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Malls Losing Anchor Stores

Raymond Pucci by Raymond Pucci
July 12, 2016
in Analysts Coverage
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No longer the star of shopping malls, department stores are being pushed out or closing on their own. A lack of differentiation, disappointing customer experiences, and e-commerce are all leading to the demise of anchor stores at US shopping malls as the following article describes.

At the Florida Mall in Orlando, Nordstrom was torn down and replaced with a Dick’s Sporting Goods store and a crayon-based family attraction called the Crayola Experience.

The Saks Fifth Avenue was demolished, too, to make way for a dining pavilion with 23 restaurants. And Lord & Taylor was carved into space for American Girl, H&M, Forever 21 and Zara.

Once the linchpin of American shopping malls, department stores are being displaced by newer types of retailers that do a better job of driving shoppers to the centers and lifting overall mall sales.

Landlords are nudging out the once-coveted big box chains in favor of sporting-goods retailers, fast-fashion chains, supermarkets, gyms, restaurants, movies theaters and other types of entertainment as they seek to keep their properties relevant in an age increasingly dominated by online shopping.

“The definition of an anchor has changed,” said Stephen Lebovitz, the chief executive of mall owner CBL & Associates Properties Inc.“Cheesecake Factory does as much business as Sears used to do.”

The remaining chains have closed hundreds of stores in recent years, as they grapple with online competition from Amazon.com Inc. and changing consumer tastes that have made department stores seem antiquated.

At General Growth malls, department store sales fell 1.9% for the 12 months through March, compared with a 4% increase at the specialty stores that line its malls. From 2005 to 2015 the disparity was even starker, with department stores sales dropping 10% compared with a 33% rise in specialty store sales.

However, all is not lost for the US shopping mall. The expansion of the services sector of the economy, such restaurants, entertainment, and recreation is giving new life to the experience of mall visits. The payments industry is responding to the changing nature of the mall merchant mix through solutions such as mobile pay apps and omnichannel. Payments can now be part of an integrated transaction to include finding, booking, and paying for a dining or yoga class seamlessly. Malls are not going away, but successful merchants will always adapt to the changing nature of their customers and how they wish to spend their money.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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