The Decline Of The Shopping Mall: A Capitalist Story

Keith Naughton Public Affairs Consultant
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All across America the enclosed shopping mall is under stress. Malls are experiencing higher vacancies, being repurposed and are even being demolished. The urbanist left is positively giddy, claiming the death of the shopping mall is a sign of the decline of suburbia and an embrace of a city-centric, centrally-planned, new age, creative class, sharing-economy, walkable, kumbaya cultural future.

Not so. The decline of the mall is a capitalist story, plain and simple.

The first enclosed, climate-controlled malls started appearing in the 1950s. This retailing phenomenon was created to serve the new, burgeoning suburbs (which grew because people demanded better living conditions than were provided by crime-ridden, corrupt, high-tax cities, not due to some conspiracy). Land and energy were cheap. Retailers followed their customers and the mall, as a large, convenient one-stop location, was invented.

Malls typically had several anchor department stores connected by dozens of specialty retailers and surrounded by a sea of free parking. The mall was superior to other forms of retail – standalone stores or town centers which lacked parking, variety and air-conditioning. In the mall people could access all the retail amenities of the city in one place without rain, snow or pickpockets.

The mall reigned supreme until a very capitalist thing happened: superior products arrived and began to outcompete it.

The mall itself is an inefficient system. There is a fair amount of common space – space that cannot be rented, but has to be heated or cooled and maintained. Non-leasable space is a disaster in real estate. It didn’t take long before malls started stuffing their hallways with Piercing Pagodas and advertising – but you can only fill a portion of that dead space.

As energy and land costs rose, new retailing options became more attractive. Open-air “power” strip centers had far less non-leasable space and sidewalks that don’t have to be heated, just power-washed with a hose once a day. Even so-called “lifestyle” centers with more elaborate landscaping and outdoor features are cheaper to maintain than a mall.

The retail landscape has also changed since the malls’ heyday. Big box retail chains, like Best Buy, Dick’s Sporting Goods, and Staples put pressure on smaller specialty retailers. Non-mall retailers like Wal-Mart, Target and Kohl’s cut into the sales of classic mall stalwarts like Macy’s and Penney’s. Sears is a dead man walking. Large bookstores like Barnes & Noble and Borders wiped out mall staples like Waldenbooks, before being crushed by internet retail.

And, speaking of the internet, Amazon and other internet vendors have grabbed an increasing share of the retail pie. Mall retailers have responded by moving their own sales online and closing physical stores. Shopping by click has knocked brick and mortar stores for a loop.

The net result of this retail industry transformation is that mall retailers are themselves shrinking or even disappearing with no new blood to take their place. Some of the new retailers like Target, Dick’s and Wal-Mart have taken cheap space from bankrupt mall retailers, but their limited additions have been just that, limited.

It is true that, as the economics of the mall have deteriorated, the mall is no longer the cultural touchstone it once was. But that’s a mathematical phenomenon. There are fewer of them. Less ubiquity makes anything less of an icon. As “The Brady Bunch” came and went, so will “Seinfeld.”

Meanwhile, there is no evidence of some impending emptying of the suburbs and stampede to the city. From 2010 to 2013, cities grew by 2 million while the suburbs grew by 4.4 million. It is true that city populations are rising, but slowly. This increase is of rather recent vintage, which begs the question, is city growth part of a lasting trend or just a “dead cat bounce?” After all, cities still suffer from corruption, crime, poor infrastructure and lousy public schools.

Malls themselves are far from evaporating. They are moving upscale, incorporating different mixes of retail, adding restaurants, and turning inside out – that is more retailers are directly accessible from the parking lot rather just via the interior space.

The mall no longer has the economic and cultural impact it once had. New forms and products have replaced it.  People have moved to superior options. And that is what happens in an open, competitive capitalist system. The left has always hated the mall, in part because it was a representation of capitalism and consumerism. Ironic that it is capitalism and consumer choice that have replaced the mall, not a leftist cultural transformation.

You would think these people would get tired of being wrong all the time.