Stayin’ Alive

The word “apocalypse” comes from an ancient Greek term meaning an uncovering or disclosure of knowledge, but that is not the sense in which most of us know it. We associate it with the Book of Revelation, which is the last chapter
of the Christian Bible.

That book describes the final battle on Earth, in which good triumphs over evil and puts an end to current times. It’s that last, end-of-the-world part which has given the word its modern usage.

I make my living, indirectly, from the retail business, so I was alarmed last winter when I began to hear that there was something called a “retail apocalypse” going on in America. There are certainly some challenges in the brick-and-mortar store sector, but end-of-days scenario? Really?

As far as I can tell, the expression popped up in early 2017, with no singular source, in response to reports in the business press of massive store closings. In most of those articles, the number of mall locations said to be folding in the first half of this year was 3,500.

That in itself is startling, but it raises even more concern when you start to consider who those casualties are. Several are among the so-called anchor stores that occupy the largest and most critical spaces, including Macy’s (68), Sears (42), J.C. Penney (138), and Kmart (108). Mall owners are worried about those closures for obvious reasons, and also for one that is less obvious.

When anchor stores leave, it can activate “co-tenancy” clauses among the other tenants, allowing them to escape their own lease or renegotiate lower rents. In either case, the mall may begin the sort of downward spiral that results in the increasingly familiar status known as the zombie mall.

There are hundreds of such un-dead places now, and one of them is near where I spend part of the winter each year in Florida. The big-name department stores have gradually departed, leaving gaping dark spaces that remind me of someone missing a front tooth, while the smaller retailers seem a little seedier and less conventional every season. I don’t have anything against pawn shops, but they don’t quite fit the profile of the intended tenant.

One of the original businesses that remains is a multiplex movie theater, now reduced to showing second-run films. The roof leaks, the screens are torn and the floors are sticky, but you can’t beat the prices. I once complained to somebody at the concession stand about the quality of the sound track, and he replied, “It’s a dollar.”

The lighting in the mall is not what it used to be, especially in the parking lot, which is looking a little rough. I’m not someone who normally thinks much about personal security, but I confess that at this mall I am careful about where I park and very conscious of the people around me when walking to and from my car. (You’re probably wondering why I go there at all, but, hey, a dollar is a dollar.)

Over the past few years, mall visits have declined in the U.S. by about half, leading analysts to predict that around 300 of our 1,300 malls are zombies, and will eventually close. Some are being repurposed as housing, medical facilities, college classrooms, corporate offices, health clubs or whatever, and some will be torn down.

I even read about one in Pennsylvania that has been transformed into the “Zombie Experience.” In a twist on the haunted-house ride at an amusement park, patrons walk through the dark, deserted and deteriorating stores. At some point they are set upon by zombies, and must shoot their way out of the place. Tickets are sold out for months.

At any rate, that will still leave about 1,000 malls, plus thousands of other venues for brick-and-mortar retailers throughout the country. If they are facing an extinction event, then America is approaching radical change. “Retail salesperson” is the largest single employment category in the U.S., accounting for more than 4 million jobs. Moreover, conventional shopping is an integral part of our culture.

It’s important to understand the reason for the decline, not just for those of us who work in retail, but also for anyone interested in where society is heading. To put it in stock market terms, we need to figure out whether we’re in a correction or a bear market.
The usual suspect, of course, is the internet. Amazon’s sales are five times what they were in 2010, but it’s not only them. Thanks to mobile apps, easier return policies and other improvements, e-commerce grew by around 15 percent in 2016.

There is also some evidence that our basic priorities may have changed. The market share for apparel, which has always been the lifeblood of shopping malls, has dropped steadily in the 21st century. Spending on experiences, meanwhile, has taken off like a rocket.

Rocket travel is available now, by the way, but regular travel is also booming. Last year was a new record for the airline industry in the U.S., and hotels are thriving as well. For the first time ever, Americans spent more money in bars and restaurants than they did in grocery stores.

Some people argue that the growing gap between the haves and have-nots is another factor behind the decrease in store visits. The rich, they claim, are forgoing mainstream malls in favor of more exclusive locales, while the less affluent are increasingly drawn toward deep discounters.

None of these trends shows any sign of reversing itself anytime soon, which calls the question. Are the doomsayers right?

If by right we mean a cataclysmic event like the whole asteroid-dinosaur thing, then I think the answer is clearly no. Physical stores still sell about 10 times what online merchants do, and their business is still growing, albeit very modestly. What the business press largely ignored in the retail apocalypse story is that while those 3,500 chain store locations are closing, about 2,900 are opening.

What is scarier is the possibility of a slow-motion disaster. As the economist Rudiger Dornbusch put it, “The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought.”

But I don’t believe that will happen, either. The United States simply has way too much retail space, and that is a condition in need of correction. At 24 square feet per capita, we have about 50 percent more than number-two Canada, and more than double that of number-three Australia.

Just this morning, Walmart announced that it was buying the online men’s clothing maker Bonobos, and Amazon announced it was buying the brick-and-mortar grocer Whole Foods. Both merchants are rushing to become more like the other, because they think that the future is somewhere in the middle.

I think so too, and that may be the true revelation that’s going on here.

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