The End of the Shopping Mall?

Why COVID-19 might be a catalyst that changes retail forever.

Mar 31, 2020
Marketing

SMITH BRAIN TRUST  The expansive parking lots are empty, and those wide glass doors are shut tight and locked. But what will happen to the shopping mall when the coronavirus crisis eases, when the stay-at-home orders are lifted and non-essential businesses are able to welcome customers back?

The shopping mall might never be the same again, says Maryland Smith’s Jie Zhang.

The indefinite government-imposed shutdown, which aims to reduce the spread of the novel coronavirus by encouraging people to stay home, arrived at a time when many of America’s iconic, enclosed shopping malls were already struggling, with consumer traffic shifting to ecommerce, discount outlets and big-box retailers.

“This is another big heavy blow to shopping malls,” says Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland. “But it’s also a catalyst.”

Zhang, who studies consumer purchase behavior and retail strategies in the digital and multichannel retail environments, says this era of social distancing will force a shakeup for the U.S. retail sector and its struggling shopping centers.

“Part of it is the public psyche,” she says. “This virus is likely not going to go away any time soon, and the one type of place where people will be much more vigilant about avoiding in the longer term will be those crowded, enclosed spaces. And that’s exactly what traditional shopping malls are.”

Zhang anticipates a “big bounce back,” for some retail and entertainment establishments when the risks associated with COVID-19 subside, amid pent-up demand for consumer and leisure activities. “People will want to go out to compensate for this time of missing out,” she says. “Unfortunately, I don’t see that happening with enclosed shopping malls.”

Open-air shopping centers, on the other hand, may see a rosier recovery. In a post-pandemic era, people will feel more “ease of mind” in spaces that are not enclosed. Already, open-air shopping centers had been rising in popularity, helped by the appeal of being outdoors and by their attractive retail and food establishments. “I expect to see them have a good, healthy rebound.”

For much of the retail sector, 2020 is shaping up to be a tough year – tougher even than 2019, when a record 9,500 stores closed for good.

Even before social distancing measures became the norm across the country, Forever21, Papyrus and Modell’s Sporting Goods announced plans to close all of their brick-and-mortar locations. Meanwhile, candles stalwart Pier 1 Imports entered Chapter 11 bankruptcy protection and had announced it would close nearly half of its 936 stores. Macys, Office Depot, Bose, Express, Hallmark, JCPenney, Kmart, Sears, and Bed, Bath and Beyond are also closing some stores. Even lux retailer Bloomingdales closed one of its 35 locations – the one south of Miami.

For malls, the impact of closures can be considerable, extending beyond the immediate job losses that result. Empty mall storefronts tend to erode consumer traffic, reducing sales prospects for neighboring shops, and diminishing overall commercial property values. One failed outlet tends to beget another, and another.

“For some shopping malls and struggling retailers, this is a very sad story,” Zhang says. “But the coronavirus crisis may also serve as a kind of shock that will force shopping malls to work harder to improve their amenities, so they can survive and thrive.”

Overall, the number of shopping malls across the United States is likely to be scaled back in terms of numbers, while being scaled up in terms of amenities, Zhang says.

“This is consistent with some of the trends that we have been watching in the sector.” she says. “To attract consumers back, shopping malls will need to beef up their entertainment offerings, their recreational offerings, and their experiential-based-shopping offerings.”

That means offering luxury amenities – higher-end restaurants, virtual try-on dressing rooms and smart mirrors, high-tech customized product offerings – that entice shoppers to return again and again.

That’s the paradox, at least in the short term. What shopping malls do best are the so-called hedonic products – apparel, jewelry, wellness products and cosmetics – the type of consumer products that fall most out of favor in an economic downturn, like the one we’re in now. The immediate future will be difficult for those retailers.

“Those who can weather this storm and survive may have the opportunity to thrive in the future when consumers eventually reach a point where they are ready to indulge themselves,” Zhang says.

“That's the bright side.”

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About the Expert(s)

Jie Zhang

Jie Zhang is a Professor of Marketing and the Harvey Sanders Fellow of Retail Management at the Robert H. Smith School of Business at the University of Maryland. She received her Ph.D. in marketing from the Kellogg School of Management at NorthwesternUniversity. She was a faculty member at the Ross School of Business at the University of Michigan prior to joining the Smith School. Her general research interest is to apply advanced econometric and statistical models to study consumer purchase behaviors and retail strategies.

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