AreTraditionalMalls a Wayof the Past?
Bartholomew Harte | bartholomewharte.net
As an increased number of consumers in the
American economy slowly stray away from
shopping at traditional malls, this trend poses a
direct threat to department stores such as
Macys or Bloomingdales, while also causing
stores such as Gap or J. Crew to reinvent their
business model.
While Americans are dining out more and
purchasing more automobiles, these spending
habits are in no means where these funds are
making headway. Within the last year, a huge
portion of where Americans are starting to
allocate funds to internet giants such as
Amazon and eBay.
During the last year alone, increased spending
at online merchants such as Amazon
increased to around 11 percent. At the same
time, retail stores such as Macys, Kohls, and
Nordstrom reported stark drop-offs in revenue.
Since shoppers are now more inclined to find
the best sales or bargains online, its no
surprise that this is reducing profit for retail
stores in traditional malls.
As a response to this, retailers have responded by
closing down stores that fail to increase company
revenue. Sparking unemployment for millions of
people, this has continued to leave more
shopping malls, plazas and stores
empty. According to various U.S. government
studies, in 2000, for every dollar spent in physical
stores, just 30 cents were spent on internet related
purchases. At this point within the eCommerce
market, online category makes up nearly 70 cents
for every dollar spent at general merchandise
stores.
According to recent studies delving deeper
into consumers psyche during the shopping
process, impulse buys make up 45 percent of
store purchases, which is around twenty
percent more than online purchases. To
illustrate, only 23 percent online purchases
are categorized as impulse buys. In response
to retail and other department stores
dwindling revenue, some stores have come
up with other plans to increase profitability.
J.C. Penneys chief executive, Marvin
Ellison, had recently told investors and
the rest of the industry the company
would switch its business focus to selling
items other than clothing. In order to
bring back older parts of JC Penneys
business, the retailer intends to expand
services like beauty salons and sell major
appliances to boost revenue.
The chief executive also makes note of the
fact customers are no longer spending
heavily on clothing goods, and if they are,
these shoppers tend to visit discount stores
such as Amazon or TJ Maxx. We look at
what customers are spending, Ellison said.
Its entertainment, its experiences, its home
beautification.
These salient factors which have shoppers
placing more emphasis on spending for the
experience, is not a necessarily a new trend,
but has been accelerating in the past few
years. Although unclear, it will be interesting
to see how traditional department and retail
stores will continue to incentivize their
products in a space that is no longer the
norm.