Going Dark in 2020

Estimated reading time: 5 minutes

Have you been to your local mall lately? If not, be prepared for some things you may not be expecting. Chances are you will find far fewer shoppers than normal and many of your favorite small specialty stores are shuttered and dark. In some malls, you may find one or more of the big anchor stores strangely absent. Your first thought will probably be “look what Covid-19 has caused.” No doubt Covid-19 has contributed to stores Going Dark in 2020 and maybe even accelerated the outcome, but it is not the only villain in this scenario. Let’s take a look at some of the other underlying reasons.  

It has been widely publicized in the news, on the internet and in business publications that companies are aggressively closing retail outlets. The list of closures spans every segment of our society and includes some of the most iconic brands that touch our everyday lives. Here are a few examples of companies you will recognize and their closures. The Gap 230, GNC 900, Foot Locker 165, Macy’s 125, Neiman Marcus 43, Game Stop 200. These are all primarily mall-based units; however, the traditional brick and mortar free standing stores are not left untouched. Those brands include … Walmart 269, Pier 1 Imports 450, Walgreens 200, Microsoft Stores 83, Office Depot 90. This short list totals over 2,500 stores. The full list of closed stores is in the tens of thousands.

The question is…Why?

Covid-19 is not the primary reason for most of these stores going dark. Oh, it did its’ part for sure. Coronavirus has been with us for less than a year and was not officially declared a Pandemic until mid-March 2020. To assume that Covid-19 was the only reason business made the decision to close stores literally overnight is not entirely realistic. For the past, several years management has been reviewing unit performance, market trends, long-term viability, lease agreements, costs to close, and other financial implications involved in closing or maintaining stores. Their goal has been to protect their brand and when necessary initiating a controlled, phased closure program. Depending on how you look it Covid-19 either forced the issue or provided an opportunity.  Some of these companies will close forever while many others will restructure and reinvent themselves based on the new normal.

What is the impact?

If you read this with no background your first inclination is to think this is a devastating event. That is understandable but not completely accurate. Will there be personal loss and displacement? … absolutely. Will it be long term?… possibly but probably not likely. If nothing else the American people and businesses have proven to be both resilient and resourceful. Let’s talk about who and how they will be affected   

The consumer: The behaviors for this category seem to be pretty much charted. There has been a definite shift to a health and welfare strategy that includes limited public contact. The most dramatic shift in behaviors is the expanded use of electronic shopping options.  Buying considerations include buy online pick up at the store or buy online with home delivery. Omnichannel distribution is a prime consideration. Brand loyalty has been stretched to fit within the purchasing behaviors. Far and away this move has been led by the Millennial and Generation Z age group. When surveyed, over 77% of shoppers have switched to this behavior and do not plan to change back when the crisis is over.

The company: Just because the retail store has closed does not always mean that the company is out of business. Most, if not all, are transactional online and continue to offer their products and services. Some store closings will be temporary and scheduled to reopen at a future date. Some will reopen in a different location and you can expect them to be in a format that better aligns with changed consumers purchasing behaviors. Look for a heavy emphasis on an electronic shopping style with a strong focus on the overall customer experience.

The mall: The consumer will change; the company will adapt but the malls have a different set of issues. There are approximately 1,200 covered malls across the country. According to Green Street Advisors, a real estate research firm, department stores account for about 30% of all mall sq footage. About 10% of that space is occupied by Sears and J.C. Penney both closing stores at a rapid rate. Green Street estimates that more than half of all mall-based department stores will close by the end of 2021. Clearly that will have a domino effect on other smaller retailers adding more pressure on mall ownership to add tenants. A difficult task in the midst of a worldwide pandemic. Best estimates are that 300 (25%) of the existing malls will be unable to survive.

So, what is next for the malls? Lots of ideas and suggestions but at this point nothing firm. One mall in Providence, RI, has converted 48 stores into stylish 225 sq ft micro-apartments. Others are converting the vacated anchor store areas into up-scale office space. Local governments are investigating the possibility of converting space into homeless shelters. Some will be demolished and the land re-purposed.  As I said, lots of ideas and suggestions.

The people: Fortunately, many of the people displaced by closures have been offered other employment with the company. Just how many will take advantage of that offer is unknown, so the impact is still to be determined. One thing is clear; business models are changing. Yesterday’s skill sets may not fit tomorrow’s job requirements. Employers are not anxious to displace loyal knowledgeable employees and where practical will offer re-skilling opportunities. Employees choosing not to take advantage of re-skilling should search for other educational opportunities to advance their career path.

Is there an upside?

Hard to say at this point but that is a question everyone must answer for themselves. There is no doubt that we will come out of this a stronger and more resilient country, community, and family. Covid-19 will clarify our core values, give us a deeper connection to purpose, a focusing of priorities and a greater appreciation of life. We will survive!

If you enjoy articles from The Active Professional, please take a minute to like and share with your Social Media contacts so they can enjoy them as well.  Thank you for your support as we strive to encourage, educate and support