Image Source: CNN Money U.S.
Do you remember when going to the mall was a big thing?
When I was a kid, I used to ride my bike about four miles from my house in Chicago so that I could walk around the Lincolnwood Mall in the suburbs. My favorite part of the mall was the food court where I would grab a slice of Sbarro's pizza, and just people watch.
It seems like these days there are not that many people to watch in the malls because they're not coming in anymore.
Foot traffic is key to keeping malls alive because as more people walk around a mall, the more likely they will be to grab something to buy.
Nowadays, however, people are going online to merchants like Amazon and niche retailers like Warby Parker and Zappos to get their goods. As more people shop over the Internet, this leaves fewer shoppers doing business at retailers in the mall. According to this article by Sarah Halzack at the WaPo, retailers like Payless Shoe Source & The Limited are going bankrupt, with more to come in the months and years ahead.
There are one of two ways to look at this phenomenon. First, as stores close in big box malls across the country, this will have a ripple effect in other areas of local economies. Support services such as cleaning and equipment repair companies will decline since stores no longer need such help. Also, city governments lose tax revenue as retail stores continue to file for bankruptcy.
Finally, there is an environmental impact where big box malls are empty and painful to convert into something more environmentally friendly other than for commercial business.
The other way of looking at this scenario however is where online retailers will look for a physical footprint to cater to their growing customer base. As stores in malls close, mall operators could make lucrative deals to major online retailers like Amazon and niche retailers like Warby Parker to take over leases and prevent malls themselves from disappearing. Also, repurposing malls into mixed use areas for residential and educational purposes could also stave off the imminent demise of the American mall.
Finally, malls could take a page from amusement parks and turn themselves into destinations of play for families to take kids to. Having more than just a movie theater for good times would also bring in additional foot traffic. The types of recreation I'm thinking of would be carnival rides and games for the amusement of families.
The decline in American retailing is far from over, however, and sadly there is more financial carnage to come. So you're probably wondering what this has to do with you as an investor and as an artist?
First, as an artist, you probably do not want your works carried in a mall store where the foot traffic is not as significant as either online traffic or in local specialty art fairs.
Second, as an investor, you want to be wary of any investment in either real estate tied to malls like General Growth Properties or high yield bonds linked to physical retailers and even ETF's that focus on retailers as an index.
For now, however, the retail space is a curious one to follow in the months and years ahead as online retailers steal more traffic from their physical counterparts. As the old catchphrase goes, let the buyer beware!
Thank you for reading @ellofinance today! Have a great weekend!