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As reported by CNN Money nearly 25 per cent of all shopping malls in the United States will be closing within five years. While shopping malls used to serve as vending and social places, consumerism seems to be in decline generally, and certainly accelerated with the rise of online stores like Amazon.
As Credit Suisse reports, the United States undertook phenomenal mall development in fifty years, from 300 enclosed malls in 1970 to 1,211 today. Credit Suisse suggests there is a retail bubble with too many stores being built, and point out that foot traffic at malls has been steadily declining for years. While online sales of consumer good is 17 per cent in the United States today, it is expected to double to 35 per cent by 2030. That decline in mall sales is borne out by the fact that “Department stores have lost more jobs than coal mines”.
And the number of mall anchor stores closing in the United States is sobering-Sears is closing 150 Sears and Kmart branded stores, while JCPenny is closing 138 stores. “Credit Suisse estimates that a record 8,600 stores will close this year alone. That’s far more than the record 6,200 stores that closed in 2008, the first year of the Great Recession”. Even Home Depot is afraid that “Amazonification” will cut into their business, with stock down 3 per cent despite high earnings.
Despite these numbers, the CEO of the International Centre of Shopping Centres (yes it actually exists) is upbeat about the future, saying that occupancy rates are at 93 per cent and the store closures represent a small percentage of the square footage occupied. And, the CEO still sees the enclosed mall as a “social gathering place”, despite the renewed interest and renaissance of main street store front retail.
Meanwhile Ivanhoe Cambridge which owns and manages Tsawwassen Mills, the 1.2 million square foot mall near Tsawwassen as well as CrossIron Mills Mall near Calgary and Vaughan Mills near Toronto has released some preliminary figures on performance. It seems that Tsawwassen Mills Mall is making $275 per commercial retail unit square foot compared to $660 per square foot in Calgary and $792 per square foot in Toronto. The overall gross sales volume is also very low when compared to the two other Mega Mills Malls in the portfolio. Is this due to the mall’s newness, its location, or are Metro Vancouver residents early adapters to online consumerism?
I think we ought to examine the link between property taxes and lack of road tolls and decline of malls a bit further.
Physical stores get taxed to death, while online businesses pay lower property taxes and almost no road tolls, for example for wear & tear they cause with all the trucks !!!
So, with new tax models and road tolls that mall decline may change actually !!
More here:
http://business.financialpost.com/opinion/lawrence-solomon-how-city-politicians-are-helping-amazon-destroy-your-favourite-local-retailers
Specifically: “Online shopping has some obvious advantages over traditional stores, but it’s the unobvious ones that are the real killers, particularly when online is in competition with stores located in high-value urban centres. Pedestrian traffic would normally give brick-and-mortar stores an overwhelming advantage — most people actually enjoy shopping — but government penalizes great locations through property taxes that rise in direct proportion to their popularity.
Online operations typically pay little in property or other municipal taxes — they sensibly locate their warehouses in non-descript, low-cost locations from which they can easily move if a municipality raises taxes. Not so a brick-and-mortar establishment — say a family-owned hardware store or a shoe store that has built up a loyal local clientele over many years in a downtown or a neighbourhood shopping district. These are captive to rapacious governments that exact taxes that bear no relationship to the cost of the services that the stores receive.
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One user fee — for the use of roads — would be particularly decisive in enabling fair competition. Under the current property tax regime, city businesses pay heavily for the upkeep of the city’s roads; their out-of-town online competitors, meanwhile, use those same roads for free to deliver goods to customers who would otherwise have purchased a locally sold product.
If roads were tolled on a free-market basis, so that commercial road users fairly paid for road use, the boon that many online merchants now enjoy would become a burden, especially when delivering packages to urban markets where traffic crawls much of the day — peak charges along congested routes, akin to the peak-period fares levied on airline passengers or the surge fares paid by Uber customers, would render many deliveries unaffordable.”
Interestingly, full road use pricing would hit outlying brick and mortar malls as well, particularly the discount malls like Tsawwassen Mills where the whole point is to drive a long way to save money.
Perhaps. Perhaps not. The issue is that online shopping is subsidized / under-taxed .. if this changes significantly enough then ordering a $6 item online might be $16 .. and as such taking the e-scooter / e-golfcart / new e-mini-car to the mall with free parking might be cheaper !
The new mall in Abbotsford “High Street” near Hwy 1 intersection as well as the new mall at the airport are doing quite well I hear ..
The issue is that the US is WAY overbuilt with malls. As such, not so much applicable to EU or Canada. There are 2,353 square feet of space of shopping centers in the U.S. for every 100 Americans, compared with 1,636 in Canada and 458 in Britain, according to recent data from CoStar Realty Information.
Even Donald Trump is onto it (“it” being undertaxation of online shopping): http://www.newsmax.com/Finance/StreetTalk/Donald-Trump-Amazon-AMZN-jobs/2017/08/16/id/807886 .. And if he tweets it it must be true ..
Some years ago I was sitting in a dull grey room in Bentonville Arkansas, the home of WalMart, with 20 people, 7 of whom were WalMart Vice Presidents, each responsible for some aspect of moving boxes from A to B. The senior VP got the floor and said “Everyone thinks WalMart is in the retail shopping business. That’s half right. The other half is that WalMart is in the logistics business. We only exist because we know how to move things around the world better than anyone else.” Amazon is the new WalMart; it’s strength is its logistics, and like WalMart, it is focusing on “fulfillment” centres, what WalMart calls distribution centres.
Very true – and exactly why Target failed in Canada.
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Reblogged this on Sandy James Planner.
Here’s an article from today’s Montreal Gazette:
Despite e-commerce growth, shopping malls are seeing a resurgence
http://montrealgazette.com/business/local-business/retail/montreals-malls-arent-dead-yet-some-are-even-growing
You need to differentiate between “shopping for entertainment” and ” I need a specific item” hopping.
Here on the North Shore shopping too often winds up being a choice of “drive twenty minutes to the one store that might have it” or ” buy something similar but not as good because it’s what’s available.”
I’ve long ago adopted the habit of checking Amazon before heading accross town on what might be a wild goose chase, and know that I’m not alone in doing so.
If I could walk a couple of blocks to do routine shopping I’d do that. Otherwise ordering online saves me time, and possibly is even greener.
Price is seldom a significant factor.
Correct. But you are a rational thinking man. Others, especially women have different shopping habits, or even teenagers. As you stated, entertainment aka retail therapy is an important part of it: the food courts, the music, the benches, the glitzy display of merchandise, the newest clothing lines, the fall collection, the flowers, the perfect weather (even if +35 and humid, or -20 outside), the kids playground .. all plays a role and as such online shopping will never replace all of your shopping needs. Even I (as an equally rational man) get seduced sometimes by it .. albeit not as often as my wife.
One reason why e-grocery stores failed is also the labour component. You bring your own, free labour to pick the 27 items on your grocery list that might take 20-30 minutes. If you pay someone $20/h (all in cost) that is $10 to be added just for picking the items, plus shipping often heavy milk, bananas, bread, ice cream etc .. worthy the extra $s for some but not many.
Browsing & then buying, like eating, is a human experience not just a necessary function.
But yes, many malls are unattractive, too far away, inconveniently located or plain dull. The strongest will survive due to location, price, experience or accessibility (by car or public transit).
The issue from a planning point of view is that property taxes might drop if malls fail as some retailers will not survive. Commercial property taxes are too high in many locations, and road use far too cheap. If properly adjusted, online shopping might not be so cheap anymore.
Good! We can get rid of the malls and build more luxury condos that nobody can afford.
Apparently they all get bought. Many malls now, such as Oakridge, building residential towers above or close to the 1-2 level mall especially when they are connected by rapid transit. See here for example http://www.vancouversun.com/vancouver+most+ambitious+commercial+residential+developments+being+scaled+back/11646964/story.html .. others are Brentwood Mall, Lougheed Mall, Park Royal in W-Van etc