US retailers revamp, reinvent as mall attrition hits

Shuttered stores dominate the interior of the Schuylkill Mall in Frackville, Pennsylvania.
Shuttered stores dominate the interior of the Schuylkill Mall in Frackville, Pennsylvania. PHOTO: AFP

America's retail landscape is in a churn, with scores of malls closing down, and household names like JC Penney, Radio Shack, Macy's and Sears closing hundreds of stores. The attrition has even hit Manhattan - on April 15, Ralph Lauren closed its flagship Polo store in Fifth Avenue.

There are several reasons for the attrition, though it is in vogue to blame it on the rise of the online behemoth Amazon, whose latest surprise acquisition of upscale supermarket chain Whole Foods led to shares of Walmart, Target, Kroger and Costco, the largest grocery retailers, tumbling last Friday.

But experts say the "retail apocalypse" headlines are exaggerated.

The US had too many malls anyway, and a newer generation of nimble and innovative retailers is bucking the overall trend of decline. The retail sector is in reality adapting and reinventing itself.

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"The US has been insanely overbuilt in retail for years; this is not an apocalypse, it is a correction," said Ms Paula Rosenblum, co-founder and managing partner at Miami- based Retail Systems Research.

The number of malls across the US may have peaked at around 1,500 some years ago, analysts say, and is now down to around 1,000 and still falling.

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We have too many malls; the most closures are likely to come from underperforming malls in large urban centres.

MS NIKKI BAIRD, a managing partner at Retail Systems Research.

"We have too many malls; the most closures are likely to come from underperforming malls in large urban centres," said Ms Nikki Baird, managing partner at Retail Systems Research, in an interview.

Malls became reliant on big anchor stores to bring in the traffic, but many of those department stores have failed to keep up with changing trends. Customers now go straight to brand stores or shop online rather than drive through traffic, look for parking, and wander around vast malls and department stores searching for what they want.

The malls are figuring it out, Ms Rosenblum said over the phone.

Two giant malls, Aventura and Mall of the Americas in the Miami area, are adding thousands of square feet to bring back what malls were once known for - a range of food, pop-up stores, crafts and entertainment that made them attractive to families.

 
 

Meanwhile, nimble and innovative retailers are thriving - in physical stores. Ulta Beauty, started in 1990, provides one-stop shopping for women's beauty and salon products, and is now the largest beauty retailer in the US. Sales jumped from US$3.9 billion (S$5.4 billion) in 2015 to US$4.9 billion last year. Last year, the company opened 100 new stores, ending the year with close to 1,000.

Eyeglass retailer Warby Parker, founded in 2010, was worth US$1.2 billion by 2015 and already being referred to in reports as a "legend" of retail. By January this year, it had 46 stores and is still expanding.

Even appliance retailer Best Buy, whose demise was predicted not long ago, has clawed back by fixing a key issue - hiring more sales staff.

The ingredients in these successes range from trendy product design to low cost, speed, convenience and attentive staff.

Warby Parker has succeeded by designing and making its own frames, keeping prices low. Customers are happy with its swift and knowledgeable service. "Warby Parker is low price, low hassle," said Ms Baird.

The company's co-founder Neil Blumenthal told the Wall Street Journal in January: "I don't think retail is dead. Mediocre retail experiences are dead."

Ms Rosenblum said: "The biggest driver of retailers closing is that they got too big, and fashion and styling changed. If it was apparel, they missed changes in styling trends; if it was hard goods, they haven't been able to create a consistent experience online."

Mr Ken Perkins, founder of Massachusetts-based Retail Metrics, told The Sunday Times: "There's been a weeding out of general merchandisers. We're seeing more success stories on the periphery that have a specific focus. The key is affordability, convenience and something new and trendy - and investing in technology so they know where the product is and get it out to the customer."

A version of this article appeared in the print edition of The Sunday Times on June 18, 2017, with the headline 'Retailers revamp, reinvent'. Print Edition | Subscribe