The recent demise of Borders Books — driven primarily by a consumer migration to the Internet — has implications that go beyond the bookselling industry, say scholars at Emory University’s Goizueta Business School.
Instead, it should serve as a wakeup call to shopping mall owners and others involved in commercial real estate, they say.
“In the short run, the Borders liquidation will add to the bulk of commercial vacancies,” notes Roy T. Black, a finance professor and director of the school’s Real Estate Program. “Barnes & Noble is still standing, but the chain, which was an early adopter when it came to e-commerce, isn’t going to suddenly snatch up all of the empty Borders stores. The fact is that online retailing is where the industry’s going. We’ve already seen book and music stores get hit hard as customers do more of their shopping online, and the trend is likely to continue to accelerate. Shopping centers and retail stores won’t disappear, but the nature of retail is likely to change.”
Discount mass merchandisers like Wal-Mart, Costco and BJ’s that utilize the “warehouse concept” have done well, especially during the slow economy, he notes.
“The reduced overhead and online presence offered by mass discount merchandisers enables them to offer convenience and low prices,” Black said. “That proposition will continue to attract customers.”
Adopting a low-cost pricing model may help individual retailers compete, but the situation’s different for shopping centers, according to Jagdish N. Sheth, a chaired marketing professor.
“Malls were originally organized to sell merchandise, but in the past few decades we’ve seen them move to offer more services as a way to cater to customers,” he said. “In the 1980s, malls started bringing in multiplex cinemas, then food courts and factory outlets. The next stage will involve not only entertainment facilities but lifestyle centers like health and fitness and accounting, legal and other professional services suppliers; and even stadium-like sports facilities that can house baseball, soccer and other teams.”
He says the changeover will be driven by demographics.
“Shopping centers have traditionally been located in suburbs where space was available at competitive prices,” Sheth said. “But as more people move back to the cities, shopping centers will have to offer a compelling reason for them to make the trip out to the suburbs. People are more likely to take the time and make the trip if they can get multiple needs satisfied in a single visit.”
The expansive space that characterizes many shopping centers may ease their move to the new model, says Sheth.
“Many shopping centers are organized in clusters with anchor stores at each end surrounded by smaller retailers,” he said. “In turn, the retail units are surrounded by vast parking lots that may be underutilized. So portions of the lots may be temporarily reconfigured to host sporting events and other forms of entertainment, from circuses to county fairs.”
But part of the challenge will be the ability of the mall owners to adapt to a new kind of leasing model.
“Until now, mall owners have been structuring their store leases on a multi-year model,” Sheth said. “In the future, their sporting and entertainment leases may be for periods as short as two weeks.”
– Marty Daks
