America’s shopping malls struggle to avoid becoming dinosaurs.


America’s department store chains – and anchor stores at countless shopping malls across the country – are reporting another rounds of disappointing sales and profit figures following the 2016 holiday season.

It underscores what we’ve been seeing all over the country – dead or dying malls.

In fact, retail industry analyst Jan Rogers Kniffen predicts that about one-third of malls in the United States will shut their doors in the coming years.

That’s about 400 of the ~1,100 enclosed malls.

Equally startling, of the ~700 that remain, all but around 250 are expected to continue to struggle.

The problem is multi-faceted. At an estimated 48 sq. ft. of retail space for every man, woman and child in America, that’s a footprint that gotten too big.

“On an apples-to-apples basis, we have twice as much per-capita retail space than any other place in the world,” Kniffen says, adding that the United States is “the most over-stored” country anywhere.

The oversupply of retail space is challenged by changing customer tastes, too. Online shopping is a huge problem for malls, as is the rising popularity of off-price stores in lieu of the department stores like Macy’s and Penneys that have served as important anchors for mall properties all over the country.

Now we hear reports that Macy’s is planning to close numerous store locations during 2017, joining Sears and Penneys which have been doing the same thing over the past several years.

How will malls survive in the future? Recently, the McKinsey & Co. consulting firm issued a report that highlighted five ways malls can remain relevant to consumers today and in the future:

Mall of America (Bloomington, MN): Expansion Rendering
Mall of America (Bloomington, MN): Expansion Rendering

Entertainment – Even in the age of “interactive everything,” consumers – particularly younger ones – continue to seek out gathering places and “experiences.”  It’s one reason why some shopping malls have had to deal with large numbers of young people flooding their spaces – not always with pleasant results.  Malls seeking out tenants that provide entertainment hubs — such as theme parks and gaming parlors, edutainment, and even virtual-reality content and immersive experiences — will be able to draw customers from a wider geographic area who crave social interaction.

Food and drink – “Food is the new fashion,” some people like to say.  Successful malls are getting in on that action, incorporating popular dining options along with unique ones as a way of becoming destination locations.

Retail – Still a core aspect of malls, but with new twists, such as creating retail centers that are also learning zones that bring together consumers, retailers and entertainment.  McKinsey uses the example of a sporting goods store that also includes a fitness studio, or offline showrooms for online retail players.  More reconfigurable spaces that can be used for pop-up stores, special product launches and seasonal offerings are also options with potential.

Transportation – Getting to and from mall properties with ease is growing in importance, and where some creative thinking might go a way towards making some malls more attractive than others.

Technology – The more that malls can create a “seamless chain” between online and on-site shopping, the better their chances are for staying relevant in the new retail environment.  McKinsey posits a number of initiatives, such as creating “virtu-real” formats that provide consumers with a more interactive retail experience through the use of touchscreen navigation portals, virtual fitting rooms, allowing smartphones for e-checkouts, and click-and-collect services to help blend the offline and online shopping experience.

In sum, for shopping malls it means fundamentally rethinking their role — and then adapting their strengths to those of the virtual/interactive world.

If we check back in another five years or so, we should have a pretty good idea which tactics have been successful – and which mall properties, too.

Hopefully, the shopping mall closest to your home won’t look like the one at the top of this article.

The Bad News Just Keeps Coming at JCPenney

JCP logo (JCPenney)
The name change from JCPenney to JCP was just one of many miscues made over the past 18 months during the tenure of CEO Ron Johnson — one of the most spectacular failures in recent retailing history.

The folks at JCPenney (JCP) just can’t seem to catch a break.

It turns out that the resignation of the company’s CEO in the wake of disastrous sales and profitability results caused by an ill-fated change in retail strategy was just the biggest clanger in a string of bad news.

Not only did the company’s sales plunge by $4.5 billion to around $13 billion, employment fell to only 116,000 workers — a huge drop from more than150,000 just a year earlier.

A centerpiece of the failed CEO’s retail strategy — opening boutique “stores within a store” — has been under constant fire, not least in the courts, where Macy’s has sued to prevent Martha Stewart-branded merchandise from being sold at JCPenney (citing a pre-existing exclusive sales agreement).

But there’s more.

We also have a report from STELLAService, an independent research company that gathers information on how well the nation’s Top 25 retailers are doing when it comes to delivering merchandise ordered online.

STELLAService has found that Staples, Zappos and Office Depot deliver merchandise the fastest.

And it’s fast all right:  these retailers achieve an average delivery time of one day.

On the other hand, who scored dead last? JCPenney. Its online division was the slowest of the 25 retailers, clocking in at an average delivery time of nine days.

That’s pretty miserable.

Is JCPenney filling the role that Montgomery Wards once played in U.S. retailing? Squeezed by big box discount stores on the one hand, and on the other by department store brands like Macys and Nordstroms the public considers far more exciting, JCPenney is trapped by its its own brand history.

No amount of “polishing the apple” in the mode of Apple’s fabulously successful retail branding can change the simple fact that the JCPenney brand name speaks to an older, middle-class demographic and psychographic audience.

Just-sacked CEO Ron Johnson has now experienced this brand reality first-hand.

One wonders how he could have missed it in the first place. Did his prior positions directing retail strategy at “go-go” brands Apple and Target blind him to the facts on the ground?

Can anyone who rubs elbows with real middle-class shoppers — even tangentially — seriously have thought that dropping store discount coupons would do anything other than turn off loyal customers?

There’s a reason coupon flyers continue to be so popular in the Sunday newspapers … and it has everything to do with millions upon millions of middle class and older consumers.

But unfortunately, JCPenney’s woes go much deeper than mere brand identity. Things appear to be seriously amiss on the operational side as well.

Any top retailer that can’t manage to deliver merchandise faster than an average of nine days deserves to have consumers snap their pocketbooks shut in response.

The next 18 months will tell us a good deal about where JCPenney is headed. Will the retailer end up regaining its brand strength … or will it die a slow death and ultimately be swept into the dustbin of retail history?

To me, the latter scenario seems more likely.  What makes it a particular shame is that the company has made so many unforced errors along the way.  Its own people, strategies and tactics have contributed as much as anything to its current plight.