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Retail is Changing Part II: Who Are the Winners and the Losers?

The quickly changing landscape in retail has brought many impacts, good and bad, to those in the sector. We’ve talked many times about what the impact of e-commerce is on retail, including what industries are doing well and which are on the decline. Some say that this means retail is dying, but on the contrary, retail is alive and stronger than ever thanks to e-commerce and its various tools. However, this leaves some previously successful sectors in the dust.

In the second installment of this two-part series, we will take a look at the losers of this changing retail landscape. (See last week’s post to read about the winners.)

Retail Luxury Corridors 

CoStar Group, a real estate research firm, examined retail leasing at luxury corridors in seven cities: Miami’s Lincoln Road, Beverly Hills’ Golden Triangle, Chicago’s Magnificent Mile, Washington D.C.’s Georgetown district, Boston’s Newbury Street, Manhattan’s Fifth Avenue and San Francisco’s Union Square. It found the vacancy rate shot up to 7% last year from 3% in 2017 — greater than the 4% those areas saw in the Great Recession. 

What this means is that what many retailers used to envision as a staple to their business model, the once coveted flagship store surrounded by other luxury stores, is no longer as valuable as they thought. It also means that existing flagship stores must offer something new that sets them apart from an online experience, or a store experience elsewhere. For example, the flagship Levi’s Strauss store in Times Square offers a customized experience that includes workers helping customers personalize their denim and order items to fitting rooms using an iPad.

Shopping Malls

Investment in multi-merchandise shopping structures (malls) peaked in 2007 and was down about 37% year-over-year, and is at a record low as a percent of national GDP.  The vacancy rate for malls across the nation is increasing and at an all time high, meaning continuous investment in the future may not be realistic. 

Interestingly enough, Boulder has been immune to the curse of malls. The Twenty-Ninth Street Mall redevelopment which opened in 2009 has demonstrated only growth instead of decline since its opening. In 2011, it had surpassed its projected contributions to the city just 5 years after it opened. Today, it remains mostly occupied. In fact, the one outlet suffering from decreased sales is Macy’s, which last year announced plans to redevelop the store to lease to office and retail tenants (with no plans to sell).  The mall has quickly become a foodie’s paradise as well, with Chipotle being the store with the highest volume of sales, and a Shake Shack with plans of opening.