Malls are undergoing a transformation, as I noted on Small Business Trends last year—and that transformation is accelerating. As the way consumers shop changes, malls are losing the big department stores that were their traditional anchor tenants. While that’s bad news for mall owners, it can be good news for small business owners (and you don’t even have to be a retailer to take advantage of the trend).
Here’s a quick overview of the current and future state of America’s malls—and how small business owners can benefit from these changes.
- The mall vacancy rate hit 8.6% in the first quarter of 2018, according to data from real estate research firm Reis. That’s the highest it’s been since 2012.
- Coresight Research predicts at least 1,000 department stores will close by 2023 as consumers continue to spend more on experiences than on things.
- All types of shopping centers, from enclosed malls to open-air malls, are feeling the pinch. However, vacancies are highest in strip malls and neighborhood shopping areas, according to Reis.
Empty retail space in malls is hurting communities, which lose jobs for residents, as well as income from retail sales tax. Of course, mall owners as well as city leaders want to fill these empty spaces.
For existing retailers, now could be a good time to:
- Negotiate for space in an upscale mall. Coresight says high-end, premium malls are more likely to survive the current shakeout than mid-range or low-end shopping centers.
- Negotiate for a bigger or better space. If you’re currently in a mall that’s losing major tenants, but you still have a solid customer base and believe the mall will survive, look into expanding your space or moving to a better location within the shopping center.
- Open a store. Are you an e-commerce entrepreneur? Consider opening a small brick-and-mortar store to test the waters of “bricks and clicks.”
5 Businesses to Dominate the Future of Shopping Malls
Here are 5 things the experts predict will fill vacant mall space, and ways both retail and non-retail businesses can take advantage of them.
1. Rental or resale shop: Alternatives to traditional retail, such as rental and resale, will take $17 billion in spending from traditional retail channels by 2023, Coresight predicts. While rental and resale businesses may not be profitable enough to support rents in large shopping centers, open spaces in strip malls could mean opportunity.
Apparel resale shops catering to younger shoppers who are both fashion-conscious and environmentally conscious have already proven popular. Beyond apparel, you could resell furniture, sporting goods, and more. A resale store selling books, CDs, records, video games and musical instruments (basically, all kinds of entertainment items) has been thriving for the past few years in a mall near me.
2. Pop-up shops: Pop-up stores in malls and shopping centers will become increasingly popular as a way to satisfy consumers’ thirst for new experiences, according to Coresight. If you own an ecommerce business, you could use a pop-up shop to connect with local customers in person, build excitement about a new product line or limited-term product release, or satisfy demand for your product during the holiday shopping season.
3. Events: Limited-time events are another way malls and shopping centers will use vacant space, Coresight predicts. Both retail and non-retail businesses can take advantage of this trend. For example, an apparel retailer could host a back-to-school fashion show for teens. A local beauty salon could host a day of makeovers. You can also find out what events are planned at your local mall and how your business could be a part of them.
4. Service businesses: Consumer spending on products (as opposed to services) declined between 2000 and 2017, and Coresight says the trend will continue through 2023, when consumers will spend an additional $78 billion on discretionary services. According to Chain Store Age, more malls will fill vacancies with service providers so shoppers can handle more of their needs with one trip. Malls with mixed-use retail and residential space, in particular, offer a lot of potential for service businesses. All those residents need services such as hair and nail salons, pet grooming services, and packing and shipping stores.
5. Office space: Some empty space in shopping centers will be converted to offices or co-working spaces, according to Coresight. This could be an opportunity for you to grab desirable commercial office space. The convenience of working in a mall location could even help you attract and keep employees.
Want an idea what the mall of the future will look like? Check out Coresight Research’s visual of malls today and tomorrow, below.
Photo via Shutterstock