WHY RETAIL SHOPPING CENTERS ARE DYING OFF

July 15, 2017

Yesterday I went to Office Depot on Sahara and Valley View to buy a color laser printer. I knew the exact printer I wanted. Office Depot had a sign next to my printer saying they price matched. So I quickly went on my smartphone and found the same exact model from Best Buy, on eBay listed for $40 less after taxes. I asked them if they would price match that. The manager said oh no we don’t price match eBay. So I questioned the price match guarantee sign, he refused to honor the sign claiming it said in small print, “ask the store clerk for details.” I told him I was ready to purchase the unit right there and then if he would honor the price match, but he refused. So I left and went online and purchased it with free shipping and no local sales tax saving myself $40 on a $200 printer.

To be fair, most retail big box stores refuse to price match online retailers, because they simply cannot compete on price after they pay for rent, salespeople, insurance, delivery, managers, and marketing ect. And that is why retail stores are closing at record speed. When there is no barrier to consumers from price comparing on a smartphone inside a store and they can save 20% with free shipping, it’s game over. Retailers a cannot compete period.

Two years ago I ran out of my favorite deodorant. I went to four stores looking for it and they were all out. So I Googled the product and found it online, for half the price, with free shipping. So I order a year’s worth at once. I saved money, time and a trip to the store. This year when I ran out, I simply reordered another year’s supply. So if people like me are purchasing deodorant online, that means we are not shopping at CVS and other major retailers for even the basics.

The picture above is an actual brochure for the retail shopping center at Cheyenne and Rainbow. In the past, a major anchor like Walmart would guarantee the success of a shopping center like this. This shopping center is visible right off the freeway, has great demographics, plenty of parking but it cannot compete with Amazon, eBay and other online stores who now sell typically for 20% less and now with free shipping. (The Shopping Center filed for Bankruptcy this month).

And the trend is not leveling off, it’s accelerating. This chart shows online sales are only going up. Amazon just opened a new fulfillment center in Las Vegas which means that when you purchase stuff online, they can now deliver it the same day. Why would anyone go shopping at a brick and mortar store again?

The only way retail shopping centers can survive is by lowering their price per foot and grow more destination businesses like restaurants, movie theaters, gyms etc. Retail will continue to shrink leaving only a small number of physical stores as we can see by the brochure. The shift has already occurred. It’s now not the future. It’s certainly now a renter’s market. Landlords must beg, pay for TI’s, give rent credit ect to compete and to survive. It’s a whole new world. How do you plan to profit from it?