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32% of Consumers Don't Feel Safe Shopping at Malls, and That Could Be Bad News for Investors

Aug 21, 2020 by Maurie Backman

When the COVID-19 pandemic first took hold, nonessential businesses were shut down across the country, and that extended to shopping malls. Months later, many malls have opened their doors and are eager to welcome a steady stream of shoppers.

But a July survey by First Insight found that 32% of consumers feel unsafe, or very unsafe, going to shopping malls. That actually represents an increase from late April, when only 29% said the same.

On the one hand, you'd think customers would be especially eager to head to malls after months of being cooped up at home. On the other, the COVID-19 outbreak did worsen during the summer, which could explain why more people are hesitant to return to shopping malls now than earlier in the year.

Either way, none of this is good news for shopping malls, which were in danger even before the pandemic hit. And if consumers remain fearful of entering them, it could lead to their ultimate demise. That's very bad news for mall investors, and it's also a possible eventuality that's largely out of their control.

Malls are in trouble

The COVID-19 crisis has clearly put malls at risk of permanent closure, but to be clear, malls were in trouble well before the pandemic began. Prior to COVID-19, many chain retailers were already closing stores in an effort to conserve cash. Department stores, which malls count on to bring in foot traffic, have followed a similar pattern.

In fact, the retail apocalypse has been looming ever since e-commerce took off, and more and more retailers have begun shifting their focus to improve the online experience more so than the in-person one. But COVID-19 has also forced a large number of retailers into bankruptcy, and those looking to reorganize and continue operating may be forced to close stores, which are notably expensive to operate. And so now, malls are in an even more precarious position than they were just a year ago, and lingering consumer fear could be just the thing that puts the nail in the coffin.

Of course, this isn't to say that some malls won't survive the pandemic. Higher-end malls will likely manage to stay the course because they cater to a specific clientele. It's lower-end malls that stand to suffer the most in the wake of COVID-19 -- particularly those that lose their anchor stores to bankruptcy.

Improving the shopping experience

Shoppers may not be motivated to make purchases at malls like they once were, especially in light of the aforementioned safety concerns. But there are ways to make malls safer, like installing sanitizing stations throughout and instructing tenants to limit capacity. These investments are worth making, especially since the pandemic is far from over, because while it's possible for consumers to adapt to current circumstances and shift to online ordering, ultimately, malls do serve as a means of entertainment -- an excuse to step out in public at a time when people feel overwhelmingly bound to their homes. And if malls take the proper steps to welcome back customers, investors may not be in quite as much trouble in the near term.

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