22 April 2019
Built five years ago, the South China Mall in Dongguan in Guangdong province is now a ghost mall with a vacancy rate of over 90 percent. Photo: Internet
Built five years ago, the South China Mall in Dongguan in Guangdong province is now a ghost mall with a vacancy rate of over 90 percent. Photo: Internet

How malls can survive the e-shopping trend

During a visit to Hong Kong last year, Alibaba chief Jack Ma sounded a warning for mall operators as he said that brick and mortar vendors are doomed in the face of rapidly-expanding e-commerce.

Now, one can argue that the prognosis was a bit of an exaggeration, but what we cannot deny is that the golden days may have indeed passed for malls and shopping centers in developed economies.

Even Hong Kong’s most-coveted commercial precincts have felt the impact — witness the growing vacancy rates at street-front shops in Causeway Bay, Tsim Sha Tsui, Mong Kok and Central districts.

Retail industry consulting firm Davidowitz & Associates has outlined the sinking prospects of malls in the United States. The company expects around half of 1,200 malls across the nation to be forced to wind up business in the next 15-20 years.

Only the first-tier retailers in the best locations and having a solid brand lineup are seen surviving. There would be no room for medium- to lower-end shopping centers.

Some statistics show that four years after the 2008 financial tsunami, 12 malls in the US closed doors and 62 were struggling to stay afloat. The current situation is likely to be worse.

Over the past five to six years, US spenders have been tightening their belts and trying to save more for hard times. Big names in the retail sector including Sears, JCPenney, Macy’s and RadioShack are all grappling with lost sales. Firms have slashed their store numbers and some have even shut shops.

RadioShack, a once-thriving electronics retailer, filed for bankruptcy last week and outlined plans to sell as many as 2,400 stores.

It appears that stores selling daily necessities and consumer goods will all have to brace for a hard time and subsequent restructuring since customers can easily find cheaper alternatives and greater variety of products on the internet.

Commercial landlords will also suffer as the chain stores are usually the prime tenants and without them malls will become much less appealing to consumers.

The bleak offline retail landscape has led a photographer, who goes by the pseudonym Seph Lawless, to come up with a special photo album called “Black Friday: The Collapse of the American Shopping Mall”, a book that documents the demise of old symbols of American commercialism.

The book also points out changes that underline the downturn: the social networking roles of malls and shopping centers are fading into obscurity. Young women, who used to be the majority of patrons of these offline outlets, now turn to electronic means to chat or swap gossip. Previously, they would have chosen a restaurant in a mall to meet up with friends and also do some shopping.

So, are mall operators and offline vendors become sitting ducks now? Not really. There are still things and services that e-shops may find it hard to offer.

We should note the developments at lower-tier malls in Seoul, where a large proportion of retailing space has been leased out to tutorial schools and learning centers. South Korean parents take their children to these malls and while the kids attend after-school classes there, the parents can do some shopping or chill out at a restaurant inside the mall, benefiting the tenants. This is how the synergy of “high-traffic shopping” is created.

In the US, indie bookstores may become the saving grace for floundering malls as such bookstores only sell publications of a certain genre or topic and enjoy distinctive customer loyalty. Bookworms generally prefer printed copies to the less tangible e-books, thus they will find a place to hang out and buy books.

This article appeared in the Hong Kong Economic Journal on Feb. 11.

Translation by Frank Chen

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An abandoned mall in Ohio, US, where department store chain JCPenny was once a prime tenant. Photo: DailyMail

A famous Hong Kong writer; founder of the Hong Kong Economic Journal

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