Shopping malls on their way out, closing at alarming rates

While holiday shopping season kicks off this Thanksgiving week, how that shopping takes place is changing drastically in America. For many, preparing for the holidays used to mean heading to the mall, where you shopped, ate, met friends and hung out. But that mall is a thing of the past.

Shopping malls are closing at alarming rates, with analysts at Credit Suisse estimating one in four malls will close in the next five years. Retail sales at department stores are down 36.7 percent after peaking in Jan. 2001, according to Morningstar.

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Rebecca Patterson, who watches retail trends as Chief Investment Officer with Bessemer Trust in New York, said the U.S. is "over-malled" in the modern age, when the amount square footage is no longer relevant. But she said changes in how we shop are nothing new.

"Disruption is the norm when it comes to retail,” Patterson said.

Rob Karr of the Illinois Retail Merchants Association agrees, saying hype of a "retail apocalypse" is not true.

"Retail has never stood still," Karr said. "Anyone who thinks it should be this way because it has always been this way doesn’t understand retail.”

For decades the general store in the middle of town reigned supreme. That’s until it was replaced by stand alone department stores like Macy’s, which opened in New York in 1902. Then the first enclosed shopping malls surfaced in the 50s, quickly followed by big box stores like Target and Walmart in the 60s. As TVs added channels, shoppers tuned into the Home Shopping Network in the 80s. And then came the latest disruption: the Internet, with sites like Amazon and eBay.

Less retail also means less money when it comes to sales tax revenue for municipalities big and small. Places like Matteson, Bloomingdale and Mount Prospect are already trying to adjust to changing trends and closing malls.

These days, anchor stores are consolidating and big malls are left with empty store fronts. The key today: reinvention.Shopping facilities are becoming entertainment facilities, with things like trampoline parks, laser tag, rock climbing and swim schools taking over vast abandoned spaces inside malls.

Malls are also less focused on the stores themselves, and more on the shopping experience. The store IRL - Internet shorthand for "In Real Life" - at Water Tower Place, lets shoppers start to browse in person, but they can still buy items online and have them delivered to their homes.

But the statistics still leave experts scratching their heads, because while malls with big footprints are undeniably struggling, only about 10 percent of total retail sales in America are currently online. The remaining 90 percent is still done in stores, according to Patterson.

Maybe the growth of the strip mall has something to do with that. Often anchored by a grocery store,  they can offer parking just steps from each storefront. While the landscape adjusts to accommodate shoppers, shoppers need to adjust too: come to terms with the mall that once was.

“The consumer has to ask themselves: how have I changed my purchasing habits... how have we contributed to that?" Karr said.

Patterson says shopping will never disappear, and how we do it will continue to change. Unemployment is at a multi-decade low of 4.1 percent. Inflation is down, and consumer confidence this season is up.

"It’s changing. But it’s definitely not dead. Just moving into a new phase, a new phase of the journey," Patterson said.