The Demise of the Regional Shopping Mall in America
In the U.S, the total number (including homes, businesses, nonprofit organizations, etc.) of personal computers in the market place grew from 19.1 million in 1985 to 230.4 million in 2005. In 1998, 76.5 million people were Internet users. By 2005, 197.8 million people were using the Internet an average of three hours per day. The year 2005 witnessed the number of Internet users world-wide exceed one billion people. The Internet was solidly entrenched.
The Internet became the catalyst for transforming the buying habits of the American consumer. Business-to-consumer sales on the Internet for 1998 were more than $10 billion. This amount is up from zero in 1994. By 2005, Internet business-to-consumer sales were over $86 billion. The Internet business-to-consumer sales were not add-on sales. They were taken from the stores of the traditional regional shopping malls.
The dollar amount of Internet business-to-consumer sales for 1998 was approximately one percent of retail sales nationally. By 2005, Internet business-to-consumer sales had grown to 2.4% of retail sales nationally. Although the Internet’s percentage of retail sales was not significant, it still had an effect on traditional retail stores. Because retail stores operate on low-profit margins, the Internet’s business-to-consumer sales had an immediate negative affect on their profitability.
More symbolic signs of change emerged in 2006. The following traditional American stalwarts had each been in business for one hundred years or more. Federated Department Stores (Bloomingdale’s, Macys, Bon Marche, Goldsmiths, etc.) had a market capitalization of $24 billion. General Motors had a market capitalization of $19 billion. Ford had a market capitalization of $15 billion. U.S. Steel had a market capitalization of $7 billion. The following two Internet related companies had been in business for approximately twenty years by 2006. Google had a market capitalization of $123 billion. Dell Computer had a market value of $48 billion.
Many of the traditional retail stores saw what was coming. They began to hedge their bet by offering merchandise on the Internet. This only assured the continuing success and growth of Internet sales.
By 1998, even the mall owners saw what was coming. Many went to Wall Street and took their malls public. By doing this, they extracted equity and transferred their ownership risk and future obsolescence to the public shareholders. Although the outlook or rather the lack of outlook was clear, reports (by vested interests) were published from time to time promoting the attractiveness of the regional shopping mall.
After a while, the mall executives stopped their upgrade programs. Preventive maintenance programs came to a halt. Vacancies increased. Aside from a few well-managed specialties, what we dug out today is what’s left of the regional shopping malls.”
“What a story! Did anyone ever write about this?”
