Finance Column » Your Money This Week » Podcast: Why are malls dying?

Podcast: Why are malls dying?

By Doug Whiteman ·
Monday, August 4, 2014
Posted 6 am ET

American shopping is undergoing a huge transformation as we spend more of our time and dollars online. As e-commerce sites boom, malls wither and big-box stores struggle to hold on to shoppers and fill empty floor space that used to be occupied by recorded music and other products that we're now much more likely to buy via computer.

Where is this trend headed? Will shopping malls become extinct?

In this week's podcast, Mark Hamrick, Bankrate's Washington bureau chief, looks for answers to these questions as he chats with:

  • Stephen Hoch, marketing professor and retail expert from the University of Pennsylvania's Wharton School, who sees more tough times ahead for traditional brick-and-mortar retailers.

Also, Bankrate's Amanda Rowe has a great tip on a back-to-school bargain that your state might be offering.

Bankrate Audio

Malls die as e-shopping thrives

Dead malls have become a creepy fascination, and big-box retailers are struggling. Can any stores survive the shift to online shopping?

Mark Hamrick

Washington Bureau Chief,

Stephen Hoch

Marketing Professor, Wharton School

Amanda Rowe




From, this is "Your Money This Week."

I'm Mark Hamrick in Washington.

Shopping: For some, it is a virtual hobby. For others, it is a chore to be avoided.

Like the activity or not, it is something consumers must do. And how it is done continues to change at a rapid pace. There's online shopping. There's the changing face of brick-and-mortar stores, including the shift away from traditional shopping malls.

This week, we feature a fascinating conversation with a retail expert from the highly respected Wharton School at the University of Pennsylvania, Steve Hoch.

Bankate's Amanda Rowe takes a look at how state sales tax holidays can help you to save.

And we'll take a walk back into business history.

All of that and more coming up on "Your Money This Week."

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There was a time in the U.S. just a few decades ago when it seemed like much of the country really did look like families you'd associate with television sitcoms, Beaver Cleaver and the like. Maybe Dad worked and Mom stayed at home looking after the kids. But those days are, for the most part, just a memory now. And that has had broad implications for the retailing business.

And then there's technology. Between the smartphone, tablets and personal computers, much shopping, involving clothing, shoes, office supplies and groceries, can be done online, of course.

We're lucky to be joined by a terrific expert to discuss the changing footprint of retailing.

Stephen Hoch is Laura and John J. Pomerantz Professor Emeritus of Marketing at the Wharton School, University of Pennsylvania.

Stephen Hoch: Okay, let me start with the mall question. First of all I think there's something like 1,100 malls in the United States. And I don't think really that there have been more than maybe 20 built in the last 10 years. So a lot of it happened in the '80s -- '70s and '80s, and then into the '90s. But, we're kind of "malled out." Right now, there are just too many stores in America and some particular formats there's more of an oversupply than others, but there's just too many stores. So if you wanted to open up a mall these days your first problem is who is going to be your anchor? There's only one department store chain really, and that's Macy's, and without an anchor the whole idea of a mall sort of becomes more problematic. There's lifestyle malls, little small outdoor jobs, but those are really more, not that much different from a strip mall.

So, I think there's another reason why malls have had problems. And I think that really has to do with the fact that they were designed for kind of a family structure that really is not what the dominant family structure is in the United States today. It was designed for stay-at-home moms who were not all that busy and had time to go out and browse. But now people are very busy. They are multi-tasking, working all sorts of things, and the mall is not a convenient shopping experience. It was a convenient shopping experience when it was designed to have all the stores you ever could possible want to, all in one location. But now people are much more opportunistic, and they're much more focused on the job of acquiring and moving on, rather than just browsing. So, if you think about it, pulling into a parking lot at the mall -- the fact is, is that whatever store you're going to go into, it's a long ways away. And if you're going to go to 10 stores, maybe that is a convenient shopping experience. So in the holidays, malls are packed, but during the week, they're not. So I don't see that changing any, or at all. Many of the mall operators have gotten very creative trying to figure out how to use up all the leftover space that is empty, but so far I really haven't seen them be able to figure out how to reinvent themselves, and it's not from a lack of trying and creativity. I think it just is not a very convenient form of shopping anymore.

Mark Hamrick: Okay, is traditional retailing involving brick-and-mortar stores likely then to see further loss of business, which includes to online? And I'm also wondering about store traffic that ultimately leads to results, as represented in sales.

Stephen Hoch: Well, I thought about this a lot, and it ends up being over -- let's see what it's been. It's almost been let's say 18 years, since 1995, when Amazon kind of opened, I would say doors, but opened their Internet portal. And today, I think in aggregate across all forms of retailing, excluding grocery, I would say that online shopping accounts for about 10 percent of purchases. Now it varies dramatically across formats. When I was growing up, two of the most popular retail formats were record stores, music stores and electronics, kind of stereos stores, and neither of those formats even exists anymore. But there's other formats, retail formats, which are more resistant.

One that you see -- I think one sector that's really been affected by the Internet much more than others is electronics retail, and basically the Best Buys of the world. So if you look at a Best Buy, I think they've adapted quite well over, in a very dynamic kind of set of categories. Electronics are constantly changing, and they were able to kind of keep out ahead of the curve for many, many years, unlike Circuit City, which went bust. But now, Best Buy is in kind of a heap of trouble because: No. 1, they have too many stores; and, No. 2, the stores that they've got are way too large. It used to be that the whole entire middle of every Best Buy contained music and DVDs, and both of those categories are dead. Or, if not dead, on life support, and now so they have all that space in the middle of the store which they really don't know what to do with. So, there's too much square footage.

So, it's pretty clear that it's just going continue on, and the one good thing for retail, for bricks-and-mortar retail, is that all the largest, most of the largest e-tailers, are retailers. Except for basically the exception of Amazon and eBay. And so they're going to be participating, and they are participating, wholeheartedly. But unfortunately, they're cannibalizing themselves which implies that what they should try to do is to shrink both the number of outlets they've got and the sizes of the outlets they've got. And if you're an ongoing concern, both of those things are very difficult to do. You can't just close down 10,000 square feet of a department store. And what are you going to do with it? It's also very difficult to get out of a lease. If you've got a 10-year lease, you've got a 10-year lease, and you can't close the store until you're through with it. I mean obviously, you can, but generally speaking that would rather just to limp along rather than have to write it off completely.

Mark Hamrick: You're listening to "Your Money This Week" from Bankrate. We've been talking with Stephen Hoch from the University of Pennsylvania's Wharton School, and we'll continue with him in just a moment.


One of the ways you can make your own dollars go farther is to take advantage of one of the many sales tax holidays across the country. Many are timed to coincide with back-to-school shopping, but they're generally not restricted to that.

Bankrate's Amanda Rowe reports:

Summertime has nearly come and gone, and now it's time to send the kids back to school. But before you go checking the classroom supplies list, you should check the calendar for back-to-school sales tax holidays in your state.

Some shoppers aren't fans of the sales tax holidays, arguing that they cost states money and rely on bad tax policy. Others argue that the tax breaks boosts local economies by luring more people into stores, where they might just buy more than the tax-free goods.

Seventeen states have made it onto the sales-tax calendar for 2014, including Florida, Texas, and Massachusetts. During the shopping spree, states designate certain items as tax-exempt. The most common items are clothing and school supplies, but some states offer broader definitions of school-related purchases.

Regardless of how long it might last, you need to pay close attention to details. Each state differs on what is tax-free and what isn't.

For the entire list of states and rules, and other ways to save big on back to school shopping, visit I'm Amanda Rowe.


Now back to our conversation with Professor Stephen Hoch, a retailing expert at the Wharton School.

Mark Hamrick: From a psychological standpoint it seems like most people want to get out of the house and have some degree of social, visual, tactile experiences. Does retail not still hold that lure for them, although, as you said, they may not want to engage in commerce that relates to analog music or electronics purchases?

Stephen Hoch: Well, I think I mean -- well first of peoples love or hatred for shopping is an individual difference. Some people really like it, and some people only like certain kinds of shopping. I think it still is considered a form of entertainment, to some degree. And obviously there can be some social interaction. But for a lot of people, social media -- the retailers have embraced social media, and so some of that socialization part about the brand and what's your favorite color and dress and all that kind of stuff can be done in the context of the Internet. And so I think what it is, I'd say there's three things about consumers that are just totally absolutely true, and it continues to become even more true.

No. 1, consumers are a lot smarter than they used to be. I know as a teacher, as a professor, the students that I teach today are much smarter than when I was in college. Now, are they IQ points smarter? No, but the fact is that they have at their fingertips all sorts of information which makes them a lot more aware of all things, and that's the same thing for shoppers.

The second thing is that people are just a lot busier, and busy meaning doing all sorts of stuff at the same time. When's the last time you just watched TV? You watch TV, you listen to the radio, you're on your computer or talking on the phone, or whatever it is. So, people are very busy, and they like to go shopping, but they also have to deal with the rest of the stuff in their lives.

The third thing, which I think you were kind of hinting at, also is that people are really interested in sort of what I call as discovery and having higher aspirations. So, the fact is, is that shopping still, people still use shopping to achieve those higher aspirations, but the fact is that with the online channel, they can do that in a much more succinct and less time-consuming manner. So, over time retail will adapt to it, but the fact is that for certain retailers, if they have hit the wall in terms of having too much square footage and too many locations, it's always difficult to shrink.

An example of this, a perfect example of this, is Staples. So Staples is -- it has grown phenomenally, I don't know how many stores it's got now. But they're closing massive numbers of them because a third of their business is online. They're still the king of office supplies, and people are still buying office supplies, but over time it's going to be a painful process for them to move away from physical locations, to even further development of the online channel.

Mark Hamrick: People may like shopping for shoes but not necessarily enjoy shopping for office supplies so much.

Stephen Hoch: I know, but isn't that's funny?

Mark Hamrick: Yeah.

Stephen Hoch: Is when you think that the last thing you could buy online would be shoes? And, people are buying shoes online all the time!

Mark Hamrick: Yeah, Exactly, Absolutely yeah.

Stephen Hoch: Because Zappos created the new model, where you ship stuff home. And there's so many categories who we never really thought about before, that when you have one central supply depot you can really carry an incredible amount of variety. You go into a shoe store, they don't have anything. They have maybe 100 of what's available for many individual brands. And once you get over the fact that you can't physically try it on before purchase and you have to wait for a couple of days until it gets there, once you get beyond that part and just adapt to those two things -- why would anybody bother to buy shoes in a store? You know?

Mark Hamrick: Yeah, yeah.

Stephen Hoch: You might as well not buy three pairs and return the ones you don't want.

Mark Hamrick: Well, and along those line of the Amazon empire, in which Zappos is included, Jeff Bezos has said that he feels as if consumers have absolutely no allegiance to his brand to the extent that if they know that they can have a good outcome with an extremely low price, they'll gravitate toward that other brand or other website in a minute. Do you agree with that?

Stephen Hoch: Yeah, and that's a part of what I was saying, that consumers are a lot smarter and a lot more opportunistic. I mean, the days of -- it's not as if people don't like brands. But people are not blindly loyal to brands anymore. In the old days I think that people were more likely, partly because they were just less familiar with all the options available to them.

One way you can see that today, is that for instance every supermarket and grocery chain has a huge selection of what they call private label products, with their name on it. And that's basically brands that Procter and Gamble sells and Kraft sells and all the other big consumer product companies. But the fact is, is that consumers have tried them and they realize in lots of cases that it's exactly the same, so why pay more if you don't have to pay more?

Mark Hamrick: Yeah, that's a very good point. Well there's obviously a lot going on out there, Steve, and it's an exciting and dynamic field to watch, and you've put it in a much more easy-to-understand context, so thanks so much for your time.

Stephen Hoch: Thank you very much.

Mark Hamrick: Stephen Hoch, professor of marketing at the Wharton School at the University of Pennsylvania.


This week in business history involves a birthday of a remarkably successful businesswoman.

Martha Stewart was born August 3, 1941, in Jersey City, New Jersey.

She worked as a model and a stockbroker before focusing her interests on gourmet cooking.

Martha Stewart would develop her interests in all things domestic into a powerful brand bearing her name. There have been bumps along the way, of course, including her time in prison for insider trading.

But there's no disputing that Martha Stewart has been an American original.



You've been listening to "Your Money This Week."

For more on this and other personal finance issues, visit Thanks to producer Lucas Wysocki for his work in the studio, and also to editor Doug Whiteman.

I'm Mark Hamrick. From all of us here at Bankrate, here's hoping you have a great week.

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1 Comment
Carmen Davis
August 10, 2014 at 12:13 pm

I don't shop malls because they're like cookie cutters. If you been to one mall you've been to all. Malls have over priced merchandise, rude sales persons and having to wait 10 - 20 minutes in long lines waiting to pay. I have more enjoyment going to thrift stores, second hand stores because there's always something different in each store.