Wednesday, August 31, 2016
Proof Malls Aren't Dead Yet
You probably haven't heard about it.
It's not a hot topic of conversation.
But it could represent the beginning of a major shift in conventional American retailing.
Two large companies that, between them, own most of North America's major malls have submitted a bid to purchase ailing teen fashion retailer Aeropostale from bankruptcy. The two mall operators are Simon Property Group and General Growth Properties. They've joined with three smaller retail industry players to salvage approximately 230 of the chain's 780 stores. Ostensibly, those stores to remain open will be the better-performing stores in each of the mall operators' better-performing shopping centers.
How does this impact you and me? Well, for one thing, it's relatively unprecedented for major landlords like Simon and General Growth to take such a proactive interest in a tenant, such as bidding for the tenant's company in bankruptcy court. According to retail industry insiders, this move represents a strategic power play by bricks-and-mortar titans to try and fend off some of the ravages of Internet retailing. If successful, it could provide a pattern for others to follow.
It's not that Aeropostale itself is such a financially important retailer, or beloved brand, or a "too-big-to-fail" employer. It sells trendy teen fashions, and each of those three words represents volatile concepts that change almost by the day. If you don't have kids, it's probable you've never shopped in their stores. And considering the steady drumbeat of store closings and bankruptcies, the demise of yet another brand likely would have little impact beyond the affected employees.
Indeed, even the mall owners bidding for Aeropostale are planning on closing a majority of the chain's locations, which will be painful enough for those being laid-off. What's symbolic here, however, is the fact that two key operators of most American malls are trying to make a sound financial bet on keeping at least part of their tenancy rosters intact.
After all, teens will still shop for fashions, although perhaps not in the ways they used to, or for the styles they used to, or in the volumes they used to, at the price points they used to. The folks at Aeropostale will still have to figure out where teen fashions are headed, and how to generate sales. But Simon and General Growth want to keep the retailer alive long enough to either ride the current down-turn in shopping trends, or at least deflate the Aeropostale balloon gently, over more time than a brutal bankruptcy would allow. Indeed, their partners in this endeavor include a company that usually makes its money dismantling bankrupt companies and selling the spoils of yet another faded brand for pennies on the dollar.
By breaking Aeropostale's free-fall, most everybody who would be affected has time to recoup, re-strategize, and maybe even make some money.
Of course, mall owners like Simon and General Growth still have their work cut out for themselves, too. The number of "dead malls" across the United States continues to climb. Customers continue gravitating towards online shopping. And people in general seem less interested in spending their time strolling around and shopping; it's not considered an enjoyable pastime anymore. Even if people want to purchase items from a bricks-and-mortar establishment, malls require a lot of walking, particularly in undesirable parking lots, or among groups of people who likely can't afford much in the mall to begin with. The concept of "lifestyle centers" has replaced the mall; basically glorified strip-shopping centers, only with textured walkways, better landscaping, and fancier lighting fixtures. Shoppers can park close to a particular store that they've already targeted as having what they want, and get in and out quickly.
Alternatively, one of the most popular bricks-and-mortar stores these days is aiming to reach beyond retail to help justify their existence. In another big change that you probably don't know about, Apple Stores is changing its name, dropping the "Stores" part and replacing it with the store's actual location, such as "Apple Union Square" or "Apple Southlake." Why? Forbes calculates that the change represents Apple's attempt to shift from concentrating on its stores as places to purchase commodities, to stores as places where their customers can be entertained apart from iPhone upgrades and such. In other words, Apple wants its stores to be mini-concert venues, or glorified coffee/wine bars, or other attractions that could help ingrain their brand in the mind of consumers.
It's a broadening of the purpose of bricks-and-mortar facilities, from mere retailing to brand-telling. Consider it marketing on steroids, beyond the product itself. Actually, considering how many malls have already hosted mini-concerts, celebrity appearances, and local attractions such as cooking shows, taste tests, automobile demonstrations, and the like, perhaps the trendy Apple is merely taking a page out of the mall playbook.
Meanwhile, even if Simon and General Growth only buy time with their purchase of Aeropostale, their intentionality about their offer remains noteworthy. It represents the degree to which companies that have built their profits on a business model that is losing favor with the public are willing to counteract such a trend with unconventional strategies. The fact that they're doing so with a teen retailer - not the surest way to profits these days - only makes it more intriguing.
So, no; your world hasn't utterly changed overnight. Besides, it's still possible that some other suitor could outbid Simon and General Growth for Aeropostale. Or the bankruptcy court might turn down their plan. Nothing's guaranteed here. But the very fact that this plan has been offered is remarkable in and of itself.
The mall experience certainly isn't what it used to be. But two of America's biggest mall operators are working hard to keep it from going away entirely. And they're putting their money where they hope their future will be.
Just as long as they don't expect America's teenagers to gush with appreciation!