MB 360–The list of retail bankruptcies continues to grow in 2017. The list includes J.C. Penney, Sears, RadioShack, and just recently Payless. Of course there is massive growth in dollar stores as Americans are pinched for cash. There has been a retail apocalypse and part of this has to do with the ridiculous amount of mall space that has been built out over the last few decades. Just like Blockbuster not seeing Netflix coming, many malls simply assumed things would never change. Then we get Amazon. The game has been fully upended and people simply choose to be more selective with what they buy. For the first time ever, Americans spent more money on bars and restaurants than at grocery stores. Habits are changing and the Millennial generation simply has different interests.
Too many malls, not enough money
One of the big issues at hand is that too many malls were built assuming nothing was going to change in the way Americans spend their retail dollars. Big box retailers had a strong hold on the market until giants like Amazon came along and forced them to compete in a different way. Some are adapting like Wal-Mart and Target that now have a larger online presence. But places like Payless and Sears simply did not have the bandwidth to keep up.
We have five times the mall space per person as the U.K. and nine times the space compared to Germany. Commercial real estate developers truly believed that Americans were mall addicts. Yet things are dramatically changing as more people spend money online.
One telling figure is the amount of money now being spent online and how quickly habits are changing. For example, take a look at these sales figures:
2010: $16 billion
2016: $80 billion
2016: $22 billion
In this short window Amazon grew and pumped out nearly four times the sales volume as Sears in 2016. Keep in mind that Sears was founded in 1886. The speed at which change is happening is truly remarkable. And that speed is only going to accelerate.
Younger Americans are also shifting how they spend their money. Millennials are too broke to purchase homes but they certainly like eating out:
Last year for the first time ever Americans spent more money eating out than on groceries. A sign of the times that people want convenience and what little money they have they are going to spend it on experiences. The mall use to be that experience but that is no longer the case.