Shifts in customer shopping trends and demands will prompt big changes at U.S. malls over the next five years, a new report predicts.
Although mall occupancy rates remain relatively high, malls are moving away from apparel-focused stores to create new “retail and services ecosystems,” the report from Coresight Research states.
“Over the coming years, many malls will reshape their offerings, moving from a focus on apparel stores clustered around department store anchors to more diverse networks of non-apparel retailers, leisure and entertainment tenants, event and pop-up spaces, and business service providers,” said Deborah Weinswig, Coresight’s chief executive officer.
The report based its findings on five major trends that are changing. Here are the trends Coresight predicts will reshape malls over the next five years:
1. Department store consolidation
Around 1,100 to 1,200 department stores will close between 2017 and 2023, the report predicts, reducing the total number of stores in the sector by one-fifth. With the exception of bankruptcies by chains like Bon-Ton, the closures will have a bigger effect on lower-traffic, lower-sales regional malls than on higher-traffic premium malls, according to the report.
2. A shift to services
Between 2000 and 2017, consumer spending on goods as a share of total discretionary spending fell from 50 percent to just over 45 percent. As a result, U.S. consumers spent $139 billion less on discretionary goods in 2017 than they would have if the goods and services split had remained at 2000 levels, Coresight reports.
3. Apparel sales moving online
Brick-and-mortar apparel sales are expected to remain flat, as e-commerce captures a greater percentage of the market. Shoppers will spend approximately $73 billion more online on apparel in 2023, with e-commerce capturing one-third of total apparel sales, according to Coresight.
4. Maturing millennials
The oldest millennials will be 43 in 2023 and will wield more than $5 trillion across all spending categories in that year, Coresight reports. Generation Z, which consists of people born after the year 2000, will also become fully fledged consumers within five years.
The two age groups will constitute more than half of all U.S. consumers, and will likely continue to prioritize value for price paid and experiences over goods. Their familiarity with digital brands is also likely to mean more online shopping, according to the report.
5. Growth of nontraditional options
Retail alternatives such as rental, resale and subscription services may make up $17 billion by 2023. That will come at the at the expense of traditional retail channels in five years, according to Coresight.
Mall owners will respond to these trends by populating their projects with more diverse tenants and offerings, including non-apparel tenants, grocers, entertainment and food service offerings, the report states.
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