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Is Being in the Mall a Liability?

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150 jobs cut at Abercrombie HQ is just the latest bad news.

Exterior shot of Abercrombie storefront in a mall Photo: Justin Sullivan for Getty Images

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The latest happening in the ongoing nightmare for malls: Abercrombie & Fitch has laid off 150 people, WWD reports. Similar trouble might also be headed for J.Crew and Neiman Marcus — both retailers’ debts are piling up, according to a separate report from WWD.

While the Abercrombie layoffs are “at the corporate level” at headquarters, it could also affect stores. The company is reevaluating all of its finances and has been “aggressive at closing unproductive stores,” Joanne Crevoiserat, chief financial officer, said on a call with Wall Street in November.

Abercrombie’s is just the latest documented struggle for “mall brands.” The Limited is shutting down its operations, BCBG is cutting a bunch of locations, and Banana Republic just let its global brand president go. Among the traditional “anchor stores,” Sears is closing 100 stores and Macy’s is shuttering 150, and JCPenney has been falling short for a long time.

macys Photo: Getty Images

And it’s not just the mall brands that are suffering — it’s malls, period. The Wall Street Journal reports several real estate firms that own groups of malls have defaulted on their loans and are trying to roll back locations or unload them to other owners. The amount of past-due loans associated with mall companies rose to $3.1 billion in 2016. Fifteen percent of malls now have vacancy rates between 10 and 40 percent, according to the New York Times.

It’s a saga that shows no sign of ending anytime soon. But what’s to blame — is it the malls that suck so the stores are suffering, or stores that aren’t driving foot traffic to the malls? Here are the factors to consider.

Gen Z Won’t Shop at “Boring” Stores, a.k.a. Most Malls

Younger generations simply aren’t shopping at malls like they used to. A study released by IBM this year found that while teens love to shop IRL, more than half are seeking the type of unique and fun experiences that many malls don’t offer. “Companies have to really be thinking about, how do I make this special for each customer? How do I individualize it for them?” Mark Mathews, VP of research development and industry analysis at the National Retail Foundation, told Fashionista. The mall — trying to be all things for all people — doesn’t appeal to individualistic teens.

Designer Todd Snyder, who just recently launched his flagship store, told Racked in a recent conversation, “The big shift that's happening is people are bored with malls. They're bored with the status quo.” Nordstrom is combatting lethargy around department stores by betting big on shops-in-shop that replicate the “storytelling element [shoppers] find online,” Cowen analyst Oliver Chen told Racked.

Even though some malls are trying to get creative (think bouncy houses and live theaters), as AP reported last year, it’s not necessarily enough.

Malls Are Losing the Exact Stores It Can’t Afford To

“Anchor” stores are the drivers that take up the most square footage and have the type of name that goes at the top of a marquee. This includes department stores like Nordstrom, Bloomingdale’s, Saks Fifth Avenue, and — uh oh — Sears and Macy’s. Malls rely on these stores to pay the biggest rent and also to drive foot traffic to other stores.

But those stores have been hurting, thanks to competition from big-box stores like Target and Kohl’s, outlets like Nordstrom Rack and TJ Maxx, and online sites like Amazon. And when mall-based Sears or Macy’s go down, they can drag the other mall stores down with them.

A near-empty shopping mall. Photo: Igor Stepovik / Shutterstock

Mall Stores Aren’t Keeping Up With Trends

What could be taking a toll on malls and the stores we associate with them is that they aren’t keeping up with trends. What we see doing well in lower price ranges are fast fashion companies like H&M, Forever 21, and Zara. And while these shops are often found in malls, they are exceptions that prove the rule.

Many mall-based brands — from Limited to Express to Gap — haven’t aced the same kind of fast fashion model that can help them jump on trends quickly. Case in point: Hollister only just realized that bralettes are a thing and relaunched its lingerie offshoot Gilly Hicks this week to compete with similar brands.

And Of Course, Online Shopping Has Ramifications

Fifty-one percent of shoppers are now making their purchases on the web, according to one survey. That’s a massive figure, and one that is probably certainly definitely draining the lifeblood of malls. If you’re looking to shop at a certain store, it’s much easier to log onto its web page (or even log onto its Instagram) than to trek over to the mall. The temptation of free samples from Wetzel’s Pretzels will only get lazy shoppers so far. And while some stores are flourishing in the digital age, online shopping only has the capacity to save retailers — not entire malls.

And Hey, Not ALL Malls Are Suffering

It’s really the non-luxury malls that are hurting. As Racked wrote last year, “The internet isn't killing malls — better malls are.” South Coast Plaza, a “luxury shopping experience” — or, in non-marketing language, a really nice mall — still has strong sales in the neighborhood of $2 billion annually.

Likewise, Jing Daily asks today if a luxury mall in China is the future of the industry. Not only does it offer upscale shops like South Coast Plaza does, but it also separates itself by standing for something, by having a brand in and of itself: The mall only sells Chinese brands, hoping to promote homegrown talent. Jing Daily reports that sales at the mall have doubled since its launch in 2011.

Could American malls do the same thing — offer only American brands — and make shopping at that location a point of pride? I don’t see why not.

It may not necessarily be that “mall” is a dirty word; it’s about what’s in the mall. South Coast Plaza’s roster of high-end brands — Saint Laurent, Burberry, Fendi, Dior, etc. — is much more appealing to consumers than a sorry collection of retailers running on the fumes of ‘90s-kid nostalgia.

No matter how you slice it, it’s looking like a downward slide for your local mall. As NPD Group chief industry analyst Marshal Cohen said recently, "mid-tier malls are going to need to step up their game" if they want to stay alive these days. "The food court won't be good enough.”