In the News and Trending: The Shopping Mall Crisis: What Will It Take for Them to Recover? Is There any Hope?
Ray Wimer is a professor of retail practice leading courses on retail, buying and planning, marketing, sales and business foundations. His experience in the retail industry and his passion for retail translates into courses, consulting and speaking engagements in marketing, personal selling and customer service.
Ray Wimer G’97 (A&S), G’98 (EDU) is passionately interested in the retail industry. “And you can’t talk about retail without looking at our traditional enclosed shopping malls,” says the professor of retail practice at the Whitman School, who fondly remembers weekends spent at the mall when he was a teenager. “I’m showing my age,” he jokes.
In Syracuse, Wimer can trace national trends at one of the country’s biggest indoor retail facilities. With 2.4 million square feet and some 250 businesses, Destiny USA is the largest mall in New York State and the eighth-largest nationally. Like malls of all sizes, it has felt the impacts of a number of crises over the past decades.
Malls, Wimer recounts, came into existence in the 1950s, taking off particularly in the suburbs. In their traditional form—enclosed, safe from the weather, with food courts, specialty apparel shops and various small retailers between large department stores as anchors—they had their heyday in the 1980s and ‘90s, fueling more investments into malls into the 2000s.
Then, the recession of 2008 hit.
“It put malls under pressure,” Wimer explains. “Owners had these huge loans, just like retailers who had rapidly expanded.” At the same time, customers were changing where they were spending their money. “Because right around then, the iPhone gets introduced, and consumers start to realize the convenience factor of shopping online. It was a triple whammy.”
By 2017, numerous retailers had filed for bankruptcy, including a few that were major tenants at malls (among them Payless, Toys “R” Us, Radio Shack), while others, such as Sears or JCPenney, have continued to struggle. “One of the private investors in JCPenney is the Simon Property Group, which owns malls, so they bought this as a key anchor to attract other stores,” Wimer says. “It’s self-preservation.”
Not all malls have been hit equally. The facilities are classified from A to D by their sales per square foot per year, ranging from $500 per square foot for class-A malls outside of metropolitan centers to under $300 per square foot for class C and D malls, which tend to reside in rural areas. “A-level malls you never have to worry about,” Wimer says, “but B, C, and D malls have been struggling.”
Destiny USA, a B-level mall, lost some major retailers, such as Bon-Ton department store in 2016, followed by Lord & Taylor in 2020. “They've been hurt, but I think they recognized that they needed to change,” Wimer says.
Like other malls, it has moved toward offering entertainment, including virtual golfing, indoor go-karts, comedy clubs, a ropes course, an escape room and restaurants. “So not necessarily what we think of as traditional retail, but inviting people to spend the day having experiences,” Wimer says.
The timing, however, was unfortunate. When COVID-19 struck in early 2020, malls and other stores shut down temporarily in many places. “And unfortunately for Destiny USA, the one thing nobody wanted to do, even when things started opening back up in June 2020, was to have an experience with other people,” Wimer explains. “So it hit them doubly hard.”
On a national level, the pandemic has also reinforced the retail polarization that was already cleaving the retail sector before 2020. While the luxury and value segments of the market have done well, companies stuck in the middle, as well as malls where they are tenants, have faced difficulties. And only time will tell whether consumers will hold to convenience habits such as home delivery and curbside pickup even after the pandemic has waned.
“That would make it challenging for malls to fully recover,” Wimer says.
Despite these obstacles, Wimer sees hope for malls. To this day, nearly 85% of shopping still takes place in person (with market research company eMarketer predicting that this will decline to 78% by 2026).
The malls themselves, however, may change. Numerous C- and D-level malls have transitioned to a new “power center” format, clustering a few retail shops around big players such as Target, Dick’s, Walmart or even a Wegmans grocery store. “They may not offer everything that’s at a typical mall, but they may serve a smaller local community that way,” Wimer says.
Other malls, such as ShoppingTown in DeWitt, are getting a second life as multipurpose spaces with housing, entertainment and shopping facilities. “You need to have either a real estate investor or a property owner who has the wherewithal to transition that,” Wimer explains.
One of his favorite examples, which he is watching with great interest, is Northgate Station Mall, just north of Seattle, which opened in 1950 but had fallen on hard times. Now it is a mixed-use environment with a hotel, condos, offices, dining, recreation and three ice skating rinks for the city’s new NHL team, the Kraken—offering a variety of ways to engage and bring in the public.
As for Destiny USA, Wimer believes the mall is on the right track by focusing on experiences.
“Living in Central New York, when in the winter you wake up and it's minus 1, there's not a lot you want to go out and do, unless you're big into snowmobiling or skiing,” he says. “At the mall, you can go and do things together.” While consumers remain hesitant during the pandemic, “I knock on wood that we get back to something normalized soon.”