the fine carriages of the town as they drove pst for a proud evening’s jaunt and the cognoscenti would wait eagerly for the glimpse of the banker’s trotting pair or the sporting lawyer’s 2:40 pacer. ”
This migrate to the local neighborhood business district (theatre, etc) romanticized these days. The shopping mall, along with cars for teenagers (cruising), overtook that “culture”.
So now, the shopping seems to be separating from the social, except for the immediate consumption. It will be interesting to see how the social will develop as, on line is nice, but eventually humans want to meet in person. We have seen “restaurant rows” revitalize some old urban streets in some cities. Many older malls seem to be migrating to the restaurant row model, although this does not bring in traffic during the day.
I bought some WPG thinking that at some point the tide will turn. Alternative uses – condos, restaurants, transit centers, city-within-a-city. So far…meh.
Amzn has opened 7 (?) brick and mortar stores and has plans for 400 more.
Things change. I have no idea what retail will look like in 10 years.
Food is pretty bulky and heavy.
Bulky, heavy, and most importantly, low margin.
“It might be this way, or it might be that way.”
Those low margins make it hard to compete with people’s willingness to do their own delivery. OTOH, if Amazon can take all the higher margin items, grocers will find themselves squeezes even tighter.
I was for a time a heavy user of amazon fresh – their grocery delivery system.
I use it less and less over time.
Why?
Because while the prices may start out quite good, they often evolved to be quite bad.
AND almost all of those things can be had at grocery stores very near my route from home to workshop or elsewhere. That is, stopping off at the grocery store on a trip I had to take anyway is nearly free. (And never leaving my house turns out to be bad for my mental health.)
On this topic – in my area, the traditional grocery stores have upped their games so much there’s no point going to whole foods or the like, the mainline grocery stores have adequate pharmacies, adequate premade food, etc. Amazon fresh produce and the like I tried were awful – so I have only ever used it for consistent packaged goods.
For every other *consumer* item – the web, often amazon. Even to the point of most clothing.
I wonder if there will come a time when anything you need *today* because you didn’t think to order it at least one day in advance will require visiting a “crises store” with poor selection and very high prices?
“I wonder if there will come a time when anything you need *today* because you didn’t think to order it at least one day in advance will require visiting a “crises store” with poor selection and very high prices?”
No. In several US cities Amazon Prime Now delivers in 2 hours or less. I believe I read that their current best record for click-to-door is under 15 minutes. With the drones operating in more rural areas already in England, it’ll be pretty hard to beat them in your car making a round-trip to a store. Drones can move pretty fast. In cities they’ll do their Uber/package thing (forget the name) and it’ll be fast too.
Don’t forget network effects. The more customers Amazon has, the more warehouses they build in more places, and the closer to you any given item in their inventory gets. Plus AI/ML software helps them predict where those items are going to go.
The odds are you’ll have better selection at better prices and faster delivery from Amazon than any store you could reach in your car in the same amount of time. The only reason to go on-site to shop will be due to some other amenity, some kind of social pattern, or face-to-face service. Perhaps one-of-a-kind items from local craftsmen will be worth a trip, just to be different.
I’ve been quite impressed with the Walmart grocery service. I order my groceries online then pick them up at the back of a Super Walmart at a selected time. I’ve not stepped foot in a Super Walmart in months. For in between visits I go to the nearby Walmart Neighborhood Market.
I think Amazon is thinking of this kind of pickup service, so Walmart has been trying to get ahead of that game. Good for them.
The Walmart service works great. The next step is to have those groceries delivered to my doorstep. I suspect that the problem in doing it is regulatory, not technical.
It’s assumed Amazon is doing the damage. Maybe it’s doing some, but I think bricks and mortar has evolved, as well.
They evolved away from the all enclosed malls of the 60s-80s (just as those had evolved away from the open-air malls of the generation before) to more convenient, larger strip malls. In my area, most suburbs have a more modern large strip center with the stores like Target, Kohl’s, Old Navy, TJ Maxx, Petco, Sprouts and Bed Bath and Beyond and several casual restaurants. Those types of malls seem to being doing fine, for now. Two new ones, with similar stores, are just being finished close to my house, while we already had one with the above stores that’s about 15 years old and starting to look dated.
I think a big part of it is that folks tastes in malls changed.
When I worked in Arnold’s stomping grounds, Silver Spring, back in the early 2000s, there was a historical preservation movement. One property they wanted was some empty stores with Art Deco tin on top. The rationale was that it was one of the first shopping locations with off-street parking. Or as also known, the strip mall. I knew then that historical preservation had jumped the shark.
When I was young, my favorite store in the mall was Waldenbooks. I also loved the “arcade” with cabinet video games. And next were the music stores where you could buy cassette tapes or CDs of music and maybe a computer software store or a video game store where you could buy mostly computer software packaged in cardboard boxes.
All those genres of retail have been completely and thoroughly replaced by far better alternatives.
As I mentioned above, The Simon Group’s “The Domain” in Austin is a good evolution of a mall like space that people want.