Retailers Follow Shoppers Away from Malls
Sunday June 1, 2:59 pm ET
By Jean Scheidnes
NEW YORK (Reuters) - The shopping mall, ever popular with teens, has fallen out of favor with time-pressed adults, and retailers who routinely blame sluggish sales on poor mall traffic are finally going where the grown-ups are.
"While everyone still does a portion of their shopping at the mall, it behooves a company to have a mixture of formats, so when (the consumer) isn't interested in going to the mall, they're not completely off her radar. Retailers have recognized that," said analyst Dawn Stoner of Pacific Growth Equities.
The growth engine of Gap Inc. (NYSE:GPS - News), the biggest U.S. clothing retailer, in recent quarters has been its lower-priced Old Navy division, which has about four-fifths of its stores located outside of malls.
Another clothing retailer, Too Inc.(NYSE:TOO - News), last Wednesday said it had decided to ditch a new mall-based chain it was rolling out and migrate instead into off-mall locations with a new chain of low-priced stores.
Too cited a "fundamental shift" in consumer shopping habits affecting all mall-based retailers as more customers bypass malls for discount stores based in strip centers or stand-alone "big-box" buildings.
Unlike chains catering to teens, who are relatively insensitive to prices or economic realities and tend to buy whatever they consider cool, Too sells clothes for young girls and therefore must appeal to parents, who control the purse strings</b, analysts said.
"While the mall will always remain relevant to teen customers, because they view it as an entertaining place and they like to hang out there, retailers targeting adults definitely need to use a mixture of real estate to capture that customer where they prefer to shop," Stoner said.
Adults see little reason to drive out of their way, fight for a parking space and trudge around the maze of a mall, analysts say, and real estate developers are responding.
The number of malls recently built or being planned have fallen dramatically, according to the International Council of Shopping Centers. In 2001, 11 malls opened. In 2002, the figure fell to eight, one less than originally projected. Eight more are projected to open later this year and six in 2004.
In contrast, developers broke ground on 135 "lifestyle centers" of less than 100,000 square feet, in the first quarter of 2003. That was up from 124 a year ago.
"There's fewer and fewer reasons for people to go to malls today," SG Cowen retail analyst Lauren Levitan said.
Department stores, traditionally the cornerstones of malls, used to be prime destinations for many categories of goods -- luggage, furniture, toiletries -- but consumers now have many alternatives, often at lower prices.
Mighty Wal-Mart Stores Inc.(NYSE:WMT - News), for example, has been luring customers from department stores partly because one can find low-priced groceries, housewares and clothes in one place, without setting foot in a mall since Wal-Marts are almost all free-standing or in strip centers.
The deterioration of the traditional department store business has spelled trouble for specialty stores, whose real estate plans have been largely confined to malls.
"The conventional wisdom was, 'we spend more to be in the mall because that's also our marketing. We'll just piggyback off the traffic driven by department stores.' That's an antiquated notion," but most retailers have yet to overhaul their real estate strategies, Levitan said.
Sears, Roebuck and Co. (NYSE:S - News) the largest U.S. department store chain and a major mall anchor, is opening a pilot stand-alone store in Salt Lake City this fall. It will sell a wider range of goods than a typical Sears, including food.
May Department Stores Co. (NYSE:MAY - News) is also experimenting with a smaller store model that could fit in a strip center or other smaller area. It plans to open more of these this year. |
