J.C. Penney on Friday said it would shutter between 130 and 140 stores in the coming months.
The announcement follows a steady drip of dreary news from major retailers. Macy’s said last month it would close 100 locations, while Sears said it would slash 150. Dillard’s and Kohl’s made similar cutbacks in recent years.
The department store downsizing is in stark contrast to — and largely the result of — surging sales of online-only retailers such as Amazon, experts say. E-commerce sales grew by 75 percent from 2011 and 2015, according to industry site Internet Retailer.
This trend brings up a key question: What’s the future of the Grand Teton Mall and other large eastern Idaho shopping centers that rely on the survival of big-box retailers?
Grand Teton’s four anchor tenants are J.C. Penney, Macy’s, Sears and Dillard’s. While none have closed — a leading reason the mall as a whole remains in healthy shape — fortunes can change quickly, as evidenced by Chubbuck’s struggling Pine Ridge Mall and other recent large retail closures.
“The online phenomenon is brutal for brick-and-mortar retailers,” said Brent Wilson, an Idaho Falls commercial real estate broker and retail specialist with Thornton Oliver Keller. “It’s hard to keep up when you have that much overhead.”
Rise of online
U.S. e-commerce sales hit $394 billion last year, up 15 percent from $342 billion in 2015, Internet Retailer reported. That’s roughly the same pace of growth for internet sales as each of the previous five years. On Cyber Monday alone last year, online shoppers set a record for sales with $3.45 billion, according to Adobe Digital Insights.
John Ney, a professor of marketing in Idaho State University’s College of Business, knows firsthand the online shopping trend isn’t limited to his millennial students. The 50-year-old said he bought many of his presents online last Christmas. “It was just easy,” he said.
Consequences of the online migration have been obvious, including in eastern Idaho.
National entertainment retailer Hastings shut down 123 stores including its Idaho Falls location last year after filing for bankruptcy. Sports Authority followed a similar path.
King’s Variety Stores announced earlier this week it was closing all 21 stores, including three locally. A King’s news release said the small chain had weathered numerous shifts in the retail landscape over 102 years, plus two world wars and the Great Depression. But it couldn’t survive the internet.
“(A)nyone with a computer can buy from millions of vendors around the world,” the store said. “Brick and mortar stores need feet and faces to survive as we have salaries, rents and other costs to cover. Unfortunately for us that is not the current landscape.”
The Grand Teton Mall, opened in 1984, has 550,000 square feet of retail space across 75 stores. It was fairly quiet on a recent Tuesday around lunchtime.
In Macy’s, more employees than customers walked the floor. Sears has seen better days, with many barren display racks and empty walls. But overall, the mall’s interior is in good shape and nearly all its storefronts are filled — a stark contrast to so many decaying and half-empty American malls.
Darren Howard, Grand Teton’s general manager, said a primary reason for the mall’s success is its location. It serves “such a large area,” he said, stretching from central Idaho, north to Montana, and even to western Wyoming. For retailers, he said that translates to an “immense value to having a store here.”
As large retailers look to consolidate and save money, closures more often come in larger urban centers, where a company has three or four stores in the same general vicinity, Howard said. Macy’s and Sears did not include Idaho Falls on recent closure lists. J.C. Penney has said it will announce its closure locations next month.
“We’re always keeping our ear to the ground in terms of bankruptcies, and things like that,” Howard said.
Women’s clothing company Wet Seal was one such recent bankruptcy victim, leaving its mall storefront vacant. Howard said the mall was not anticipating any other closures soon, though sometimes such announcements do come “out of the blue.”
Bonneville County residents have higher incomes on average, another reason Grand Teton Mall stayed healthy even as stores and shoppers departed Chubbuck’s Pine Ridge Mall, Wilson said. Bonneville County gross retail sales typically top $3 billion annually, he said, while Bannock County is in the $1 billion range. Macy’s and Dillard’s closed at Pine Ridge, and other stores have followed suit.
If just one anchor tenant closes at Grand Teton, “it could be catastrophic,” Wilson said. A mall’s small retailers have clauses in their lease contracts that require anchor stores — which drive much of the customer traffic — to stay open, Wilson said. If they don’t, the smaller retailers will receive fewer customers and pay significantly less rent to the mall.
Losing a big-box store can turn into “a domino effect,” Wilson said, as small stores that supplemented the anchor retailer also depart.
How to survive
Traditional retailers that want to survive “are going to be doing a combination” of both internet and store sales, Wilson said.
In the past two years, Howard said he’s watched retailers at the mall start to change their approach, as they work to build a new type of relationship with the customer both online and in person. “They want items now,” he said of the next generation of shoppers. “But they also want the convenience of shopping at home, and a price-match.”
Howard said Grand Teton’s corporate owner, GGP, also has poured “millions of dollars” into trying to “be in front of the customer online.” The company owns dozens of malls across the country, and each has its own smartphone app, helping customers find deals, and assisting them with parking and wayfinding, he said. Grand Teton announced its smartphone parking app in the lead-up to the 2016 holiday season.
Howard said the mall is planning an expansion in the coming year. It wants to diversify its offerings with several new stores and restaurants on vacant land next to the primary mall building, he said.
Ney, the ISU professor, said one thing is clear: Malls and large retailers will need to quickly adapt to the growing online shopping landscape.
“Millennials are seeing mobile phones as their primary shopping tool in the future,” he said. “To get them off that phone, you’re going to have to offer a really engaging customer experience.”
Malls and big-box retailers will need to offer top-notch customer service, plus food and entertainment attractions that bring customers in the door, Ney said. Apps will need to integrate with the in-person shopping experience, he said, and it must be convenient to pay.
“I don’t want to say the shopping experience is over, because there are a lot of people who want to have that,” Ney said. “But it can’t be the same old, same old (experience).”
Luke Ramseth can be reached at 542-6763. Twitter: @lramseth