mall

We’ve seen the story before, Amazon is taking over the worl… I mean malls but while shopping malls may just seem like clusters of stores they’re actually very delicate profit-making formulas. The ideal place to settle a mall is a central wealthy location with lots of traffic close enough to attract locals easily driven to from nearby towns, and for maximum profit tourists accessible with everything planned just right a mall is far more fruitful than its individual stores could ever be.

Although even then the tides seem to be turning. How can even the perfect mall beat the price and convenience of Amazon? The data seems to confirm online shopping is on the rise while more and more malls are withering away, but graphs like this are misleading. The mall is far from dying and Amazon only confirms this

Before we get there we first need to understand what makes a mall unique because malls are owned and managed by a single company. Their incentives are very different from an individual store a group of small local stores is normally the perfect opportunity for a big corporation to come in and steal their business. To the owner, though, a mall with too much competition means fewer stores and less rent being made. So they carefully pick renters that not only cooperate but actually complement one another.

This is why malls tend to have a similar set of stores whether you’re in Washington or Wyoming. Well if there are malls in Wyoming each class of mall from the 5-star to the less than glamorous has a standard meta deck of stores that have been proven to generate more profit together regardless of where it’s located. You have to consider though the real heart of the mall are the anchor stores. Big department stores that draw in the crowds for everyone else you’d never drive to a store specifically for remote-controlled helicopters or seasonal moustache warmers. Here’s the thing though, if one anchor store can lure you into the mall these other shops get your business – and they’re positioned on opposite ends of the building making you walk past everything else to get between them.

The goal of a drive-thru is to get you in and out as quickly as possible but malls are just the opposite. They do anything and everything to prolong your stay. They want to satisfy your needs so well that it’s always just easier to stay a little bit longer so for every need on Maslow’s hierarchy. There’s a convenient solution. Not ten steps away the food court fills you up brave deputies stand guard friends keep you company and your purchases are psychologically rewarded. Companies even seem to think they’re providing some sort of profound civic duty (ehem, Apple). “We actually don’t call them stores anymore, we call them town squares”. There’s an obvious problem with this strategy.

More and more people can’t or don’t want to spend a lot of time shopping. It may take some time but the trend seems clear: physical retail stores are dying and the internet will be the new way to shop. There’s one big problem with this theory, Amazon just bought the grocery store Whole Foods for $14 billion. If physical retail stores are soon to be a thing of the past than why are wire companies like Amazon and Alibaba investing in them? Part of these deals is about getting data for the algorithms. I don’t think 14 billion dollars is worth it, but if you take a closer look at which stores are closing you may notice a theme.

These are businesses that never adapted. They cross their fingers that this internet thing would be a fad and kept selling the exact products. Amazon is great for unless I need an HDMI cable this very instant but besides that I’m just going to buy one online and probably even save some money. The average shopper at Whole Foods though has a thousand dollars of discretionary income to spend a month. They want to pay for a premium experience likewise everything in an Apple store could be sold online.

Apple continues building newer and shinier stores at great expense. Amazon sees this pattern to walk in stores aren’t dying old outdated ones are, so what does this mean for malls? The bad news is that many of these dying businesses are actually anchor stores. For average middle-class malls without a Macy’s or JC Penney paying rent and attracting visitors many are in serious trouble, but higher end malls are doing better than ever the more expensive the store the more customers care about the experience.

Also, the harder it is for the internet to replace as long as the upper class keeps growing. Upscale malls will only do better and better so yes there are malls that are dying but malls as a thing aren’t dying at all and neither is retail. The best way to predict the future is to look at where big smart companies are putting their money. Companies like Amazon and Apple are clearly betting on walk-in retail being around for a long time so you should too. You can shop this holiday season knowing the mall Santa will be back next year.