Amarica’s malls final paper

AMERICA’S MALLS AND DEPARTMENT STORES CRISIS AND HOW TO AVOID THIS PHENOMENON IN EUROPE
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Abstract
The United States is currently undergoing a crisis in its retail industry. There have been numerous closures of shopping malls and department stores. While others are getting closed down, others remain struggling as they file for bankruptcy. Apart from those getting closed down or struggling, there are certain shopping malls that continue to record increase in sales. The situation is not easily understandable. A lot has been written on the subject although the actual situation still remains unclear. This thesis paper aims to provide clarity on the actual situation facing America’s shopping malls and department stores.
This thesis employed the use of various research methodologies; both primary and secondary. Literature survey, as a secondary research methodology, was used in this research. Relevant information on the topic was collected and analyzed. Online survey and interviews were the primary research methodologies used in this research. The data collected, both qualitative and quantitative, were analyzed.
According to the data analyzed, America’s shopping malls and department stores are alive; though sales have dropped and some are getting closed down. But still, a lot of retail activity still takes place in the shopping malls and department stores. Lack of customer experience in the malls was determined as the main reason for the numerous closures of shopping malls and department stores in the U.

S. Online retailing has also played a role in the crisis.
Introduction
“Dead malls” has become a frequent term used for the past few years in the United States media. The term was coined to refer to the abandoned large shopping centres in the country. The retail market has faced challenges in recent times. In 2017, headlines on the struggles of the retail market including loss of jobs and closure of stores dominated the U.S. media. About 6400 store locations were closed in 2017 and this expected to continue over the next few years (Garfield, 2017, n.p). All major department stores including Kohl’s, Sears, Macy’s and Wal-Mart have closed down some of their stores in recent years. In 2017, Macy’s announced that it would close 68 of its stores with a majority of them located in high-quality malls. Most of the affected Macy’s stores also happened to occur within 10 miles of another store. This suggests that most of these shopping malls and department stores are too many in a small space leading to cannibalism. The closure of these stores has also been common in areas where profits generated are low (Garfield, 2017, N.p.), further pointing towards too many malls and cannibalism.
The United States has about 1200 major shopping malls, shopping center surfaces with a growth rate that doubled the American population increase in the years between 1970 and 2015 and had a greater shopping surface area per capita than Canada, 10% more than Germany and 5% more than the United Kingdom (Thompson, 2017, N.p.). However, these malls were always crowded with all kinds of people willing to spend their time and money there. About forty years ago, when shopping malls and department stores were started, they were designed so that members of communities could have a common space to interact and have a sense of belonging. Shopping malls and centres were started as neutral, safe and public spaces which englobed art, entertainment, and commerce (Quito, 2015, N.p.). People were able to acquire all the commodities they needed at one point. A lot of commercial and entertainment activities were enclosed within a single space. This made it very convenient for consumers. A lot of activities were conducted at the mall. In a study by Farrag, El said and Belk to determine what activities constitute to the mall experience, they come up with seven main activities from the study. These activities include self-identity, freedom, safety, convenience, entertainment, bargain hunting and appreciation of modernity. It is obvious that a lot of activities attracted consumers to the malls. It is, therefore, a surprise that numerous shopping malls and department centres are being shut.
As the closure of numerous shopping malls and department stores continues, other retail companies in the industry continue to struggle. Some of the established retail brands that are struggling include Ralph Lauren, Sears, Radio Shack, Lululemon, and Urban Outfitters (Hortascu and Syverson, 2015, 89). Huge retail brands continue to close some of their stores to stop incurring losses, while others such as Radio Shack are filing for bankruptcy (Sanburn, 2017, 42). According to Standard & Poor’s, ten retail companies were declared bankrupt in 2017 alone (Calfas, 2017, N.p.). This shows the crisis facing shopping malls and department stores. The decision to file for bankruptcy is never made overnight. It shows these retail brands have been struggling to generate revenue and they also predict the situation is not going to change soon. Struggling retail brands always find it difficult to revive themselves since there is little revenue generated to cover investment costs or costs of other strategic plans.
This crisis facing America’s malls and department stores would be understandable if the United States economy was struggling, but this is not the case. On the contrary, the U.S. economy has been thriving. The United States has posted positive GDP growth rate since the end of 2009; with 2017 recording the highest growth rate of 4.49% since 2010 (4.56%) (Trading Economics, 2018, N.p.). And according to the United States Department of Labor, the rate of unemployment in the U.S. has been on the decline since the end of 2009. The unemployment rate has steadily dropped from 9.9 percent at the end of 2009 to currently at 4.1 percent. This means more people receive monthly income hence have money to go shopping. There has also been a stable wage growth, more significantly for middle and lower-income classes.
The state of America’s malls and department stores is also difficult to understand since there are some companies whose sales continue to grow. These are high-quality malls that perform above the industry’s average; generating in excess of $1000 for every square foot (Thomas, 2018, N.p.). Examples of such malls include Ala Moana Centre in Hawaii which records sales worth $1,450 for every square foot; Sawgrass in Florida ($1,149); Oakbrook Center ($911) (Thomas, 2018, N.p.). These malls mostly host food stores, experiential venues, and various e-commerce brands. These high-performing malls are located in high-density places or regions known for high numbers of tourists. Over the past five years, these malls have recorded double-digit growth rates in terms of sales. And investors such as Simon Property Group and General Growth Properties are still investing in these high-quality malls so that they become more powerful. For example, the King of Prussia mall which is located outside of Philadelphia was recently expanded by 155,000 square feet (Thomas, 2018, N.p.). This was a billion dollar expansion and redevelopment project. Such kind of investments makes the already high-quality shopping mall more interesting.
This research is very significant since it aims to address the current situation of America’s malls and department stores. There has been a mixed performance in sections of America’s retail industry. While some of the shopping malls and department stores are being closed, others are recording continuous increase in sales. Various reasons for this mixed performance in the retail industry have been thrown around, especially for the closure of numerous shopping malls and department stores in the past year. Most stakeholders in the industry have blamed the growth of online shopping while others have shifted the blame on the widening wealth gap. Other stakeholders also believe changes in consumer preferences are the major cause of the crisis faced by America’s shopping malls and department stores. It remains unclear what has caused the closure of numerous physical stores in the U.S. while others continue thriving. This research will aim to address this knowledge gap.
Research Questions
Over the years, shopping malls and department stores have played a major role in delivering products to the final consumer. About a decade ago, retail business was booming in the United States. However, the situation is currently different. Shopping malls and department stores in the United States have been struggling, some being closed. On the other hand, some of the shopping malls have been doing extremely well. This research attempts to provide a better understanding of the current situation facing America’s malls and department stores and also how such a situation can be avoided in Europe.
The author, therefore, aims at evaluating the American retail model through the years, from its origin to its progression, in an attempt to establish the possible causes of the current situation facing America’s malls and department stores. There is a contrast in the performance of shopping malls in the United States, with some performing poorly to the extent of being closed while others are performing well as their sales continue to increase. This thesis, therefore, will focus on determining the current situation of America’s shopping malls and department stores; whether they are dead or still alive. The thesis will also look into the possible consequences of America’s case in Europe. To achieve these objectives, the following research questions are crafted,
What is the actual health of the American shopping malls and department stores?
What has caused the closure of numerous shopping malls and department stores in the United States?
Are the model of shopping malls and department stores still viable?
What can American retailers do to reverse the continuing closure of their shopping malls and department stores?
What impact can this case make on the European retail model?
Key definitions
Retail refers to the sale of goods and services to the final consumers with no intentions of resale (Hortascu and Syverson, 2015, 90).
A shopping mall refers to a large enclosed area where consumers are able to acquire a variety of goods and services. A mall has numerous shops, restaurants, banks and movie theatres.
A department store refers to a large retail establishment which offers a wide range of products sorted in different departments.
Online shopping refers to the act of buying either goods or services over the internet.
A retail model refers to the structure or means of creating value for goods and services to consumers (Sorescu et al., 2011,3). This is determined by how retailers organize their operations, how they execute these operations and the participation of various stakeholders.
Research Structure
This thesis paper starts with an introduction section. This section focuses on the relevance and contemporary nature of the topic. This section also has three other subsections; Research Questions, Key definitions and Research Structure.
Section 2 of this thesis paper has the Literature Review. The Literature Review is divided into four subsections to provide a better understanding of the topic. These subsections include the origin and development of the American retail industry; the current situation of the American retail industry; the evolution of the American retail industry and Europe’s retail situation. The context of the thesis is to evaluate the American retail model and to provide a better understanding of the crisis facing America’s shopping malls and department stores.
Section 3 of this thesis paper discusses the research methodology. It is subdivided into 4 subsections, Approach; Research Design; Data Collection and Quality of Research.
Section 4 of this thesis paper analyzes and discusses both the primary and secondary data collected in the literature survey, online survey and interview.
Section 5 of this paper makes the relevant conclusions based on the analyzed data.
Literature Review
This section will focus on identifying and collecting secondary information that is relevant to this research. It will focus on the origin, development and current situation of America’s retail industry. The United States’ retail industry is the largest in the world (The Swedish Trade & Invest Council, 2015, 3). A third of the retail market share is controlled by 12 largest retail companies which include; Wal-Mart Stores, the Kroger Co., Costco and the Home Depot. Most of the sales in this retail industry are done in physical stores; however, online sales are growing rapidly. The industry has recorded positive growth, except during the recession; a period in which the industry recorded a negative growth rate. The industry has since bounced back and continues to grow. The performance of the U.S. retail industry is captured in Appendix 1. Information on the European retail market, with special attention to the United Kingdom, will also be collected. This will enable comparison of the American and European retail markets. The comparison will help determine whether the crisis in America’s shopping malls and department stores is likely to be witnessed in Europe. Throughout the literature review, the author will aim to establish the possible causes of the crisis facing the American retail industry.
The Origin and Development of the American Retail Industry
Before 1945, the Pre-Modern Period, general stores and businesses run by the family such as grocery stores and hardware stores served the people in various town. General stores offered a wider variety of products at a single location. Such stores were common all over the United States. This was the beginning of the retail industry in the country (Hortascu and Syverson, 2015, 90).
Between 1945 and 1975, there was the development of department stores and store chains all over the nations. Retail brands such as Sears, Woolworth, Wal-Mart and Macy’s, among others become common in the U.S., especially in cities and the suburbs (Hortascu and Syverson, 2015, 90).
There was further expansion in the American Retail Model between 1975 and 1990. The store chains become more popular across the nation. This period also marked the start of a new speciality store referred to as the category killers. These stores sold all products within a certain category such as electronics. These stores become too many across the nation, saturating the market (Hortascu and Syverson, 2015, 90).
Between 1990 and 2000 there was the consolidation of the retail industry. Regional store chains got spread into other regions, as big retail chains only got bigger; expanding into other regions. Stores run by family members were gotten rid of as they were unable to compete with the expanding chain stores in term of prices. This period also led to the development of malls where all products from food to clothes were found under a single roof. Consumers only had to go to a single place to find everything they wanted; this was very convenient for the consumers. The prices of the products were also lower. Wal-Mart became the world’s largest retailer during this period as it adopted the mall concept. A study in the 1990s had predicted that about 50% of the stores that had been constructed all over the country would be shut by the year 2000. This prediction was proved right as a number of retail stores which included, McCory, Zayre, G.C. Murphy and Venture Stores among many others were closed. Other regional store chains were also gotten rid of in the retail industry; paving way for national store chains like Home Depot, Wal-Mart, Costco and Target to become leading retail chains. A few stores controlled majority of the retail industry.
The new millennium brought with it online retailing. Online retailing has grown rapidly over the years as more people have trusted the internet to purchase goods and services. Online retailing has grown steadily from 0.9 percent in 2000 to 6.4 percent in 2014 (Hortascu and Syverson, 2015, 96). In 2017, online sales increased by 15.9 percent from the previous year and accounted for 8.9 percent of the total sales (Kleinhenz, 2018, 4). Online retailing currently transacts 9-10 percent of the total retail sales in the United States (Statista, 2018, N.p.). Appendix 2 shows online retail sales in the U.S. from 2013 to 2017 and a forecast to 2021. Therefore, it still remains a small part of retail activities. In 2013, the majority of online shopping, about 85 percent took place in the Electronic Shopping and Mail-Order Houses (ESMOH); a subindustry under online retailing (Hortascu and Syverson, 2015, 97). The main categories of products sold online include; footwear, accessories, and clothing. Other categories of products include; jewellery, furniture and garden equipment and supplies.
It is expected that the American retail model will continue changing. Lesser brands of retailers will be gotten rid of as the bigger brands continue to expand. This can be attributed to the fact that bigger brands have the capital to invest further in their brands through expansion of their stores and also adopt new technology which is attractive to the consumer. This is what may be happening in the current retail industry; as high-quality malls are expanding others are being shut down. It is also expected that more people will shop over the internet as more products are made available on the online retail platform. The American retail model is one which will always continue adapting within every decade. It is, therefore, crucial for retailers to notice such evolution and align themselves with it; because if they do not, the industry will find a way to wipe them out of it.
The Current Situation of the American Retail Industry
The United States retail trade continues to have mixed performances for the past year. According to the U.S. Census Bureau, retail trade fell by 0.5 percent in February 2017. This was followed by 0.1 and 0.3 percent rises in the next two months. There was no growth in May. Retail trade again fell by 0.1 percent in June; however, this was followed by a positive growth of 0.5 percent in July. The trade again fell by 0.1 percent the following month. This was followed by a period of constant positive growth, with growths of 2 percent, 0.7 percent, and 0.8 percent recorded in September, October, and November respectively. There was no growth in December. The industry began the New Year (2018) on a poor performance, with a drop of 0.3 percent in retail trade. This was the largest drop in the past year. This was mainly attributed to a drop in auto sales. However, there were also drops in other four out of thirteen major retail categories, sporting goods, hobby, book and music stores; health and personal care stores; furniture and home furniture stores; and gardening and building material stores. Other categories such as electronics and appliance stores; general merchandise stores; miscellaneous store retailers; clothing and clothing accessories stores and sales at service stations indicated positive growths in January. Also, there was no growth in remaining sectors which include, non-store retailers; food and beverage stores and food services and drinking places (Ferreira, 2018). The following information is captured in Appendix 3.
The year 2017 alone saw the ten retail companies in the retail industry declared bankrupt. Also, many established firms like Ralph Lauren, Lululemon, and Urban Outfitters are struggling, while other established retailers such as Sears and Macy’s are closing their stores. Macy’s announced more than 100 closures of its shops. According to Ronald Friedman, a partner at Marcum LLP, America is an over-retailed country, and since the mid-2000s there has been a decrease in sales and traffic in most of the anchor mall shops such as JCPenney, Macy´s and Sears (Sanburn, 2017, N.p.). Making a comparison versus last year, in April of 2017 more than 2,880 stores had already been closed, that’s more than half of the whole outlets shut down in the entire period of 2016. Based on Credit Suisse predictions, by the end of this year, 8,640 retail spaces will close meaning that this crisis will be more severe than the Great Recession of 2008 when 7,242 shops disappeared (Gustafson, 2017, N.p.). Based on the report published by Morningstar Credit Ratings, 45% of the American shopping malls suffer from low sales and a significant drop in the tenant’s occupation and according again to Credit Suisse, it is estimated that between 20% to 25% of the shopping malls in America will close by 2020 (BI) (The Economist, 2017, N.p.).
However, as some parts of the retail industry continue to perform poorly, others continue to flourish. Only 3.4 percent of American malls can be considered to be dying as the rest 96.6 percent can still be considered to be very much alive (Hurley, 2015, N.p.). Some sections of the industry are performing well. For example, jeans and young apparel sales are performing well, due to the motivation of teenagers who are going back to the malls giving encouraging results for traditional shopping mall brands, despite the reduction of the foot traffic. For instance, Hollister has had a sales increase of 5%; American Eagle has risen their sales by 2% and has reported ten consecutive quarters of sales growth (Loeb, 2017, N.p.). But there are different opinions about youngsters´ shopping trends as Dan Bell, director of The Dead Mall Series, who believes that teenagers have an old perception of shopping centres, something that belongs to their parents´ childhood and not theirs (Sanburn, 2017, N.p.). Furthermore, what are considered as “luxury malls,” are still achieving excellent results with sales up to 470 USD per square meter and outstanding revenues including malls such as Galleria in Houston, Shops at Crystals Las Vegas and the BAL Harbour in Miami. These Shopping centres represent around 29% of the total retail surfaces in America, and its tenants are high- end retailers such as Saks Fifth Avenue, Bloomingdales, Neiman Marcus and Nordstrom (De Haro, 2016, N.p.). Considering that the US wealth is concentrated in a narrow part of the population, the key success of these malls is that they are targeting very high-end profiles that are not willing to get discounts but luxury and exclusivity.
The Evolution of the American Retail Industry
The retail industry has always evolved and restructured itself throughout its history. Many factors have led to such evolution, development of information technology, cultural trends and changes in consumer preferences (Goodings, 2017, 2). The retail industry has changed over the years. In the past, consumers had limited knowledge of products. The salesperson played a huge role during the transaction process; they influenced what consumers bought. But as information technology has continued to develop over the years, information on products is easily available on the internet. Consumers have been able to conduct their own research hence become knowledgeable about the products they wish to buy. Consumers also found it difficult to locate the right product at the right store. Familiarity with one’s surroundings was key in locating the right product. Over the years, it has become easier to locate stores and products with even maps and directions to the exact location (Hagel et al., 2015, 3).
To have a better understanding of the evolution of the American retail model, it is therefore important to understand the evolution of the industry’s stakeholders. These stakeholders have largely influenced the continuous evolution of the retail industry in the U.S. (Goodings, 2017, 2). These stakeholders include the consumer, the investor, the retailer and the technology companies.
According to Goodings, the consumer, as a stakeholder in the retail industry, wants a seamless retail experience (2017, 6). And the development of information technology has enabled this. This has been enabled by creating more accessibility to goods, choice, availability and price transparency. Online retailers such as Amazon have raised consumer expectation. Consumer traits have changed over the years, though the change is influenced by locality and the generation of the consumers. Consumers prefer local products and a generation such as ‘Baby Boomers’ are more likely to be loyal to a brand compared to the ‘Tomorrow’s Teenagers’ generation (Goodings, 2017, 6). However, some consumer wants are general across the globe; they include convenience, value, experience, a connection, wellness and flexibility (Goodings, 2017, 6).
Retailers have also been evolving to meet the ever-changing consumer expectations. Each retailer is coming up with their own strategy to satisfy their customers. However, currently, more retailers with physical stores are making them digitally productive (Goodings, 2017, 7). These retailers believe their physical malls and stores are still key to the success of their retail business. They have, however, incorporated some technology in their stores; examples include virtual reality, touch screens in their stores and smart fitting rooms (Goodings, 2017, 7). The role of the shopping malls and department stores is however changing. They have become marketing tools, inventory, and distribution centres (Goodings, 2017, 7).
Technology companies have played a huge role in the transformation of the retail industry. For a very long time now, new development and innovations in technology have changed the way people live and communicate. In retailing, the development of technology has changed consumer preferences over the years. Amazon is one of the biggest technology companies involved in retailing. Amazon started by dealing with books, then electronics and is currently even retailing grocery products. As of 2017, Amazon had 244 million active users, with 30,000 warehouse robots as a workforce. In 2012, the company had about 32,000 employees across the globe but that number had risen to 110,000 towards the end of 2017. Amazon currently has operations in 15 countries; giving consumers access to about 400 million products (Goodings, 2017, 8). Amazon’s global reach is rising rapidly, as seen in Appendix 4, and is still expected to increase. In 2017, Amazon, through Amazon Prime, shipped more 5 billion products globally (Business Insider, 2018, N.p.). Amazon Prime has now been introduced in countries such as Mexico, Singapore, the Netherlands and Luxemburg. In Singapore, there were 11,000 downloads of the Amazon app just three days after it was launched there (Business Insider, 2018, N.p.). It proved an immediate hit. In India, Amazon has overtaken Flipkart (an e-commerce company based in India) in terms of mobile engagement (Business Insider, 2018, N.p.). Amazon has also seen rapid growth in Mexico since its launch. Amazon has become a nightmare for brick-and-mortar offline shops, as their sales have grown from 16 billion USD to 80 billion USD in seven years, and half of all American homes are subscribed to Amazon Prime based on the report made by Consumer Intelligence Research Partners (Isidore, 2017, N.p.). But not only Amazon, the e-commerce way of shopping is also successful now thanks to their ability to be quick, offering smooth policies for returning goods, convenient, as there is no need to go anywhere else to buy, and securing the trust of clients regarding the payment methods which has increased due to the innovation of new apps and financial services such as mobile wallets. From 2010, the e-mobile industry has risen by 20% of expenditure (Thompson, 2017, N.p.). Apart from the wide variety of product it offers and the improved convenience, Amazon also offers cost transparency. Amazon has disrupted the traditional means of retailing such as the use of shopping malls and department stores. Other technological developments that are influencing retail include virtual reality, smart fridges, driverless cars and artificial intelligence.
Shopping malls and department stores, as means of traditional retailing, are being challenged by the ever-developing technology. Though, the impact is not even across the globe. Goodings argues that retail is still alive; however, it is consumers who have changed how they live and shop. And as long as technology continues to develop, this is expected to continue (2017,2). Shopping malls and department malls are therefore expected to transform and align themselves with new technology and new consumer preferences. The continuous growth of technology has disrupted the retail market and has the potential to significantly change the whole retail industry as previously known.
It is expected that the closure of America’s malls and department stores will continue as online sales continue to rise (Goodings, 2017, 2). It is also speculated that the rise of online retailers such as Amazon and the closure of various malls and physical stores in the United States will lead to the development of a huge white space in the retail industry (Winthrop and Konisar, nd, N.p.). This, according to Winthrop and Konisar, will lead to the formation of two types of retailers; automators and humanizers. Automators will use the latest technology to find, buy and deliver products. This will be done at the lowest prices possible. Amazon is expected to be the dominant automator. Humanizers will be made of young brands whose main aim will be to provide consumers with what they care about; other than socks and shampoo. These brands will develop a connection at an emotional level with consumers and also provide consumers with a personalized experience.
It is therefore key for shopping malls and department stores to be flexible and adapt to new trends. The trends should focus on satisfying the new consumer preferences. For traditional retailers to survive in the current retail industry, it is imperative that they respond to the retail evolution.
There are future expected trends that will largely influence the retail industry in the United States. These trends will, as always, determine the successful retailers and those that done away with. In the next phase of the industry, it is expected that retailers will use segmentation and localization concepts (Maxwell and Dugal, 2015, N.p.). They will employ several strategies so that they target specific segments of customers and also specific local markets. Retailers will use new concepts rather than established concepts in order to gain competitive advantage. Customer service will also prove to be very key. The way retailers serve customers will become more important compared to the products they sell (Maxwell and Dugal, 2015, N.p.).
Europe’s retail situation
Evolution of European retail has always been driven by the stakeholders (Fernie, Fernie, and Moore, 2004, 1), much like in the United States. These stakeholders include the consumer, the investor, the government, the retailer and the technology companies. However, it was not until the 1990s that technology played a huge role in changes occurring in the retail industry. The interaction between the industry’s various stakeholders leads to change and evolution in the industry. Changes in the consumer environment such as lifestyle trends, demographic and socioeconomic trends influence change in the retail industry (Fernie, Fernie, and Moore, 2004, 2). The government is also responsible for some of the change that has occurred in European retail industry. This is achievable through the regulatory laws set by the governments. These regulations influence the locations and operating time of psychical retail stores.
There are variations in the situations of the retail industry in the United States and Europe. The continued evolution of the retail industry due to new innovations in technology does not have the same impact across the globe (Goodings, 2017, 3). For example, the U.S. has about five times more space covered by shopping malls compared to Europe; with 1600 square meter per capita in the U.S. compared to Europe’s 300 square meters (Goodings, 2017, 3). Europe, therefore, has a different retail make-up to the United States. Another factor that contributes to the difference in the impact of technology is that the most the U.S. shopping malls rely on the city’s centre’s vibrancy (Goodings, 2017, 3). Shopping centre sales density is an indicator of retail performance. Since the U.S. has numerous shopping malls and department stores, sales are spread very much within all these malls and stores. In comparison, European shopping centres enjoy high shopping centre sales density due to the lesser number of malls and stores (Goodings, 2017, 3). Shopping centre sales density of various European countries compared to the United States is shown in Appendix 5.
Online retailing is varied in Europe, with the United Kingdom market more mature compared to the rest of Europe. Appendix 6 shows the percentage of consumers in European countries who order their goods or services online in the year 2006 compared to 2016. All the countries have a significant increase in consumers ordering products online over the ten year period. However, growth rates have slowed in the past year across the European region. In 2017, online retail accounted for 8.9 percent of total sales. This was a rise of 15.9 percent from the previous year (Kleinhenz, 2018, 20). A lot of factors are still expected to influence online retailing; for example, the use of drones will lower transportation costs and also improve the efficiency of online retailing while new legislation such as increased taxation will have a negative impact on online retailing.
Shopping malls and department stores in Europe are still expected to transact 73% of retail sales by the year 2021 (Goodings, 2017, 7). Consumers will always have the desire to go out, feel the products they are about to buy, socialize with other shoppers and exchange ideas. Consumers will always want this shopping experience (Yates & Sykes, 2017, 3). There is a high chance this will not change for some time to come. Therefore, physical stores still play a big role in retailing. However, the role of physical retail stores in Europe is also changing. With these stores using online features such as ‘showrooming’ and ‘click & collect’ the stores have begun inventory and distribution centres. Shopping malls and department stores have adopted such features to increase shopping convenience which is what most consumers expect. Sales through ‘click & collect’ in the UK is still expected to increase by 66% over the next five years.
There are recent trends associated with the European retail industry. Many retail stores are upsizing so that they can also create flagship stores. These stores are increasing their floor capacity at a certain location so that it acts as the head store while the others are flagship stores still promoting the retailer’s brand (Yates & Sykes, 2017, 6). Examples of such retailers include Zara, JD Sports, River Island and H&M. JD Sports especially has almost doubled the size of the store located in Grosvenor’s Liverpool ONE scheme from 16,000 square feet to 30,000 square feet. JD Sports has also doubled the size of its Glasgow Fort store to 40,000 square feet (Yates & Sykes, 2017, 6). There has also been a recent trend in the growth of certain retail sectors in the European market. Sectors such as sports, cosmetics, and lifestyle brands have grown rapidly. For example, at Westgate Oxford which is about 800,000 square feet and is newly opened, Estee Lauder has taken units for five of its brands (MAC, Smashbox, Bobbi Brown, Aveda and Jo Malone). The VF Corporation has also taken units for vans and Timberland, two of its brands (Yates & Sykes, 2017, 6). Consumers are also in search of independent retailers who offer authenticity and a sense of community. More independent retail shops are being opened compared to those being closed hence an increase in the total number of independent retail shops in the U.K. (Yates & Sykes, 2017, 6). For a retailer to remain successful in the U.K., it is crucial that they adopt a strong omnichannel strategy. This strategy involves the integration of a retailer’s operation in the store, on social media and online. There should be a level of consistency in the service, products, and experience for consumers. Retailers are also adding different and newer brands to their stores with the aim of attracting more consumers to their shops. For example, Debenhams has added brands such as Franco Manca, Sports Direct, Patisserie Valerie and Joe & The Juice (Yates & Sykes, 2017, 9).
More future trends are still expected to set in the U.K. retail market. Consumers will continue wanting more retail experience. A study has shown that consumers are spending more on ‘experience’ compared to fashion such as footwear and clothing (Yates & Sykes, 2017, 10). The ‘experience’ is provided by recreation, restaurants, culture, bars, and hotels. For shopping malls and department stores to avoid being totally eclipsed by online retailing, they should aim to provide a premium experience to their customers. Physical stores should include free unlimited Wi-Fi, rest areas, valet parking, charge points and kid’s areas (Yates & Sykes, 2017, 11). Customers should have an experience they will not forget from the time they arrive to when they leave. Malls and stores should adopt such trends that exceed customer expectations and offer an experience that they may not get shopping online; such that they will always look to come back. Lululemon is an example of a retailer who offers unique customer experience; they offer yoga, run clubs, and nutrition classes (Yates & Sykes, 2017, 11). This ensures customers never forget the experience of shopping at the mall and always looking to coming back. The brand looks to gain customer loyalty and remaining relevant in the ever-evolving retail market. It is also expected that retail centres that will be able to integrate the digital experience into their operations and physical centres will thrive. It is therefore important for shopping malls and department stores to adopt a new digital technology. It would enhance the shopping experience of consumers. It is therefore expected that ‘weak’ retail centres including shopping malls and department stores will continue being phased out, leaving room for only innovative and high-quality shopping centres.
Research Methodology
The aim of the research methodology is to collect and analyze data that provide an answer to the research questions (Ghauri & Gronhang, 2005, 109). This paper utilizes both qualitative and quantitative data. This chapter will also cover reasons behind the choice of methodology and the working of the methodology itself.
Approach
To find reliable answers that fulfil the purpose of this research study, it will key to use the correct method. The approach will also play a big role in the collection of information. This is partly because the empirical information has to be consistent with the research purpose and partly because the information has to be treated as correct (Bryman & Bell, 2007, N.p.).
Research design
Research design can be defined as “a logical plan for getting from here to there, where here may be designed as the initial set of questions to be answered, and there is some set of conclusions (answers) for these questions” (Yin, 2009, N.p.).
Research designs are based on different strategies; these strategies are distinguished by three conditions. These conditions include the form of research questions, the needed control over behavioural events and focus on contemporary events. Each research design has its advantages and disadvantages. However, the ultimate objective of a research design is to avoid gross misfits and apply the best research design in solving the research problem.
At the initial stage of the research, it is advisable to use an exploratory design. An explorative design has various benefits such as; it offers more flexibility and an unstructured process, unlike other research designs. The researcher can discover possible connections between concepts. Under exploratory design, the main objective of the design will be to understand and interpret the phenomenon being investigated through studying of relevant literature (Gripsrud et al., 2004, N.p.). It is essential to have an understanding and interpretation of the phenomenon being researched. To achieve this, relevant literature covering the subject topic should be studied.
Analysis of relevant literature is one of the key approaches to this research. The literature survey will aim to evaluate the American retail model, from its origin, as it progressed and evolved over the years and its current situation. The literature survey will also cover the European retail model. This paper seeks to determine the actual health of America’s retail industry. The paper will, therefore, look at trends in America’s retail model with the aim of explaining the causes of current numerous closures of America’s shopping malls and department stores. A comparison with the European retail industry will also be made. According to Ghauri and Gronhang (2005), this aspect of studying trends or ‘behavioral studies’ is considered as qualitative research.
The interview can also be used as a method for qualitative research. According to Jamshed (2014), interviewing is the most common format for collecting data in qualitative research. The main focus in interviewing is to have a good understanding of what the interviewee is saying (Kvale, 1996, N.p.). Interviews particularly aim to get information based on the interviewee’s experiences. Interviews can also be used as a follow-up to other information acquired by other means such as questionnaires, or to further explore an issue (McNamara, 1999, N.p., Oakley, 1998, N.p.). Interviews are also considered more personal compared to questionnaires. The interviewer can also ask follow-up questions. An interview is normally completed on what the interviewee says. If an interview seeks out the interviewee’s opinion or impression on a certain topic then it becomes easier to respondent correctly. However, interviews can be time-consuming and resource intensive.
There are four types of interviews, informal, conversational interview; the general interview guide approach; standardized, open-ended interview and closed, fixed-response interview (Mason, 1994, N.p.). Informal, conversational interviews have no predetermined order or questions; they are normally open and very adaptable (Corbin and Morse, 2003, N.p., Gray, 2007, N.p.). On the other hand, general interview guide approach is more focused on a general area of information. However, it is still adaptable since follow-up questions can be asked. In standardized, open-ended interviews, the same questions which are open-ended are asked to the respondents (Corbin and Strauss, 2008, N.p.). This approach offers an easier way to analyze and compare the data collected and normally last between 30 minutes to more than an hour (DiCicco-Bloom and Crabtree, 2006, N.p.). In closed, fixed-response interviews, same questions which have similar alternatives are asked to all respondents.
Qualitative research is normally used if the subject topic requires very detailed information and deep understanding (Ghauri & Gronhang, 2005, N.p.). Qualitative research is also holistic, full and rich with very little distortion (Miles, 1994, N.p.). Qualitative research is also mainly applicable when the research questions are subjective, and analyzes opinions and behavioural attitudes (Kothari, 2004, N.p.; Ghauri, 2005, N.p.). According to Cresswell (2013), qualitative research is similar to a “fabric made of different colours, threads, and design (Burchett, 2014, N.p.).” This means that, due to the various opinions considered in qualitative research, it is not easily explainable much like the complexity of the fabric.
The online survey is an example of a design that can be used to collect quantitative data (Andrews et al., 2003, N.p.). Online surveys can take two forms, asynchronous email survey which can be traced back to 1986 (Kiesler & Sproull, 1986, N.p.) and synchronous web-based survey which can be traced back to 1994 (Kehoe & Pitkow, 1996, N.p.). Web-based surveys are able to verify and store survey responses automatically. On the other hand, for email surveys, responses are transferred manually before being stored. Email surveys also allow direct communication with the respondents. Online surveys should be designed to;
Prevent multiple submissions (Yun & Trumbo, 2000, N.p.)
Support various browsers and platform (Yun & Trumbo, 2000, N.p.)
Present the questions in a logical manner (Kehoe & Pitkow, 1996, N.p.)
Collect both narrative answers and selection-option answers (Yun & Trumbo, 2000, N.p.)
Provide feedback to the respondents after participation; in the form of a thank you (Smith, 1997, N.p.)
Online surveys are quick to distribute and normally cost less. Software applications that help in conducting online surveys include; “Survey Wiz” “FactorWiz” which are designed to eliminate transcription errors and also to prevent the respondents from altering their responses; these had been considered as challenges in using online surveys (Birnbaum, 2000, N.p.). For online surveys, it is also important to keep in mind confidentiality guidelines and subject privacy. This is to ensure the online researcher does not violate the privacy of individuals or that of the online community (Cho & LaRose, 1999, N.p.). There are two main sampling techniques used in an online survey (Couper, 2000). They include; non-probability and probability-based sample selection methods. In non-probability based methods, potential respondents are invited to participate at various multiple online locations. Probability-based methods restrict the population of those willing to participate in the survey.
Quantitative research is normally used to generate numerical data that quantifies a problem. Quantitative research quantifies behaviours, opinions, attitudes and other defined variables. These research methods are normally more structured when compared to qualitative methods. Through quantitative research, the researcher is able to identify relationships between two variables.
Data collection
The researcher has a wide variety of data collection methods to use to collect data. These methods can be divided into two categories; secondary data and primary data. This thesis used three data sources; interviews with various players in the retail industry (from the U.S. and Europe), an online survey of American consumers and a literature review on the subject being researched.
Secondary data is normally collected by other people (Ghauri & Gronhang, 2005, N.p.). Sources that are used to collect secondary data include books, catalogues, online data and journal articles. It is important to consider and understand the fact that data from secondary sources were first collected to serve another purpose other than one’s own research questions. It is, therefore, necessary to analyze the data before using them in the research then come up with the most relevant data.
This thesis uses literature survey to collect data on the evolution of the American retail industry, with special attention paid to the current crisis facing shopping malls and department stores. This is with the aim of establishing the actual health of the retail industry in the United States. The secondary data will also be used to evaluate whether such a crisis in the United States’ retail industry is likely to occur in the European industry. This thesis obtained secondary data from all possible sources such as previous research related to the subject being evaluated, news reports, journal articles, commercial and academic abstracts. The secondary data was obtained and then summarized such that they aligned with the requirements of the thesis. American and European retail models are worldwide phenomena that have studied and researched widely. A lot of information on the subject is available, and therefore, using data from these secondary resources was reasonable for the thesis. It is also less expensive and consumes less time compared to the collection of primary data. Secondary data is also important in confirming or disapproving assumptions that were made at the start of the research process.
Primary data is normally more suitable and relevant compared to secondary data. This can be attributed to the fact that the primary data is collected to serve a specific purpose or answer specific research questions. The timeframe for collection of both sets of data is also varied; with timeframes for primary data collection being much greater compared to the secondary data. Primary data also normally requires much work connected to collection and processing (Gripsrud et al., 2004, N.p.). The thesis is mainly based on primary data received from experienced personnel in the retail industry and the American consumers.
To understand the evolution of customer preferences, in relation to the closure of America’s shopping malls and department stores, it was necessary to obtain first-hand data from American consumers. An online survey was conducted, a web-based survey, on a software application known as the “Survey Monkey.” The sampling was probability selection based. This is because participants in the survey were only restricted to users of the “Survey Monkey” application. The survey comprised of 25 questions, 23 of which were selection-based questions while 2 required narrative answers. The aim of this online survey was to quantify opinions, preferences and attitudes of American consumers towards online retailing and offline retailing (specifically shopping malls). The five design requirements mentioned under the research design were also implemented. Confidentiality guidelines were also met as respondents were allowed the chance not answer questions which they considered personal or private information.
50 respondents participated in the online survey. All the 25 questions received 100 percent response. 52 percent of the respondents were aged above 60; 34 percent ranged between 45 years and 60 years; 4 percent ranged between 30 years and 44 years and 10 percent ranged between 18 to 29 years. There were no respondents below the age of 18 due to “Survey Monkey” policy. 56 percent of respondents were female while the remaining 44 percent were males. The household income of the respondents was also collected. 20 percent had incomes between $50,000 and $74,999; 12 percent ranged between $25,000 and $49,999; 10 percent ranged between $125,000 and $149,999; another 10 percent had a household income more than $200,000. 8 percent of the respondents had a household income ranging from $10,000 to $24,999; another 8 percent with income between $75,000 and $99,999; 6 percent with income below $9,999 and 4 percent with incomes between $100,000 and $124,999. 2 percent of the respondents had household income between $150,000 and $174,999 and another 2 percent with incomes between $175,000 and $199,999. 18 percent of the respondents preferred not to give their household income. The online survey also ensured the respondents were spread across the nine regions of United States. 28.57% of the respondents reside in the Pacific region; 18.37% reside in the West South Central region; 12.24% reside in the East North Central region; 8.16% in the Middle Atlantic region; another 8.16% in the South Atlantic region; another 8.16% residing in the Mountain region of the U.S.; 6.12% of the respondents also reside in the New England region and another 6.12% residing in the West North Central region. 4.08% of the respondents reside in the East South Central region. Information of the device type used by the respondents was also collected. 46 of the respondents used a Windows Desktop/Laptop; 24% used an iOS Phone/Tablet; 14% used an Android Phone/Tablet; 10% used a MacOS Desktop/Laptop while the remaining 6% used other devices. The 25 online survey questions have been attached to Appendix 7.
An interview was conducted with 13 operators in the retail industry, both from the United States and Europe. The interviewees included a former director for Maritime Transport, one of the largest logistics suppliers to, among other e-retailers, Amazon UK and Tesco within the UK. Another interviewee was Karl Scholz who is the Vice President of Global Demand Marketing, Black Duck Software and also Director of Global Marketing. The third interviewee was Tom Williams who is a Commercial Director based in London. Another interviewee was Paula Ibanez Hualde who is a Senior Fashion Buyer- Knitwear and Swimwear at Gocco S.A based in Madrid. Heather Huffman, a Commercial Brokerage Consultant in NAI Mobil, was also interviewed. The sixth interviewee was Blair Butler, a Real State at Cow Holdings, based in Dallas. Kristel Waston working at the Commercial Structuring North America, based in New York City. The eighth interviewee was Menia Eugenia Josa Martinez who is the owner of the online shop Eugeniota Collection. Another interviewee was Juan Ordonez based in Spain as the General Manager for CERAVE Brand at L’Oreal Company. The tenth interviewee was Mariana Arellano who is a Global Accountant Specialist at YKK Corporation of America, based in San Francisco. Another interviewee was Teresa Pastor Gilabert who is a Marketing and Operations manager at Vinos and Gourmet, Inc., based in San Francisco. Patricia Sarasua, a Spain Brand General Manager, La Roche Posay was also interviewed. The last interviewee was Miguel Hernando who is the Latin America Zone Brand Director for L’Oreal Company. More information on the interviewees’ roles in their companies has been captured in Appendix 8. The interviews were conducted with the aim of having expert opinions on the research topics from various players in the retail industry, both in the United States and Europe.
The interview was a standardized, open-ended interview. This was to remove any sort of bias and give freedom to the interviewee. Providing options/choices would have limited or restricted the interviewee to the researcher’s pre-conceived notion. The interview questions have been attached in Appendix 9. Additional information on online retailing was also covered in the literature survey.
Quality of research
The quality of research is crucial to this thesis. In qualitative research, the quality is important since the results of the research are influenced by the assumptions, understanding, and claims of the researcher. Both the quality of quantitative and qualitative research can be determined through validity and reliability of the data collected (Mays & Pope, 2000, N.p.). According to May and Pope (2000), it is difficult to come up with solutions that the possible errors in qualitative research. The validity of the qualitative research can, however, be tested using different approaches. Based on research, four approaches can be used in determining the quality of research (Yin, 1994, N.p., Lincoln, 1994, N.p., Miles, 1994, N.p., Denzin, 1994, N.p.). The following four approaches can be used to gauge the quality of a research.
Construct validity
Internal validity
External validity
Reliability
Validity refers to the degree of investigation set out to be investigated by the researcher (Leung, 2015, N.p.). With online survey used in this research, it is difficult to avoid validity bias. This is because the sampling method used was probability-based. The sample that participated in the survey was not scientifically selected (Duda & Nobile, 2010, N.p.). It is therefore difficult to generalize the results of the research such that it applies to all consumers in the United States. The respondents in the survey just happened to have the “Survey Monkey” software application and were persuaded to participate in the survey because of a monetary or another form of incentive.
Construct validity makes sure that proper measures are used to study the concepts. Construct validity is ensured through using various sources of evidence and making sure that these sources are reliable (Riege, 2003, N.p.). Construct validity corresponds to the design test confirmability. For this thesis, several secondary sources were used ranging from news reports to commercial abstracts and recent research on the study topic. Construct validity was also improved with more primary data through an online survey of American consumers an interview with an Amazon personnel.
Internal validity ensures the credibility of the research done. Internal validity evaluates relationships between established variables in a research study. This thesis paper utilized the evolution of America’s retail model and worked to connect the current situation with the industry’s past trends. This would provide a link to analyzing possible causes of the numerous closures of America’s shopping malls and department stores.
External validity evaluates whether the obtained results from the research or the conclusions made can be used to generalize or make predictions based on the little sample of data collected. As discussed earlier, since probability-based sampling method was used for the online survey, it is difficult to generalize the results such that they apply to every American consumer. From the external validity, the relevance of the research can also be judged. The primary approach to determine the external validity is through studying the generalization process and evaluating how the research conclusions have been made based on the samples.
Reliability describes the coherence of the results where same instruments and measures are taken to undertake a research (Raya, 1985, 276). The relevance of the research is evaluated by determining whether the research adds new knowledge to already existing knowledge, or whether the results can be generalized regardless of the research settings or context (Maya & pope, 2000, 52).
Data Analysis & Discussions
Secondary data
The performance of America’s retail has been mixed over the past one year, as shown in Appendix 1. The position of the industry seems unstable. However, all information and trends observed point towards an evolution of America’s retail model. Throughout its history, the retail model has changed in almost every ten to twenty years. It all started with general stores run by families such as grocery stores and hardware stores serving members of communities; with general stores offering a wider variety of products. This was followed by the development of department stores and store chains between 1945 and 1975. This also marked the beginning of retail brands. The next fifteen years were followed by further expansion of store chains. It also marked the beginning of category killers, which were speciality stores that sold all products within a certain category such all electronic products. Between 1990 and 2000, there was further expansion of regional retail chains as they moved into other regions. This period also marked the development of shopping malls which enabled consumers to purchase all products within a single roof. As the retail industry continued evolving, lesser and inferior retailers such as general stores and family-run stores were phased out.
The year 2015 marked the beginning of numerous closures of shopping malls and department stores. In 2015, only 3.4% of the physical stores were considered to be dying but currently, about 45% of the shopping malls are struggling with 20-25% of the malls expected to be closed by the year 2020. However, similar to other evolutionary periods in the industry, it has also been marked by the rise of another form of retailing. Online retailing has significantly grown from 0.9 percent of the total sales in 2000 to 6.4 percent in 2014. Online retailing is still expected to grow further. Also, luxury malls with high-end retailers do not seem affected by the crisis facing other shopping malls. Their sales have continued to rise despite the crisis. Some sections of the retail industry such as jeans and young apparel also seem to be performing well despite the crisis. The retail industry is evolving; with consumers now preferring luxury or customer experience and also preferring to buy a certain section of products in the shopping malls.
In analyzing the possible causes for this evolution, it is important to consider the causes of the other evolutions. Evolution in the retail industry has always been driven by the industry’s stakeholders. The stakeholders in the retail industry include; investors, customers, retailers, and the government. The development of information technology has also added technology companies to the list of these stakeholders. Technology companies have influenced changes in the retail industry, especially with the advent of online retailing. However, throughout the history of the industry, the consumer has been the major driver of change in the industry.
As the retailing models shifted, it is evident that consumers wanted a place that would provide a wider variety of products. This can be seen from family-run stores to general stores to department stores and store chains, then to category killers and finally to shopping malls. These models always expanded so that they could stock more products to meet customer expectations. Family-run stores only sold a limited amount of products since they served a small population. General stores offered a wider variety of products compared to family-run stores at a single location. Then come the department stores and store chains which offered a wide range of products sorted in different departments. Category killers offered all products within a certain category such as all electronic products in a single location. The shopping malls then become the ultimate retail model. Shopping malls offered variety goods and services under a single roof. This was very attractive to the consumers as they flocked shopping malls. Shopping malls improved shopping convenience to a very large extent. Consumers could access numerous shops selling a wide variety of products, and also access numerous services under one roof. However, based on the evolutionary history of the industry, it was obvious that consumers would always want more. Then come online retailing. Currently, shopping malls and department stores are being outdone by online retailers in offering a wider variety of products. As seen in the evolutionary processes of the retail industry, those retail models not able to compete by offering a wide variety of products are also phased out. America’s shopping malls and department stores cannot compete with online retailers in offering a variety of products. A big player in online retailing, Amazon, gives customers access to about 400 million products.
However, unlike other retail models, shopping malls offered more than just products. Malls were places of interaction and having a sense of belonging. Shopping malls and centres were started as neutral, safe and public spaces which englobed art, entertainment, and commerce. Shopping malls offered an experience that consumers still crave. This is evident in the good performance of luxury malls with high-end retailers. Luxury malls sell more than products, they sell experience too. Consumers never forget their experience at such shopping malls. And it is evident that customers still crave for such experience. Luxury malls are still achieving excellent results with sales up to 470 USD per square meter and outstanding revenues including malls such as Galleria in Houston, Shops at Crystals Las Vegas and the BAL Harbour in Miami. Consumers also prefer to purchase certain products in physical stores rather than online. This is true for apparels, for example, jeans and young apparel sales are performing well. Hollister has had a sales increase of 5 percent; American Eagle has improved sales by 2 percent and has also reported ten consecutive quarters of sales growth.
For retailers, when the evolution and progress of the retail industry are considered, they have always obliged to the changes in consumer preferences. Those who have been unwilling or unable to align themselves with new customer preferences have been done away with from the industry. However, the consumer preference towards shopping experience and preference to shop for a certain category of products in physical stores rather than online is good news for shopping malls and department stores retailers. It ensures that America’s shopping malls and department stores will remain alive for a long time. Retailers who focus on customer experience will continue attracting consumers to their stores.
Investors have also been playing a huge role in the evolution of America’s retail industry. They have continuously invested in the enlargement and spread of retail stores in the United States. The investments have always ensured a new retail store is normally larger than the current one. They have always increased the size of shopping centres. This is aimed at increasing space to improve on the variety of products being sold. This is evident in the size increase and a number of retail stores over the years. Department stores and store chains were larger than family-run stores and general stores. They occupied larger space to avail more variety of products to the consumer. They continuously expanded. The number of category killers stores was also too high such that they saturated the market. This shows the continuous investment in availing more products to the consumer. When the mall concept was conceived, investors were more than willing to invest in the idea. The United States has about 1200 major shopping malls; with a greater shopping surface area per capita compared to several countries such as Canada, Germany, and the United Kingdom. Investors are still investing in mall expansion, however, this time not only to improve on product variety but also with the aim of providing the ultimate experience to their customers. Investors such as Simon Property Group and General Growth Properties are investing in high-quality malls such that they become more powerful in attracting customers. For example, the King of Prussia mall which is located outside of Philadelphia was recently expanded by 155,000 square feet. This was a billion dollar expansion and redevelopment project. Such kinds of investments make the already high-quality shopping malls more interesting to consumers and are able to provide unforgettable customer experience.
The European market is different from the U.S. market; therefore, it is difficult for the crisis facing American shopping malls and department malls to occur in Europe. First, the U.S. has more stores when compared to Europe in terms of surface area per capita. Shopping malls in America are anchored by department stores; however, the shopping malls in Europe are anchored by supermarkets, fashion brands and electronics. Also, in Europe, shopping centers are constructed near population centers rather than in rural areas as in the United States (Machin, 2017). The proximity of shopping malls to population centers helps in attracting a large number of consumers to the malls. Due to their fewer numbers, compared to those in the U.S., most of the shopping malls in European are premium malls. They are able to reinvent themselves and offer a great shopping experience for the customers (Machin, 2017). Such activities that create great customer experience include special events and add-on activities. Such activities always attract customers, hence high-end retailers. For example, Apple, one of the world’s most iconic brands, uses its stores as showrooms. This allows customers the opportunity to try their products before buying them. In France, for example, Apple has 70% of its stores are now located in shopping malls rather than on the High Street. The strategy by Apple to adopt flagship malls will soon be adopted by other brands. It is expected that the high-quality malls in Europe will continue attracting consumers and improve the sales. It is also expected the malls located near large populations will always have consumers. However, the role of shopping malls is expected to change over the years. Some will become places where consumers come to interact with their favourite brands, especially for electronics; others will become leisure centers. Inferior shopping malls with low customer experience or customer service are expected to die out. It is evident that the situation affecting America’s shopping malls and department stores will soon reach Europe. The good news for Europe is that they are better prepared for such a situation and the impact would not be as huge as that in the United States where numerous shopping malls and department stores have shut down.
Primary data
According to the data collected, most American consumers now prefer to shop online rather than in the shopping malls. 58 percent of the 50 sampled response preferred online shopping to 42 percent who preferred offline shopping. According to [Interviewee], the focus on online retailing driven by retailers is the single and most influential factor that has contributed to America’s malls and department stores crisis. He goes on to argue that, “Retailers such as Amazon, in particular, have contributed to this downfall as they offer a diverse range of products that physical retailers cannot compete with- their stock holdings without the economy of scale of national distribution centers would be impractical therefore the sheer offering to the consumer is far more appealing than a physical store can provide.”
Reduced number of customers in the malls has led to the closure of numerous stores. 66 percent of the respondents noticed a significant drop in the number of people who visit their local shopping malls. Further inquiry on the frequency of mall visits showed that 66 percent of the respondents visited the mall less than once in a month. 24 percent visited the mall more than once but less than three times in a month. Another 6 percent visited the mall more than three times but less than six times in a month. 4 percent of the respondents visited the mall more than six times in a month. 68 percent of the respondents also confirmed that they visited the mall more often in the past. When further asked on the reason for the reduced visits, various reasons come up. Majority of the responses related to a low variety of products sold at the malls. Some respondents cited same old products sold at the mall; they never look to improve the products by improving the range. Closure of stores in various malls also reduced the variety of products in the malls hence reduced visits to the malls. Most of the responses also related to unattractive experience at the malls. This included; poor customer service, the mall was crowded, malls filled with rowdy youths and generally the mall being an unattractive place. The reduced number of visits was also attributed to the rise of online shopping as consumers prefer the convenience associated with it. The most mentioned advantages of online shopping were the availability of a wide range of products and travel conveniences such as saving time, avoiding long distance and traffic jams. Other respondents mentioned a change in lifestyle brought about by age, having kids and also deciding to shop less. Lack of money and the high prices of products in the mall were also mentioned as reasons for the reduced number of visits to the mall.
The survey sample also asked on aspects of online shopping that appeals most to them, 40 percent of the 50 responses mentioned comfort, 34 percent mentioned quickness while 22 percent were attracted by the fact that there were no time limits for online shopping. Another 4 percent preferred the fact that they would remain anonymous during the shopping process. All these aspects relate to convenience. [Interviewee] also indicated that convenience is the most attractive aspect of online shopping. He says, “The major benefit of online shopping which appeals to the consumer is the convenience. One click and you can purchase items which will be on your doorstep- or any destination you require- is a compelling offer. Now with economies of scale, these e-retailers also tend to offer the best value as well.” The other interviewees also mentioned aspects of convenience such as time-saving as the most attractive aspect of online shopping that attracts. The convenience of online shopping attracts consumers.
The sampled population was also asked about the aspect of offline shopping malls that they dislike. Majority of them, 36 percent, mentioned high prices. This was followed closely, at 32 percent, by travelling inconvenience. Other reasons mentioned included bad customer service at 22 percent and lack of offers (which relates to the high prices) at 10 percent. These aspects are varied. For online retailers, since they buy products in larger quantities, they enjoy higher discounts compared to shopping mall and department store retailers. This reduces operating costs for online retailers. Online retailers such as Amazon can, therefore, avail products at cheaper prices compared to physical stores retailers. Online retailers can also afford to offer product offers and still enjoy high profits. It is difficult for offline retailers to compete with that so they have to maintain the high prices without any offers. This can also be attributed to high operation costs on the side of retailers with physical stores. [Interviewee] argues that “Physical space is costly in terms of land and development costs, rates, utility costs and staffing costs. In contrast, the cost per item to these large retailers to sell an item online is relatively small, especially once scale is achieved.”
Offline retailers can also not compete with the comfort convenience afforded by online retailers to consumers. According to [Interviewee], “The convenience to the customer of being able to order from the comfort of their sofa at home far outweighs the benefits of them physically seeing the items in store prior to purchase.” Travelling inconveniences such as poor weather, costs of travel, traffic jam and possibly parking fees discourages shoppers from going to the mall. Customer service is also an issue for most of the consumers who find time to go shopping at the malls and department malls. Customers wish to have a good experience when they go shopping at the malls.
However, there are also aspects of online shopping that consumers do not find charming. Majority of the respondents, 52 percent, cited the lack of possibility to try products as the most unattractive aspect of online shopping. Other disliked aspects of online shopping mentioned included; exchanging policy at 26 percent (which relates to the first response), lack of trust in some of the online retailers at 12 percent and no real experience when shopping online at 10 percent. Most of the aspects cited by consumers relate to the customer experience. Offline shopping, especially for apparels, is attractive for consumers since they can try out different attires and finally settle on their favourite. This decision-making process constitutes the shopping experience at the mall. It is difficult for online retailers to generate such experience. Consumers are also discouraged with the exchanging policy of online retailers; it is difficult for them to return goods bought online but do not meet their expectations. Lack of trust when shopping online still remains a discouraging aspect of online shopping. Most consumers associate online transactions with scammers.
The respondents were also queried on the aspects of shopping at the malls that appeal to them most. A majority of them, at 64 percent, cited the possibility to try. As mentioned earlier trying products constitutes the mall experience and it is what consumers still crave for. Another 18 percent cited the general shopping experience which includes feeling products, trying products, interacting with various people in the mall and haggling over prices. The other mentioned aspects also related to shopping experience; with 10 percent of the respondents citing company (which relates to interactional experience) and also entertainment at 8 percent.
Information on the category of products that consumers prefer to purchase either at the mall or online was also collected. Regarding online shopping, a majority of consumers, at 40 percent preferred to purchase electronic products online. Another 24 percent preferred to buy apparels online while 4 percent mentioned that they preferred to shop for food online. 32 percent of the respondents preferred to buy other product categories online. When asked about a category of products they prefer to purchase at the malls, a large majority of the fifty respondents, 68 percent mentioned apparels. 10 percent of the respondents mentioned food, while 6 percent mentioned electronics. Another 16 percent also preferred to purchase other categories of products at the malls. In this question, it evident that customers still want the shopping malls, especially to purchase apparels. This reinforces the idea that consumers still crave for a certain experience such as trying out products.
Change in consumer preferences has greatly changed the American retail industry over the years. An overwhelming majority of the respondents, 72 percent attested to this; claiming that their preferences as consumers have changed over the years. Kristel Waston says that consumers preferences have shifted from ‘more is better as long as it is cheaper’ to preferring fewer better products. [Interviewee] attributes this to the development of information technology. He says, “Society has shifted towards an online bias in every aspect and shopping is no different. The consumer can now be confident that they can order from all their favourite brands from the comfort of work or home and be confident that the items will arrive quickly and exactly as ordered.” With time, consumers will always want more. Heather Huffman, one of the interviewees, says that the consumers’ need for constant change has driven the crisis facing American shopping malls and stores. Technological changes have also influenced the retail industry. However, a majority of the respondents, 66 percent, denied observing any technological changes at their local mall for the past few years. Furthermore, a large number, 43 out of 50, was not impressed with the technological changes they saw at the shopping malls. The technological changes had little influence on the frequency of visits to the mall. 92 percent of the respondents attested that they did visit the more often due to the technological changes. However, a majority of the respondents, 70 percent, feel they would be better served if a retailing brand had both physical stores and online sites.
Majority of the respondents, 58 percent, thought that it has not become too expensive to shop at the mall. Majority of the consumers are okay with the prices of the products sold at the mall. High prices of products had been cited as a possible cause for the reduced visits to the mall. When compared to online retailing, the prices of products at malls are quite high. This has pushed some of the consumers to online shopping. However, from the response it obvious that the high prices of products at the shopping is not the main cause of reduced visits to the mall. This response is reinforced by another where respondents were asked whether they associated malls with people of high social status. An overwhelming majority, 86 percent, denied this notion. The respondents felt shopping malls are for all members of society regardless of their social status or their financial status. The respondents were also asked whether they thought there were too many malls in their surroundings. 74 percent of them thought the number of malls was not excessive. These responses show that customers are still willing to visit and spend money at the malls if certain aspects of the shopping malls were adjusted.
56 percent of the respondents expressed dissatisfaction with the services they received in the shopping malls and department stores. Majority of the consumers never experience anything special while in the shopping malls. Most consumers crave unforgettable experiences while in the malls. This is evident in the 54 percent of the respondents who said they would visit the mall more often if customer experience in these malls was improved.
Shopping malls and department stores offer a small variety of products compared to online retailers. When asked whether they would shop at the malls more often if the malls improved the variety of products they sold, 58 percent of the respondents said they would. Customers prefer a retailing platform where they are able to compare various products in terms of quality and price. This appeals to consumers since it creates convenience for them; instead of moving around various stores looking for the right product. Having a variety of products in the same place makes it easier for them to pick the right product.
Respondents were also asked about the kind of changes they would like to see at their shopping malls. A large percentage of the respondents want to see more variety in the shopping malls. This variety can be considered in terms of products and the range of stores. Consumers want to see a wider variety of products and not empty shelves in stores or closed stores. Consumers also want a range of stores; with majority mentioning food stores. Generally, consumers want more products in their shopping centres. Some also suggested building more stores since the ones they shop at are too far away. The respondents also want to see more customer service and experience at the malls. Consumers want to feel safer at the malls; in terms of health and security. Respondents also mentioned parking facilities, entertainment and reduced smoking at the malls. A large number of teenage hanging out in malls also bothered some; citing overcrowding. All these would improve the mall experience for numerous people. High prices and the operation duration of malls were also cited. Some consumers feel the prices of products in the malls are too high. Consumers also want malls to be open for longer hours. These responses indicate what consumers expect of their shopping malls. 64 percent of the respondents indicated that they would visit the mall more frequently if these changes were adopted by the shopping mall retailers.
Conclusion
This section of the thesis paper focuses on answering the research questions. This section will also provide suggestions to avoid a similar situation of America’s retail crisis in Europe. It will also provide suggestions for future studies. It will also focus on limitations of the thesis and practical implications of the thesis paper.
The objective of this thesis paper was to determine the current situation of America’s shopping malls and department stores; whether they are still alive or dead. American retail industry continues to have mixed performance and it is unclear whether what is happening to the industry. A lot has been written about the closure of numerous shopping malls and department stores in the U.S. The number of customers visiting the malls has dropped significantly. Many factors have been attributed to the crisis facing the American retail industry. For example, the rise of online shopping has been mentioned as the main cause of the crisis facing shopping malls and department stores. Others have also claimed that America as a country is over-retailed; that the malls built were too many for the American population. Another factor attributed to the closure of various malls and department stores is an increase in the wealth gap between the poor and the rich. That people have found it more expensive to shop at the mall. Changes in customer preferences have also been attributed to the low number of people visiting the shopping malls and department stores. It is evident that there is a knowledge gap on the crisis facing American shopping malls and department stores. This paper aimed to address that knowledge gap. Apart from determining the actual health of the shopping malls and department stores; the paper has also determined the actual cause of numerous closures of shopping malls and department stores in the U.S. The European market has also been evaluated; to determine the possibility of such a crisis occurring in their retail industry.
To achieve the set objectives, the thesis crafted five research questions. These research questions have been answered below, according to the data analysis done.
What is the actual health of the American shopping malls and department stores?
The American shopping malls and department stores are still alive. About 91 percent of U.S. total retail sales are done offline. Though this percentage has gone down over the years, shopping malls and department stores still remain key in the U.S. retail industry. The closure of several shopping stores across the nation does not necessarily mean the death of the American malls. A lot of retail transactions take place in the shopping malls and department stores. The role of shopping malls is also changing. The stores are now being used for advertisement, especially for electronics such as mobile phones and laptops. Shopping malls are also becoming entertainment hubs and lifestyle centres. That does not necessarily mean they are dead. Blair Butler adds that the shopping malls are here to stay; however, they are adopting a different outlook such as alterations, nail salons, restaurants and exercise classes. Online retailers will also soon physical stores to connect with their customers in a physical way, especially when retailing food products. American consumers are still willing to visit the malls, only if the quality of service and customer experience is improved. Those that are not able to provide meet the expectations of the customers are being closed done. Shopping malls and department stores are still very much alive, however, their role is changing and consumers are expecting more from the malls.
What has caused the closure of numerous shopping malls and department stores in the United States?
Numerous closures of shopping malls and department stores have been witnessed in the United States over the past couple of years. The number of people shopping at the malls has greatly reduced. This has led to low sales volumes for the retailers. Low sales volumes normally result in losses. When retailers continuously make losses, it becomes expensive to keep the stores open; therefore, they close their stores.
The low number of customers visiting the shopping malls and department stores has caused their closure. But more specifically, it is the lack of quality customer experience that led to these numerous closures. Consumers visiting the mall no longer have a special experience when they visit the mall. When malls were first created, consumers not only visited the stores to buy products, they visited the malls to have a good experience. This experience constituted interaction with numerous people, hanging out with friends, feeling products, the decision-making process of picking out the right product, trying products (especially the attires category), and a sense of belonging to the community. The quality of service and experience in the American malls has certainly gone down. Consumers now associate malls with rowdy teenagers, unsafe place, health hazard due to smoking and overcrowding in certain malls, empty shelves and generally poor customer service from the retailers. Online retailing just happened to offer a convenient way out for the consumers. Miguel Hernando says, “I prefer to think consumer behaviour is behind this shift and that information technology has been a channel to do so.” This also explains the steadily improving performance of luxury malls. In such malls, quality is ensured. Above everything, they sell customer experience. They make sure customers never forget their experience at such malls. And consumers are still willing to spend their money in such malls. Consumers are still willing to visit the shopping malls and department stores, but only if the quality of service and experience is improved. However, consumers will keep staying away from the malls if the customer experience is not enhanced.
The low number of customers visiting the shopping malls and department stores has also been caused by the steady rise of online retailing. As the retail industry developed, before the influence of information technology, customers preferred stores where they would get a wide variety of goods. This evident in the growth in the size of physical stores over the years; from family-run stores to general stores to department stores and store chains, then to category killers and finally the shopping malls. Consumers always wanted bigger and bigger stores where they would be able to access more and more products. The stores that could not compete with the larger stores in availing a variety of products to consumers always died out. Shopping malls were considered the ultimate place to shop due to the availability of a range of products. Consumers, therefore, frequented the malls. However, online retailing has outdone shopping malls in availing a wider variety of products. Therefore, it should not be a surprise that consumers prefer online retailing which offers millions of products in a single space. Online retailing is also more convenient compared to shopping at the malls. Consumers are able to shop at the comfort of their homes; avoiding inconveniences associated with travelling such as unfavourable weather, traffic jams, travelling costs and at times parking costs. Since consumers can shop at the comfort of their houses, they no longer see the need to visit shopping malls and department stores. It is more convenient to shop online and even a wider range of products available online.
The closure of numerous shopping malls and department stores in the United States cannot be blamed on the fact that the U.S. is over-retailed. It had been suggested that there are too many malls in the United States; such that the ones in excess of demand were being closed down. This is however not true. In fact, consumers want to see stores in their localities. It seems most America’s shopping malls and department stores are located in the wrong areas. Karl Scholz says that suburb malls have suffered most. This is in contrast to the malls and stores being built or reimagined in America’s urban cities. Karl attributes this to a population shift. When the malls were being built, the majority of U.S. population lived in the suburbs. However, over the years, more Americans have moved to the urban cities. This has heavily reduced the number of potential customers willing to shop. More stores near consumers’ location would enable retailers to avail a range of products to the consumers. Specifically, consumers want to see more food stores. For American consumers, it is not a matter of quantity but rather a matter of quality. Consumers expect high-quality service at the malls; they do not see a problem with the number of shopping malls. They are more concerned with the quality of service and also the general experience at the shopping malls.
The closure of numerous shopping malls and department stores in the United States cannot be blamed on the high product prices in the malls. The high prices of products and unaffordability of the products had also been suggested as a cause for the crisis facing the retail industry. While the prices of products relatively high in the malls compared to online retail, it is not true such products are unaffordable to consumers. Consumers are still willing to spend their money in the malls. However, they want to get value for their money. Consumers want to buy more than just products; they want to buy unforgettable shopping experiences. This is also evident in the luxury malls. Consumers are still spending their money in such places where they are able to receive every value for their money. Shopping has not become too expensive neither have Americans become poorer, they just expect value for the money they spend in the shopping malls and department stores.
Are the model of shopping malls and department stores still viable?
The current model of shopping malls and department stores in the United States are no longer viable. Shopping malls and department stores need to change their operational strategies so that they are able to survive the current changes in the retail industry. Their operational strategies should focus more on providing the ultimate experience to customers. Shopping for products at the mall is no longer a priority for the consumers; online retailers’ carter for such needs. Consumers now want to spend money on the experience they would not likely get while shopping online. And as long as the quality of experience remains low and online retailing continues to develop, consumers will keep staying away from the malls. Physical store retailers should, therefore, pay more attention to meeting customer expectations. This would definitely increase the number of customers shopping at the malls.
Physical store retailers should also focus more on retailing products that customers would prefer to buy offline rather than online. Such categories of products include foods and apparels. Consumers prefer these products in physical stores rather than online. With foods, it is easier to gauge the quality of the product compared to when buying it over the internet. With apparels, consumers are able to try out different types and sizes of attires before settling for one.
Retailers should also adopt both online and offline platforms to increase their sales. This would ensure more consumer engagement which would, in turn, result in more sales. Most consumers would also prefer this. The offline stores can be used for customer service where customers are able to ask any questions they might have regarding the product. The stores could also be used to advise new products in interactive shops and showrooms. This kind of model is mostly applicable to electronics retailers who sell items such as phones, laptops and other technological gadgets.
What can American retailers do to reverse the continuing closure of their shopping malls and department stores?
The paper has already determined that the major causes of numerous closures of America’s shopping malls and department stores are the low-quality experiences and the rise of online retailing. Retailers should work on an approach that ensures retail value proposition. The ESE approach would ensure means of designing and managing customer experience (Murray, 2016, N.p.). The ESE approach is made up of three main components; Environment, Selection, and Engagement (ESE). The Environment component involves the places where consumers shop. This is the first step to enhancing customer experience. This component analyzes the consumers that are to be attracted to the store. It involves market segmentation, target selection, and positioning. The information collected can be used in deciding the store location, use of technology, retail format, integration of various channels (such as online platforms and the physical stores) and the store layout, design elements and atmospherics (Murray, 2016, N.p.). The Selection component analyzes the retail environment in terms of convenience and comfort. This determines the experience the customers have while shopping in the store which in turn influences spending, word of mouth and loyalty (Murray, 2016, N.p.). The Engagement component analyzes the tools and techniques used by the retailer to manage their product selection and to create the shopping experience (Murray, 2016, N.p.). This approach aims to create a personal shopping experience for consumers.
Physical store retailers should focus on a certain category of products. Consumers want more food stores, and also they prefer to buy apparels in physical stores rather than online. The two categories of products, foods and apparels, offer a way back for shopping malls and department stores. Food stores would be able to compete with whatever is offered online since consumers would always like to see what kind of food they are buying. Consumers still have trust issues with buying foodstuffs over the internet. Physical store retailers can take advantage of this and offer more variety and high-quality food in their stores. Tom Williams also suggests that malls should increase food options for customers. For apparels, consumers still prefer to purchase this category of products in physical stores. This gives them the opportunity to try on different attires and pick out the best. Contrary to online shopping where consumers do not try on different attires. This increases the chance of customers buying attires that do not match their size. It then becomes inconvenient to return the product or order another one. Physical stores also offer customers the opportunity to feel the material of the attires they are buying. These factors give them a competitive advantage over online retailers when selling apparels.
However, technology is very developed; there are already applications that allow customers to find the right clothing size while shopping online. [Interviewee] says that the ever-developing technology will only improve convenience offered by online retailers. He says, “This convenience is dramatically increased as retailers are continuously improving the information they can provide to their customer in regards to the items- for example, the technology now employed on the sizing guides can now ensure the likelihood of a consumer receiving an item that fits perfectly is improving all the time. When you add to the fact that the majority of retailers offer free returns the offer is a compelling one to the consumer.”
It is therefore important for retailers to improve the quality of service and focus more on customer experience if they are to attract consumers back to the shopping malls and department stores. This sentiment is shared by Juan Ordonez who believes improving customer experience is the only way back to malls. Paula Ibanez also suggests that shopping malls should change to become social meeting points for retailers and their customers such as brand showrooms. [Interviewee] says that “The physical shopping experience will have to be revolutionized from its traditional offer. Convenience, sizing and stock availability is now being catered for far too capably by online retailers. It is my opinion that physical outlets will need to instead focus on the customer experience as a way of bringing individuals into their physical stores.” He goes on to give examples such as Apple in the way they treat their customers in the store. He also mentions Pepe Jeans who offer bespoke products tailored to the individual through the store. Another example is the Prudential Center in Boston which has good restaurants from Italy. While consumers dine in the local establishments, they have an Italian experience. [Interviewee] adds that this will be costly for the physical store retailers though “this personal approach is the only way the physical outlets will be able to survive.” Heather Huffman adds that it is important for retailers to create an experience for consumers that they will want to have again and again. Kristel Waston says retailers should aim to turn shopping into an experience, other than just purchase of products. Kristel also adds that retailers need to evaluate feedback from shoppers with the aim of influencing the way they design their products and stores. Teresa Gilabert also suggests that physical store retailers should offer different things that online shopping cannot provide to consumers. Patricia Sarasua also thinks that reinvention of customer experience is the only way back for malls. Miguel Hernando adds that for malls to remain relevant to consumers then, “The key is to give to the consumers new, different and better experiences than the ones they have through the online channel.” More consumers would definitely visit the mall more often if the quality of service and customer experience was improved. This would generate more sales for the retailers hence offer a means of revival for the struggling shopping malls and department stores.
What impact can this case make on the European retail model?
The number of total sales occurring in shopping malls and department stores is still expected to fall over the next few years in Europe. Online retailing is expected to transact more and more transactions over the years. However, this would not have a big impact on the European retail industry when compared to the American situation. Mariana Arellano says, “The U.K. has a different lifestyle change, culture and traditions that I do not think it will affect the industry.” The European retail industry is insulated against impacts of such situations. This can be attributed to various factors. The surface area occupied by shopping malls per capita in Europe is much lower when compared to that of the United States. Since the relative number of shopping malls is much lower, it ensures most of the malls are high-quality malls. These malls are associated with high level of customer service. Tom Williams, based in London, says, “Malls and stores offer high experiences such as personal shoppers and designers which are tailored to an individual experience making the customer feel worthwhile. He adds, “The overall experience is being changed, for example in Westfield, White City (London), they now have a cinema on site.” This ensures these malls receive consumers who are always looking to go back to the personal experience. Consumers will always be willing to visit and spend money at these malls.
Another factor that ensures these malls are not affected heavily by reduced sales is the fact that they are located near heavily populated areas compared to malls in the U.S. which are located in near rural areas. The fact they are located near potential customers ensures that they will always have customers at their doors. Heather Huffman also agrees with this; he says that if the malls are located in big cities or places with a high number of tourists, then the malls are insulated from very low sales. This ensures the reduced sales in malls do not affect the malls to the point of closing as is the case in the United States.
Another factor is the design of the malls, especially in the U.K. Maria Eugenia, as an architect, also adds that, the design of malls in the U.K. are different to those in the U.S., as they are designed to focus more on food products and leisure activities. This ensures there are consumers who are always willing to visit the U.K. malls.
According to Paula Ibanez, in the United States, everything is more horizontal. Paula says, “People usually drive their own cars to get anywhere in the U.S. but the U.K. cities are more vertical as people take the subway to go from place to place more often. So stopping by a convenience store, pharmacy or shop is easier because it can be on your way home.” This insulates the European retail industry from high drops in sales.
Also, several stores in Europe have started to focus more on customer experience, adopting trends that help the physical store retailers connect with the customers at a personal level. Maria Eugenia says that U.K malls are offering their malls additional services beyond the pure shopping experience.
Reflecting on theoretical findings
The purpose of this thesis was to determine the actual health of America’s shopping malls and department stores, whether they are dead or alive. The thesis was crafted with five research questions. The first question was the main research question since it reflected the research’s main objective. It aimed to describe the situation of America’s shopping malls and department stores. The second research question was directed to find reasons for the situation discovered in the first research question. The third research question aimed to determine the retail model of American shopping malls and department malls is still viable. This relates to the first research questions since it is presumed the current retail model is to blame for the downfall and crisis facing a section of the retail industry. The fourth question also relates to the first research question since it aims to provide a solution for the situation identified in the first research question. The fifth research question makes a comparison of the European retail industry and the United States industry. The main objective of the research has been achieved and the research questions answered according to the collected data and data analysis. First, the American shopping malls and department stores are still alive with a high number still willing to visit the malls. A lot of activities still take place inside the malls so it is premature to consider them dead since a number of them have closed down. Several factors have come into play when considering the situation facing the crisis facing America’s shopping malls and department stores. First and most importantly is that the level of consumer experience has dropped in the malls. Consumers no longer feel a personal connection with the malls. And since they acquire products elsewhere, in this case online, they are keeping away from the malls. However, most American shoppers would go back to the malls if the level of customer experience was improved. The numerous number of malls in the United States has also led to a ‘dilution’ of the quality of service offered hence consumers no longer feel anything special in the malls.
Theoretical limitations
The thesis paper tries to understand the situation facing America’s shopping malls and department stores. A lot of information has been written on the subject. Various reasons have been proposed for the numerous closures of the shopping malls and department stores. The different reasons were based on the understanding of the authors. It was, therefore, difficult to develop background knowledge on the topic. The topic had a different perspective based on various previous research and news reports.
Methodological limitations
Due to the size and populations of the data collected in this research, generalization may not applicable in certain scenarios.
Another major limitation of this research was the use of secondary resources which provided scattered information. The information was also based on the author’s understanding. Therefore, the validity of the research could be biased as mentioned under the research design sub-section.
Time to receive data was a limitation of the research.
Managerial implications
To survive, retailers should focus more enhancing the experience of customers in the shopping malls. The level of experience and quality of service has significantly dropped in the malls. This is why consumers are avoiding malls altogether. Online retailing just happened to provide a good alternative to shopping for products. Retailers also need to observe changes in customer preferences and also their shopping trends. This is with the aim of providing the ultimate experience to customers
For online retailers, they should adopt more technology that would aid consumers in picking the right sizes; this is specific to attires. Most consumers prefer to purchase apparels in physical stores.
Future studies
Further research should be conducted to determine an effective model for physical stores that would ensure that, not only do consumers visit the malls more often but also improve sales. A balance should be struck between bringing consumers back to America’s shopping malls and also improving on sales. The effective model would ensure customers visits are translated into sales.
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Appendices
Appendix 1

Figure showing U.S. Retail Sales from 2008 to 2016 and a forecast to 2018
Source, U.S. Retail Sales 1992-2018 Data Chart Calendar Forecast News.
Appendix 2

Figure 2 showing percentage of total sales taking place online; from 2013 to 2017 projected to 2021.
Source, Statista
Appendix 3

Figure showing U.S. Mixed Retail Performance in the past year
Source, U.S. Retail Sales 1992-2018 Data Chart Calendar Forecast News.
Appendix 4

Figure showing the rapid growth, both globally and in the United States, of Amazon in the past few years
Source, Business Insider
Appendix 5

Figure showing Shopping centre sales density of various European countries compared to the United States.
Source, Tomorrow’s World retail.
Appendix 6

The figure shows the percentage of consumers in European countries who order their goods or services online in the year 2006 compared to 2016.
Source, Tomorrow’s World retail.
Appendix 7
Survey Questions
Do you prefer online shopping or shopping at the mall?
What aspect of online shopping appeals to you most?
What aspect of shopping at the malls appeals to you most?
What aspect of online shopping don’t you like most?
What aspect of shopping at the malls don’t you like most?
What category of products do you prefer to purchase online?
What category of products do you prefer to purchase at the malls?
If malls improved the variety of products that they sell, would you shop there more often?
What is the average number of times you visit the mall in a month?
In the past, did you visit the mall more often?
If you visited the mall more often, what made you stop frequenting the malls?
Whenever you have visited the mall, do you always feel your expectations as a consumer have been satisfied?
If customer experience at the malls was improved, would you visit the mall more often?
As a consumer, have your preferences changed over the years in relation to shopping at the mall?
From your observation when in the mall, has there been a significant drop in the number of people who visit your local shopping mall?
Do you think it has become too expensive to shop at the mall?
Do you associate malls with people of high social status?
Do you think there are too many malls in your local area?
What kind of changes would you like to see at your local mall?
If the changes you mentioned above were made, would you shop at the mall more frequently?
Have you observed any technological changes at your local mall for the past few years?
Were you impressed with these technological changes?
As a result of these technological changes, did you visit the mall more often?
Do you feel you would be better served if brands had both physical stores and online sites?
In future, where do you expect to do most of your shopping, at the mall or online?
Appendix 8
List of interviewees and their roles
Interviewee, [Interviewee]
The role, A former director for Maritime Transport, one of the largest logistics suppliers to, among other e-retailers, Amazon UK and Tesco within the UK. In his role as director for Maritime Transport, [Interviewee], oversaw the rapid growth rapid of the Tesco online business. In a period of seven years, the net spend for Tesco grew from £60k pa to over £20m pa. The growth of Tesco online business over the seven-year period represents the general growth and transformation of online retail.
Interviewee, Heather Huffman,
The role, Commercial Brokerage Consultant in NAI Mobil. NAI Global is the world’s leading managed network of commercial real estate firms. With over 5,000 professionals, 325 offices in 55 countries worldwide, we bring together people and resources to deliver results for our clients wherever needed. Our clients come to us for our deep local knowledge. They build their businesses on the power of our global managed network.
Interviewee, Kristel Watson, NYC.
The role, Commercial Structuring North America. Responsible for the successful structuring and negotiation of complex asset-based and project-based contracts for distributed generation projects for large commercial and industrial energy users, across multiple sites and partners on a deal-by-deal basis. Services include designing, building, owning, operating, monitoring, and maintaining distributed generation assets, as well as other efficiency upgrades and energy insights through our Panoramic Power technology. Contracting and structuring methods include capital sales, EPC agreements, and financing through structures such as ESAs, PPAs, various “as-a-service” offerings, and on-bill financing through our EfficiencyEdge product, among others.
Company name, Centrica
Interviewee, Blair Butler, Dallas, TX.
The role, Real State at Crow Holdings Capital.
Company name, Crow Holdings Capital.
Interviewee, María Eugenia Josa Martínez
The role, PhD Architect and owner of online shop Eugeniota Collection Professor at ISEM University of Navarra
Company name, University of Navarre
Interviewee, Karl Scholz
The role, VP of Global Demand Marketing, Black Duck Software & Director of Global Marketing, Synopsys Software Integrity Group
Interviewee, Tom Williams, London, UK.
The role, Commercial Director Company, Maritime Transport Ltd. Founded in 2001, Maritime Transport is the leading private-owned logistics and Transport Company in the UK, being a leader in container transport, distribution, and warehousing. Also, the company has the largest number of depots in the country and is the owner of Secondhand Truck Ltd.
Interviewee, Paula Ibañez Hualde, Madrid (Spain)
The role, Senior Fashion Buyer-Knitwear, and swimwear at Gocco S.A. GOCCO was created in 2000 in Madrid and has since grown to over 261 stores. Since 2005 it also has started to enter selected foreign markets. Today the Company has about 625 staff. GOCCO ´s annual turnover reached over 38 EUR MN on the 28th of February 2013. GOCCO´s Product lines consist of the baby (0 to 24 months), boys (2 years to 12 years) and girls (2 years to 12 years) and include formal wear, casual wear and sportswear as well as pyjamas, nightdress, party dresses and smart coats amongst many other garments. These product lines are complemented by swimwear, shoes, and accessories (belts, gloves, hats, etc.).
Interviewee, Juan Ordoñez Navarro, Madrid, Spain
Role, CERAVE Brand General Manager for Spain, Active Cosmetics Divisio-L´Oréal.
Company name, L´Oréal
Interviewee, Mariana Arellano, San Francisco, CA.
Role, Global Account Specialist at YKK Corporation of America.
Company name, YKK Corporation of America
Interviewee, Teresa Pastor Gilabert, San Francisco, CA.
The role, Marketing, and Operations Manager
Company name, Vinos and Gourmet, Inc.
Interviewee, Patricia Sarasua, Madrid, Spain.
Role, Spain Brand General Manager, La Roche Posay
Company name, L´Oréal, Active Cosmetics Division.
Interviewee, Miguel Hernando Vigil, Miami, FL.
Role, Latin America Zone Brand Director, Fragances, Designer brands-Giorgio Armani-Yves Saint Laurent
Appendix 9
Interview Questions
What factors do you think have contributed to America’s Malls and Department Store’s crisis?
How big of an impact has development in information technology played in this crisis?
Do you think online shopping, with leaders such as Amazon, is to blame for the downfall of offline shopping and physical malls?
What aspects of online shopping do you think appeals most to consumers?
How have consumer preferences changed over the years, in relation to the shift from offline shopping to online shopping?
Do you expect this trend in the downfall of shopping malls to be experienced in other parts of the world such as the U.K.?
Do you think there is a way back for shopping malls in the retail industry?