assign 8c and 8d

Mall Owners Push Out Department Stores by: Suzanne Kapner Jul 11, 2016

TOPICS: Retailing, Solution to Reduced Traffic Issue

SUMMARY: Department stores used to anchor malls, but now developers draw traffic with restaurants, gyms and grocery stores. Online shopping increased competition for department stores. The rent they pay and the option to renew leases means marginal department stores can continue to operate for years. Landlords can make more per square foot with a different mix of stores. Despite closures in recent years, department stores are not closing locations fast enough. One estimate is the 800 more locations need to close to regain the sales-per-square foot numbers from a decade ago.

CLASSROOM APPLICATION: A study found that food, home furnishings and sporting goods took over 54% of the space at 229 malls when department stores left. Landlords redevelop malls to earn higher returns. A department store pays as little as $2 a square foot while other tenants pay $15 to $20. An added benefit is that the new mix of tenants often brings in more traffic. Amazon.com and changing consumer tastes are driving changes at malls because department stores no longer draw customers as they did in the past. The current environment contrasts with the past when mall development depended on department stores as anchors.

QUESTIONS:  1. Do you and your family and friends still shop at mall department stores? Why or why not? 2. What kinds of retail stores other than department stores draw you and your friends to the mall? What “magnet” retailers are mentioned in the article? 3. Evaluate the impact of Amazon.com on department stores and the subsequent effect on malls. 4. Why are rents so low for department stores, compared to other retail stores in the mall and why is it difficult to increase them? 5. In your opinion, what is one thing department stores could do/change in an attempt to adapt to competition from Amazon and changes in consumer behavior? End