CareCredit - Women's Health April 2024

Retailers Reduce Reliance on Shopping Centers Even as Gen Z Loves Malls

Gen Z, malls, retail

Amid ongoing uncertainty, retailers are scaling back their reliance on in-mall locations, even as the new generation of shoppers flocks to these shopping centers.

On the most recent wave of earnings calls, retailers spoke to their efforts to focus their store growth pipelines more on off-mall locations.

Macy’s CEO Tony Spring spoke on the company’s last earnings call to the brand’s efforts to “prioritize our highest return on more opportunities and open more small-format, off-mall Macy’s” amid the company’s push to close roughly 150 underperforming stores.

Bath & Body Works CFO Eva Boratto noted alongside its last quarterly report that the company has been making “progress increasing our off-mall penetration,” noting that the shift away from malls “is a benefit for us.”

Foot Locker, too, stated on its last earnings call that it has been “making strides in our shift to off-mall,” per president and CEO Mary Dillon’s commentary.

Plus, Signet Jeweler, owner of Kay Jewelers, Zales and Jared, shared on a call Wednesday (March 20) that, among its 114 locations closes last year were mostly “lower-performing mall locations and U.K. stores,” as off-mall has been performing stronger, according to Chief Financial, Strategy & Services Officer Joan Hilson.

Additionally, Portillo’s president and CEO Michael Osanloo observed on a recent earnings call that “whole mall has been a bit depressed” in the aftermath of shootings at shopping centers.

Victoria’s Secret, too, shared that it has had “very good success today” in its off-mall locations, and is consequently working “to decrease our mall exposure in certain locations or in certain markets where malls might be consolidating,” per CFO Tim Johnson’s latest earnings commentary.

Yet new generations of shoppers seem to be seeking out malls as a hub for social connection. According to a report last year from the International Council of Shopping Centers (ICSC), “The Rise of the Gen Z Consumer,” 60% of consumers in this generation report that “even if they don’t need to purchase something specific, they visit malls just to socialize or meet friends,” and 70% report believing that “retail centers and stores have done a good job designing experiences that offer fun places for Gen Z members to enjoy together.”

Indeed, malls serve as spaces where young consumers can meet up with friends, socialize and engage in activities together. They offer a variety of entertainment options, such as movie theaters, arcades and food courts, which make them attractive destinations for social gatherings. They may offer a sense of community and belonging, particularly for young people who live in suburban or rural areas where there may be fewer social venues.

Plus, the majority of consumers around the world continue to seek out brick-and-mortar stores, according to the PYMNTS Intelligence study “2024 Global Digital Shopping Index: The Rise of the Click-and-Mortar™ Shopper and What It Means for Merchants,” commissioned by Visa Acceptance Solutions. The report, which drew from a survey of nearly 14,000 consumers across seven countries, noted that 71% of consumers prefer to engage with physical retail locations at some point along the shopping journey, be it shopping in stores or purchasing online for on-site pickup.