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  • Shopping malls may just seem like clusters of stores but 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 - tourist

  • accessible. With everything planned just right a mall is far more fruitful than its

  • individual stores could ever be. But even then, the tides seem to be turning. How can even the perfect mall beat the price and

  • convenience of Amazon and 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 but

  • To the owner of a mall 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

  • But 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 but 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 doing 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. We actually don't call them stores anymore

  • we call them town squares. But 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

  • Dollars. If physical retail stores are soon to be a thing of the past,

  • why are companies like Amazon and Alibaba investing in them? Part of these deals is about getting data for the algorithms but nowhere near

  • 14 billion dollars worth, 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 i'm just going to buy one online and

  • probably even save some money but the average shopper at Whole Foods 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 but they continue building newer, shinier stores at great expense

  • Amazon sees this pattern too. 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 JCPenney 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 and 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 and 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 and with luck we may even be blessed with Paul Blart 3

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Shopping malls may just seem like clusters of stores but they're actually very delicate profit-making formulas.

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The Death of Malls?

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    Emily posted on 2018/08/28
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