In the wake of a record-setting year for brick-and-mortar store closures, retailers in 2020 face a need to innovate as they navigate industry disruption.
U.S. retailers last year announced plans to close more than 9,300 stores — far surpassing the previous record of approximately 8,000 store closures in 2017, according to a December analysis by Business Insider.
With so many store closures retail centers and malls have taken a hit, especially as anchor stores such as Boston Store and Sears have shut down.
But overall, retail sales have grown annually since 2010, according to the National Retail Federation. And industry leaders are optimistic about consumer spending in the midst of a strong economy, saying retail isn’t dead, it’s just evolving.
Last year brought a number of changes to the southeastern Wisconsin retail landscape that paint a picture of where the industry is headed in 2020.
Brookfield Square ended 2019 with the completion of a multimillion-dollar redevelopment of the former Sears store site at the southeast end of the mall. The building was razed and replaced with two centerpiece tenants: Marcus Theatres’ Movie Tavern and Chicago-based WhirlyBall.
“Brookfield Square is a great example of what’s happening in malls around the country, where former department stores like Sears or Bon-Ton are being replaced with new uses,” said Stephen Lebovitz, chief executive officer of CBL Properties, the mall’s owner.
In 2019, 75% of CBL’s new leasing across its 108 properties were non-apparel tenants, Lebovitz said. He expects that trend to continue in 2020 as consumers increasingly value experiences over things.
He said the recipe for transforming traditional malls includes combining “relevant retail,” such as entertainment, restaurants and fitness, with “a greater density of development on the site.”
Fast-growing fitness franchise Orangetheory Fitness opened adjacent to Movie Tavern and WhirlyBall at the redeveloped Brookfield Square site, and portions of the surrounding parking lot were used as sites to build two standalone restaurants, Uncle Julio’s Mexican from Scratch and Outback Steakhouse.
As malls continue to evolve, experience-based businesses will emerge as their anchors, while big-box department stores are phased out, said Sanjoy Ghose, a marketing professor and director of the PhD program at the University of Wisconsin-Milwaukee’s Lubar School of Business.
“They are not the traditional anchors in the mall, but mall owners are hoping that they will be anchors in their own right to bring people into the mall,” Ghose said.
Southridge Mall in Greendale recently added Chicago-based escape room Sixty to Escape to its growing roster of entertainment-based tenants. The venue will open in mid-February in the former Sears building, now home to Dick’s Sporting Goods, Golf Galaxy and the state’s first Round 1 Bowling and Amusement, as well as T.J. Maxx.
At other shopping centers, the physical footprint of traditional-use retail space will shrink to make way for non-retail uses like housing and commercial offices, Sanjoy said.
Such is the case at Bayshore in Glendale.
Work began in November on a multimillion- dollar project aimed at downsizing the mall’s retail space by demolishing or converting existing buildings for alternative uses, and better connecting the property with the surrounding neighborhood’s streets and pedestrian walkways.
The project is still on track for a late 2020 completion, said Kirk Williams, managing director for Cypress Equities, which manages Bayshore.
A two-month-long demolition of the northern indoor mall portion is slated to start soon, and a new and improved outdoor centralized green space is expected to be complete by May.
Williams said tenant negotiations are currently in the works with some national retailers showing strong interest in Bayshore and the North Shore area. So far, Bloomington, Minnesota-based ERIK’s Bike Shop is the only new tenant announced for the mall.
For food and beverage tenants, the focus is on the local market.
“Local F&B is a strong component because that’s the ethos of the community,” Williams said. “People want to relate, they want to go somewhere that they know.”
Malls in other parts of the country are filling space with direct-to-consumer brands, which often start as an e-commerce business and later open brick-and-mortar locations as a form of marketing or connecting with consumers.
Brian Spaid, assistant professor of marketing at Marquette University’s College of Business Administration, expects that trend to take hold locally this year.
“Those stores have their model figured out really well and the stores just become, really, a touch point for consumers in an area (the stores) determined that they have enough customers to support,” Spaid said.
Even as Amazon continues to dominate the e-retail landscape, direct-to-consumer companies, such as Warby Parker and UNTUCKit, both of which have stores in Milwaukee’s Historic Third Ward, are seeing success by trying brick-and-mortar on for size.
“They’re either selling products that are not available on Amazon or they’re offering an experience that Amazon can’t replicate,” Spaid said