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Sometimes, the biggest clues to financial health lie in the tiny details.
Sbarro, the pizza maker that’s ubiquitous in food courts across the country, recently filed for a second bankruptcy in three years. The chain is going for a Chapter 11 reorganization. The filing cited “declining traffic in the mall food courts where it does much of its business.”
Think about that. Pizza, one of the most popular foods in the world, can’t make money in a mall.
That’s just one more small sign that the era of regional shopping centers drawing customers with a vast selection of things you can feel and touch may be drawing to a close. And other non-mall retailers may soon be feeling the pinch as well, as we move from an era of getting in the car and traveling to go shopping, to sitting at home and ordering it with a click.
With online shopping now accounting for some 40% of overall sales, doubling since 2012 to the Seattle Times, it’s only a matter of time before your local mall joins the long, sad list at deadmalls.com, a site devoted to the demise of this particular retail phenomenon.
Part of the change is cultural. Malls rely on so-called “anchor” tenants, which used to include Sears, Montgomery Ward, Woolworth’s, and other old-school retailers that sold a little bit of everything. But today’s big box chains – the Targets, Walmarts and the like – prefer to have their own free-standing locations.
Of course, incidents like this, or this, don’t help.
It’s Not Just the Malls
There are companies that specialize in shopping malls that are doing well. Senior citizens, after all, need a space to walk around. And there are places where inclement weather, or lack of income, leaves little to do on a Saturday.
But most of the value of a mall is based on the lease rates it purportedly can get, an estimate looking all the more shaky in an age where major tenants are opting out and foot traffic is diminishing. These highly leveraged locations may be caught in a death spiral.
Add to that that we’re just in the early stages of the “on-demand” revolution. Companies like Amazon are gearing up in a big way, opening huge retail distribution centers that allow them to get you goods within a day, sometimes on the same day. Of course, these centers employ few full-time employees, relying instead on temps when the “surge” of retail activity hits during the December season. But that’s another story.
In fact, some analysts believe that overall US retail growth is an illusion, being fueled by poaching and expansion. In The American Model of “Growth”: Overbuilding and Poaching, the theory goes that if one Starbucks is great, two are even better. And a lot of similar thinking goes into the expansions of drug store chains and other retail players, many of whom poach customers from the big box stores.
This, of course, will lead to many chains hitting their limits, closing unprofitable stores, and dragging down retail locations as vacancies affect nearby businesses.
Sbarro, the pizza maker that’s ubiquitous in food courts across the country, recently filed for a second bankruptcy in three years. The chain is going for a Chapter 11 reorganization. The filing cited “declining traffic in the mall food courts where it does much of its business.”
Think about that. Pizza, one of the most popular foods in the world, can’t make money in a mall.
That’s just one more small sign that the era of regional shopping centers drawing customers with a vast selection of things you can feel and touch may be drawing to a close. And other non-mall retailers may soon be feeling the pinch as well, as we move from an era of getting in the car and traveling to go shopping, to sitting at home and ordering it with a click.
With online shopping now accounting for some 40% of overall sales, doubling since 2012 to the Seattle Times, it’s only a matter of time before your local mall joins the long, sad list at deadmalls.com, a site devoted to the demise of this particular retail phenomenon.
Part of the change is cultural. Malls rely on so-called “anchor” tenants, which used to include Sears, Montgomery Ward, Woolworth’s, and other old-school retailers that sold a little bit of everything. But today’s big box chains – the Targets, Walmarts and the like – prefer to have their own free-standing locations.
Of course, incidents like this, or this, don’t help.
It’s Not Just the Malls
There are companies that specialize in shopping malls that are doing well. Senior citizens, after all, need a space to walk around. And there are places where inclement weather, or lack of income, leaves little to do on a Saturday.
But most of the value of a mall is based on the lease rates it purportedly can get, an estimate looking all the more shaky in an age where major tenants are opting out and foot traffic is diminishing. These highly leveraged locations may be caught in a death spiral.
Add to that that we’re just in the early stages of the “on-demand” revolution. Companies like Amazon are gearing up in a big way, opening huge retail distribution centers that allow them to get you goods within a day, sometimes on the same day. Of course, these centers employ few full-time employees, relying instead on temps when the “surge” of retail activity hits during the December season. But that’s another story.
In fact, some analysts believe that overall US retail growth is an illusion, being fueled by poaching and expansion. In The American Model of “Growth”: Overbuilding and Poaching, the theory goes that if one Starbucks is great, two are even better. And a lot of similar thinking goes into the expansions of drug store chains and other retail players, many of whom poach customers from the big box stores.
This, of course, will lead to many chains hitting their limits, closing unprofitable stores, and dragging down retail locations as vacancies affect nearby businesses.
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