Malls struggling as retailer lose market share

A new study shows that mall retail tenants' market share has taken a nosedive in recent years. Maybe Radio Shack and McDonald's have taken notice: Both are among a handful of tenants that vacated Battlefield Mall this summer.

The study, compiled by Customer Growth Partners, a New Canaan, Conn.-based retail consultant, reports that retailers in malls saw their market share cut almost in half in the last seven years. From 1995 to 2002, mall retail tenants' market share dropped from 38 percent to 19 percent, the study shows.

Nationally, mall problems may have more to do with the department stores that anchor them and less to do with the tenants inside.

According to Retail Trends, the Bank of Tokyo-Mitsubishi U.S. retail index that serves as a barometer for retail activity, department store sales are down 3 percent compared to last year. The study is based on year-to-date comparable store sales of about 100 major retailers compared with the same period in 2002.

Department stores, often mall anchors, are apparently taking a back seat to discount chains, where sales increased 2.6 percent this year.

The reason is simple: "It's the economy," said Michael Niemira, senior economist for Bank of Tokyo-Mitsubishi.

Despite a July that provided department stores' first positive sales month since November 2001, analysts don't foresee a turnaround.

Consumers' turning to discount retailers is "an ongoing trend, but it just gets accelerated when economic conditions are particularly soft," Niemira said. "Now will the (department) store sector come back as hinted at by the most recent report? Most likely there'll be some cyclical recovery, but that doesn't necessarily mean that you're going to see strong sales. Department store sales have been relatively soft over a longer period of time. ... And that's likely to continue."

Leading the discounter surge is Family Dollar and Dollar General, which are up 4 percent. Target and Wal-Mart have seen more moderate gains at 2 percent and 2.8 percent, respectively.

Battlefield Mall

The parent companies of the department stores that anchor Battlefield Mall show revenue decreases compared to the first seven months of 2002: May Department Stores (Famous Barr) is down 5.7 percent; Sears is down 4.3 percent; Dillards is down 4.2 percent; and J.C. Penney is down 1.3 percent.

A walk through Battlefield Mall reveals seven vacancies.

Mall officials don't see a correlation. They say such turnover is expected.

"Retail is constantly changing," said Rob Rector, mall manager. "We've got to continue to roll with it."

But RadioShack was no ordinary tenant; it was an original tenant when the mall opened in the 1970s.

RadioShack spokesperson Allyson Cross said it was a matter of economics.

"The shopping center did not provide an adequate return on investment for us," Cross said.

There is a noticeable trend of RadioShack stores locating in strip centers near or adjacent to Wal-Mart Supercen-ters, including all the Springfield Supercenters and the Nixa Supercenter.

Without disclosing numbers, Rector said overall sales at the mall are flat.

"We're running head to head with last year," he said. "We're not seeing the large losses that you're hearing in the reports."

Other Battlefield Mall vacancies are Successories, Foot Action, Piccadilly Cafeteria, San Francisco Music Box and Deck the Walls. Casual Corner also vacated the mall, but its space has been occupied by Hollister Co., a sister company of Abercrombie & Fitch.

American Eagle Outfitters is expanding its store to occupy the space vacated by RadioShack, Rector said. The new American Eagle is planned to be open by Christmas and will move to the former Wehrenberg Cine 6 movie theater space during renovations.

The future of the vacant theater space is unknown.

"We'll continue to do an analysis on it and determine what's the best use for it," Rector said.

He said the mall's leasing team is working with its parent company, Simon Property Group, to devise a plan. There have been talks with other theater operators as well as retail tenants, he said.

Regional draw

Mall officials said being a regional center helps to stabilize sales numbers when national data show slides.

"We're in the center of the strong south Springfield retail hub. That also brings (traffic) from surrounding counties upwards of 125 to 150 miles out. Springfield is the definition of a regional shopping center."

The growing metropolitan statistical area also grows its customer base, he said.

Ultimately, they say, the customer decides who stays in the mall and who leaves.

"Customers vote with their dollars," Rector said. "When they vote, they're telling us what they want."