With formerly successful retailers such as Sears, Rue21 and The Limited in or headed for bankruptcy, the owners of the impacted big-box storefronts and retail centers are having to find new ways to keep their parking lots packed.
“A lot of people are trying to figure out how to reorient the big boxes,” said Craig Collins, senior director of Commercial Kentucky. “There is disruption in our industry, which creates opportunity.”
Big boxes are being subdivided into smaller storefronts or filled by home improvement businesses, discount clothing stores, entertainment and climate-controlled storage, experts say.
“I think any landlord that has an abundance of big-box retail space on their books is feeling the pressure,” said Scott Gilmore, a vice president at CBRE, adding that some 100,000-square-foot stores are being parsed down to 40,000-square-feet or smaller spaces. “That is what should happen because the footprints aren’t needed.”
According to financial institution Credit Suisse’s count 2,056 stores in the United States closed in 2016. That is still lower than the more than 5,000 stores that closed in 2015; however, Credit Suisse is predicting that more than 8,500 stores will shutter this year.
While some see it as the dying off of brick-and-mortar retail, experts told Insider that’s not the case; the market is simply just changing.
Retail property owners are “looking at what can that space be used for and what does the community want from that space. They may not want it to be a big-box store. They may want it to be a fitness center, or they may want full-fledged redevelopment into restaurants or movie theaters,” said Stephanie Cegielski, vice president of public relations for International Council of Shopping Centers
Even during the recession when discretionary spending tightened, there weren’t mass closures of stores or malls, Cegielski said.
“You definitely saw some, occupancy rates fell to 88/89 percent, we’re currently at about 93 percent, so even in the great recession you didn’t see this mass exodus,” she said. “It’s not the mall of 1986 when everyone was going out to the suburbs. …They have to diversify their tenant base.”
And while some national clothing retailers are making a splash in the news with closure or bankruptcy announcements, Cegielski noted that there is a sector of clothing retailers doing quite well.
The discount clothing stores, including Ross Dress for Less, Burlington Coat Factory, T.J. Maxx and Nordstrom Rack, are expected to see between 6 percent and 8 percent sales growth in 2017, according to Retail Dive.
Cegielski noted that younger generations are driving the growth behind the discount stores.
“They tend to wear something once,” she said. “Whereas, my generation might have spent $100 on a nice dress, this generation is like ‘Well, I can get five dresses and wear them.’ ”
A number of retailers have begun offering online shopping with in-store pick up to attract and keep customers, she said. That gives the consumers the convenience of shopping online and allows them to pick up their orders when they want; it benefits retailers as well because one-third of those customers buy additional items while in the store.
“There is always going to be a desire for both,” Cegielski said, adding that local boutiques don’t typically offer a broad variety of one item, so consumers will continue seek online or national retailers when looking for something specific.
Retail companies also are introducing technology in their stores to attract shoppers.
For example, Cegielski said, Spehora has an interactive mirror that allows customers to see how different shades of lipstick would look on them without actually trying the lipstick on. Neiman Marcus also been rolling out dressing room mirrors called Memory Mirrors that take pictures and video of a shopper in different outfits so they can compare them side by side.
To be successful, retail property owners need to find the right formula — a mix of clothing, entertainment, service and other businesses, Glimore said.
“With any marketing strategy, you have always got to be flexible,” he said.
With Credit Suisse predicting that a quarter of malls in the United States will likely close by 2022, even malls, the ultimate retail centers, are looking beyond traditional clothing retailers to fill storefronts. A prime example is the restaurant and entertainment center Dave and Buster’s moving into Mall St. Matthews.
According to a June 2017 investor presentation from General Growth Properties, the national company that owns Mall St. Matthews and Oxmoor Center, apparel stores occupy 25 percent of space at its malls across the country. That is down from 43 percent in 2013.
Meanwhile, entertainment businesses are now occupying 18 percent of space at malls, up from 4 percent in 2013, according to the presentation.
“Retail brick-and-mortar is always going to be in demand,” Gilmore said. “There is likely going to be more consolidation, but it’s not all doom and gloom. (The industry) just needs to become more adaptable.”