We’ve seen the impact the coronavirus outbreak has had on retailers — business is way down. That’s especially true at department stores like Macy’s, Neiman Marcus and J.C. Penney. Now a report by Green Street Advisors predicts more than half of department stores located in U.S. malls will close by the end of 2021. And that could have a domino effect.
Malls are typically built around anchor stores that occupy multiple floors and tens of thousands of square feet. All the smaller stores in between that sell clothing or jewelry or hot pretzels rely on those anchors to bring in customers.
“When an anchor goes dark, the specialty stores that occupy the concourse leading to the department store anchor struggle because the traffic is vastly diminished,” said Mark A. Cohen, who directs the retail studies program at Columbia Business School.
Which is why, he said, these smaller stores often have clauses in their leases that allow them to pay lower rent if an anchor store shuts down.
Cohen paints a grim picture of what can happen next.
“Malls that have been suffering from this phenomenon start to invest less in housekeeping and in security,” he said. “Parking lots are not as pristine. The mall becomes less attractive as a destination.”
He expects a lot of malls to close because of this crisis.
But department stores have been struggling for years, and some malls have found creative replacements for them.
Now we may also see malls become “service centers, where anchor stores are replaced with fitness or beauty or restaurants or even medical providers that are more on the service side than on the product side,” said Barbara Stewart, who teaches retailing and consumer sciences at the University of Houston.
The problem is, these kinds of businesses might not be looking to open a new location anytime soon.
COVID-19 Economy FAQs
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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