Malls are going south in the U.S. General retail may also go the same way, unless shops transform themselves.  Here’s our story why retail is facing an apocalypse.

My family used to own two businesses in different malls.  The rent in the mall was ten times higher than a retail space outside the mall.  Also, the retailer would have to sign a rental contract for five to ten years and every year the rent would increase.

The retailer had to pay monthly commissions on top of the rent to the mall. You didn’t get to choose your location in the mall. Mall management usually assigned a spot.

The retailer also had to use their approved contractors and architects to remodel the retail shop. The mall’s architect had to approve the retailer’s plans before starting the remodel. The mall had the retailer tear everything down to the bare bones then rebuild everything. The retailer also had to carry millions of dollars of insurance.

The retailer had to open every day on time and couldn’t close early. The retailer had to open even when it snowed. The mall was only closed on Easter, Thanksgiving, and Christmas. The retailer also had extended hours before Christmas so people could shop longer. The retailer was fined if it didn’t follow mall hours. The retailer had put up with all these rules because it was getting walking traffic.

Turning Point

I started seeing the traffic decline in the mall about ten years ago when people started to buy online. Every year we saw fewer and fewer people going to the mall at Christmas time and large anchor retailers like Nordstrom left the mall and built their online presence.

We competed at the mall by providing a great customer experience.  However, the value to the customer experience diminished.

My customers told me that they liked buying online because they didn’t have to deal with parking and the crowds at Christmas time. They also didn’t have to stand in line at the post office and pay a fee to send their gifts. They could order online and have it shipped to the person for much less than the mall.

In many cases, the online stores had more choices and much lower costs. Some retailers didn’t even do Black Fridays because customers could get the same price online and did not have to wait in line.

Airports are becoming malls also. People are arriving at the airport two hours earlier than their next flight and waiting around before they can board. The airports are putting in retail stores, restaurants, cafes, salons, art, and even offer concerts. Airports are becoming the new malls. Will they avoid the same mistakes of dead malls?

The Solution

Customers used to go to the mall for a great user experience but that isn’t the case anymore. That’s why the malls across America are becoming dead malls.

Retailers have to change their retail model if they want to attract customers. Successful malls and retail stores must offer unique items and great buyer experiences – what they can’t get from an online store.

What was the new business model and solution we used?  We reinvented ourselves moving into new markets, selling merchandise online and setting popup shops to test ideas.

What are you going to do when the disruption visits you?

Bio:

Victoria Lai is the project manager with WorkingIt.com and 800Compete.com.