Why COVID-19 Might Be a Catalyst That Changes Retail Forever
The shopping mall might never be the same after the coronavirus outbreak, said Jie Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at UMD’s Robert H. Smith School of Business.
The expansive parking lots are empty, and those wide glass doors are shut tight and locked. But what will happen to the shopping mall when the coronavirus crisis eases, stay-at-home orders are lifted and non-essential businesses can welcome customers back?
The shopping mall might never be the same again, said Jie Zhang, professor of marketing and the Harvey Sanders Fellow of Retail Management at UMD’s Robert H. Smith School of Business.
The current indefinite government-imposed shutdown, which aims to reduce the spread of the novel coronavirus, arrived at a time when many of America’s iconic, enclosed shopping malls were already struggling as consumer traffic continues shifting to ecommerce, discount outlets and big-box retailers.
“This is another big, heavy blow to shopping malls,” said Zhang, “But it’s also a catalyst.”
Zhang, who studies consumer purchase behavior and retail strategies in the digital and multichannel retail environments, said this era of social distancing will force a shakeup in the U.S. retail sector and its malls—which may come to represent precisely the kind of contact we’re being told to avoid now.
“Part of it is the public psyche,” she said. “This virus is likely not going to go away any time soon, and the one type of place where people will be much more vigilant about avoiding in the longer term will be those crowded, enclosed spaces.”
But the crisis could also be a catalyst, said Zhang, who anticipates a “big bounce back” for some retail and entertainment establishments when the risks associated with COVID-19 subside, amid pent-up demand for consumer and leisure activities.
“People will want to go out to compensate for this time of missing out,” she said. “Unfortunately, I don’t see that happening with enclosed shopping malls.”
Open-air shopping centers, on the other hand, may see a rosier recovery. In a post-pandemic era, people will feel more at ease in spaces that are not enclosed. Already, they’d been rising in popularity, helped by the appeal of being outdoors and by their attractive retail and food establishments. “I expect to see them have a good, healthy rebound.”
It can’t come too soon. For much of the retail sector, 2020 is shaping up to be a tough year – tougher even than 2019, when a record 9,548 retail stores closed in the U.S., according to Coresight Research.
Even before social distancing measures became the norm across the country, Forever21, Papyrus and Modell’s Sporting Goods announced plans to close all of their brick-and-mortar locations. Meanwhile, candle and rattan furniture stalwart Pier 1 Imports entered Chapter 11 bankruptcy protection and had announced it would close nearly half of its 936 stores. Macy’s, Office Depot, Bose, Express, Hallmark, JCPenney, Kmart, Sears, and Bed, Bath and Beyond are also closing some stores. Even lux retailer Bloomingdales closed one of its 35 locations.
For malls, the impact of tenant store closures can be considerable, extending beyond the immediate job losses that result. Empty mall storefronts tend to erode consumer traffic, reducing sales prospects for neighboring shops, and diminishing overall commercial property values. One failed outlet tends to beget another, and another.
Overall, the number of shopping malls across the United States is likely to be scaled back in terms of numbers, while being scaled up in terms of amenities, Zhang said.
That means offering more entertainment options and luxury amenities—higher-end restaurants, virtual try-on dressing rooms and smart mirrors, high-tech customized product offerings—that entice shoppers to return again and again.
That’s the paradox, at least in the short term. What shopping malls do best are the so-called hedonic products—high-end apparel, jewelry, wellness products and cosmetics—the type of consumer products that fall most out of favor in an economic downturn, like the one we’re in now. The immediate future will be difficult for those retailers.
“Those who can weather this storm and survive may have the opportunity to thrive in the future when consumers eventually reach a point where they are ready to indulge themselves,” Zhang said. “That's the bright side.”
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