The new era of the mall

Until not long ago, malls in the United States were a veritable pilgrimage site during the holiday shopping season. But the change in consumer habits and the irruption of electronic commerce, especially through mobile devices, threaten its existence. The situation is forcing the large operators of these centers to reinvent themselves so as not to disappear and to play a relevant role in the future of commerce.

During the 1970s and 1980s, the mall was the place where young people in the US went to buy the latest electronics, clothing or music. On the way, they stayed with friends and ate something before going to the movies. It was even where they could get their first job. But its popularity has fallen to the point that the most pessimistic give it 15 years of life for the simple fact that it is no longer a necessity for the average American.

The "space available" signs are becoming more frequent, to the point that vacancies are at levels not seen since 2009, when unemployment was at 10% and demand plummeted. The drop in traffic is the argument used by the Sbarro pizza chain to justify its second suspension of payments in years. Macy's, the nation's largest department store chain, is set to close 60 mall stores this year, while Sears and JCPenney try to survive however they can.

The purge began with the Great Recession due to the combined effect of falling consumption and the collapse of the housing market. Properties were sold off and those that were less profitable were closed. The trend is only accelerating. If in 2010 35,000 million visits to the centers were registered between the months of November and December, three years later they were half, according to ShopperTrak.

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Online records

The line that separates traditional and electronic commerce is increasingly fine for the consumer. That's causing Amazon to become the new Costco. The e-commerce portal's sales set a new record over the Thanksgiving holiday and makes more money than the big brick-and-mortar chains combined. It already distributes the merchandise with its own trucks. "The growth of mobile devices and the greater accessibility to online prices are helping to increase sales electronically," they point out from Fidelity. The American consumer is very astute when looking for the best price on any product. Now he is increasingly using his phone and tablet to compare prices on various portals instead of going store by store.

Not only do you not have to get up from the couch for the crawl. You don't even have to leave the house to enjoy the merchandise, which arrives at the door in a day or two. Amazon offers free deliveries to subscribers to its Prime service and also gives access to streaming movies. In recent years, the return service has been improved. It was one of the biggest obstacles facing e-commerce.

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This is changing the profile of the buyer. As Piper Jaffray points out, they no longer need to go to the mall to walk around and buy what they see on the stands. "They go straight to what they want," they say. This causes, at the same time, that they also spend less time in shopping centers. Before the crisis, an American made up to five visits to stores every time he got in the car to go shopping. Now they stay at three, according to ShopperTrak.

It's not just about saving on gas. It's for not wasting time. "It is the new paradigm", they point out from Cushman & Wakefield. The purchasing pattern has changed to the point that 62% of consumers go to the Internet at least once a month to purchase an item. 87% of those who own smartphones or tablets use them to make purchases, according to The Nielsen Company.

In 2008, e-commerce accounted for 3.5% of total sales, according to the latest data from the Bureau of Labor Statistics. In 2013 it already exceeded 6% and this Christmas shopping season it is estimated that it will reach 8%. Forester Research anticipates that by 2018 they will reach 11%. If this trend continues, the firm Green Street Advisors assumes that 15% of the centers will become non-commercial spaces within a decade.

The problem goes much deeper and reflects a social change. The middle class in the US has less purchasing power than before the crisis and that explains why so many centers are closing. Walmart, TJMaxx and other discount chains are attracting these customers who are now looking for a cheaper alternative.

Reinvent Yourself

The future of shopping centers is a recurring theme at the annual meetings of the Retail National Federation. And the message is simple. Physical stores must reinvent themselves and offer the customer an experience that cannot be found on the web. Rick Caruso, one of the most heard voices in the sector, believes that in order to avoid extinction, one must begin by embracing hospitality.

Caruso is the owner among other properties of the center baptized as The Grove in Los Angeles. "You have to be groundbreaking," he insists. Fidelity analysts point out that, despite the difficulties, there are segments that are weathering the storm well. He gives as an example the shopping centers where healthy food restaurants are offered, instead of being full of fast food chains, and the outlets (objects of leading brands from previous seasons).

Blake Nordstrom admits they need to do more to bring consumers back to physical stores and not lose business. But the owner of the Nordstrom apartment chain says the big challenge is raising the capital to invest in these properties, because the risk is greater than making changes to the online strategy to increase the presence in the field of e-commerce.

The experts at Cushman & Wakefield is clear that the new commerce ecosystem means that stores have more space dedicated to storage and must change the method of delivery of purchases directly to the consumer to adjust to the new reality of the Internet. It is the format that portals such as Warby Parker, Birchbox and Amazon itself are using.