MUNCIE, Ind. (Inside INdiana Business) – As online shopping outlets continue to offer a wider variety of products than stores can physically stock, Ball State Economist Mike Hicks says the closing of brick-and-mortar retailers is part of a “natural evolution.” On the heels of the announced closure of the Macy ‘s store at Muncie Mall, leaving JCPenny as the once-popular mall’s sole anchor store, Hicks says this trend isn’t declining anytime soon.
The Star Press reports the Muncie Mall, owned by Ohio-based Washington Prime Group, has been labeled a “non-core, over-leveraged shopping center” that the publication says WPG plans to default on. According to its annual report, the mall had $33.9 million in mortgage debt at the end of 2018.
In an interview with Inside INdiana Business, Hicks says a surge in online sales paired with a recent redistribution of populations are the two main factors that are impacting the success of brick-and-mortar retailers in Indiana.
With the growth of online shopping, Hicks says the state of the Muncie Mall isn’t an isolated case, but rather it could be an indicator of an outdated business model.
“Our capacity to buy a lot of what would otherwise be trip-oriented items on the internet, makes it a lot harder to just run a brick and mortar store right here. There’s real permanent costs of having watches- you know, think about a department store like Kohl’s- watches, shoes, jeans. You know, the traditional department store stuff, it is very difficult to keep anything like the selection that you would have online available and so as American consumers explode their online shopping, that challenges the continued model of a department store, mall, or any sort of brick and mortar retailer like that.”
While consumers are able to get many products online, Hicks says those sales aren’t the only contributor to the decline of physical storefronts.
“The second thing that I think is really challenged them is the much more rapid urbanization of the population. And so, places that in 1970 had a relatively high share of the population, so this is when the malls were becoming popular in the 1960s in the 1970s in places like Muncie, and Kokomo and Terre Haute had large malls, because they had relatively large population share, the population is now concentrating in urban places, so Indianapolis, for example, and so when you combine the two: the movement of people from small towns and rural places into large cities, combined with just growing online shopping, you get the death of a lot of brick and mortar retailers.”
There are smaller factors involved, too. Hicks says today’s consumer generally spends money on experiences and services rather than goods. He says while some malls have added movie theaters and arcades to help combat this, the traditional model for brick-and-mortar stores isn’t holding up.
As vacancies open, some are repurposed with medical facilities, warehouses and recreational activities, but Hicks says he doesn’t see one specific sector moving in and capitalizing on these locations.
Hicks says this natural evolution of brick-and-mortar retailers is a big challenge for those who invested money in Sears or JCPenny, the latter he predicts will be bankrupt by summer time. But for consumers, he says it won’t make a huge impact.
“Really, this is consumer led. So while we may lament at the disappearance of a mall, the reason that it disappeared is because we didn’t go there anymore.”