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December 3, 2014

Why malls across America are dying


Indoor shopping malls across America are struggling due to technology and changing consumer behavior.

On average, household income has stagnated or declined for middle- and low-income households, who form a major component of mall consumers.

Meanwhile, the rise of online shopping has displaced the need for malls in people’s lives. Online shopping has doubled in the past seven years, and teenagers who used to hang out at the mall now socialize over social media and phones.

No new indoor malls have been built since 2006, and 15 percent of malls are expected to close their stores in the next 10 years; some will shut down entirely and others will be repurposed.

Transforming mall spaces is a challenge, according to Brian Sciera of W.S. Development.

“If we want to survive today, we want to carve out a point of difference in the marketplace where we become something special. You have to be out of the commodity business and into the experience business,” he said.

Malls need to offer unique experiences beyond retail spaces to draw customers, according to Harvard Business School Professor of Business Administration Len Schlesinger.

“What’s going to draw traffic to a shopping experience? And it’s no longer the stores,” he said. “Now it’s movies, gyms, restaurants and entertainment.”

Warm up questions
  1. Is there a mall in your area? Does it mostly contain stores, or are there other types of businesses?
  2. Where do you like to hang out with friends?
Critical thinking questions
  1. What are the costs involved with a trip to the mall? (Consider transportation costs, etc.) Now compare those costs to the cost of online shopping—is there a difference? How would this difference affect people’s behaviors?
  2. supplydemand
  3. Look at the supply and demand chart above. The place where the supply and demand curves meet represent equilibrium, where the supply of a product meets the demand for it and results in the price on the y-axis. Now apply this chart to malls. What happens when consumers only want to go to 2 malls (demand), but there are 6 malls in the area (supply)?
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