The so-called retail apocalypse has caused upheaval for America's malls. A number of mall-based chains have already closed, and store closures are on a record pace in 2019. The reality, however, is that many chains have managed to adapt to avoid these issues. In reality, retail losers are chains that aren't well run.
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This video was recorded on June 18, 2019.
Shannon Jones: Apparently we are going to the mall today. I must say, I'm not a huge mall fan now that I'm no longer in my teenage years. But now that I have a child who is nine years old, I find myself more and more at the mall. So I'm excited about today's topic.
Dan Kline: Yeah, you're in the mall zone. My kid is 15, I have a son, and he grew out of his 'every time, every day, let's go to the mall,' arguing with me about buying $30 T-shirts and $200 sneakers. Thankfully, those days appear to be behind me.
Jones: Oh, thanks, I have so much to look forward to, Dan!
Kline: [laughs] Yes, you do!
Jones: Today's show is all about shopping malls. You've likely heard about the death of the American shopping mall, probably have witnessed it in your own town as well. But today we're diving into what that looks like and which mall stocks are doing well, as well as the ones that aren't.
Dan, to kick things off, I feel like I see headlines nearly every day, things like "The American Retail Apocalypse" or "Malls See Tsunami of Store Closures in 2019." Can you just give us some context? How bad is it, especially this year compared to years prior?
Kline: It's bad, but it's also being misplayed. The retail apocalypse is the idea that every store is going to die because people don't want to go to the mall, they don't want to go to big box retailers, they're just going to buy everything from Amazon on their phone. That's true for bad retailers. If you're a retailer who did nothing to address the fact that these trends are happening, then you're in real trouble. But if you're a retailer that embraced omnichannel, that gave people fun reasons to go to their stores, that made a transformation, then you're just fine. That's kind of what's happening in America's better malls. Yes, we're seeing store closures. If you go to the mall month after month, you're going to see more changes than you used to see over the years, because we've had bankruptcies like Payless that had a store in pretty much every mall. That's a big opening, and something has to go in there. We'll talk a little bit later about what's filling them.
We've had about 5,000 store closures this year, through March. That's ahead of last year, and we're on path for a record pace. We've also had about 2,500 store openings. We're not seeing too many retailers open thousands, even hundreds of stores. What we are seeing is a lot of retailers being very selective and opening in the A malls or the best places. Mind you, those 5,000 closings are not all in closed malls. Some of them are strip malls, some of them are victims of a big box in a strip going out and killing all the things that were left there. But for a big list of companies, this is bleak.
Jones: So, a bit overdone, you would say some of these headlines are?
Kline: Well, yeah. It's easy to look at, say, Sears and J.C. Penney and say, "Oh, my god, Amazon is going to kill everyone." But you have to bring up Best Buy and Walmart and Target. Obviously Target is sometimes a mall store, Best Buy is sometimes a mall store. They're also sometimes stand-alone. But those are companies that said, "OK, this is what people want from Amazon. Can we give them that? And can we give them something that they can only get from a store?" I can right now jump on my phone, see if Best Buy has the laptop, HDMI cable, I don't know, blender, toaster, whatever it is I might want, see if they have it, buy it, and go pick it up at the Best Buy down the street. Amazon can't do that yet. Now, Amazon might be able to deliver a selection of items in some markets within two hours. But they're not going to equal anytime soon a full Best Buy, a full Target, a full Walmart. There's absolutely things you can build upon if you're a brick and mortar store. If you're a mall-based toy store -- that's not really a thing anymore, but let's pretend you are -- you can hold a Pokémon tournament or Magic the Gathering or Warhammer painting. Yeah, you can buy all those products for the same price or cheaper online, but you can't create the sense of community; you can't do the things that give people the immediate gratification that a store can. So, yes, we have a retail apocalypse of poorly run stores going out of business because they didn't change with the times. Or, in the case of Sears, they said they were changing, but they didn't actually do anything. So, really, this is about retail management. It's not about consumer behavior.
Jones: Yeah. That's really where, as you were mentioning, the bricks and clicks strategy, really building out these omnichannel presences. Even more, it's about figuring out the right ratio of what's going to be sold online vs., are you going to have a retail store.