• Another Blow to City Centers: Retail Stores Move Outward

    From Democrats at work@21:1/5 to All on Thu Mar 2 23:11:53 2023
    XPost: alt.crime, chi.general, sac.politics
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    Major brands are eschewing both downtowns and malls in favor of smaller residential locations in the US, compounding the financial strain of
    office vacancies.

    After Covid-19 lockdowns in 2020, Abercrombie & Fitch Co. closed a large
    store in Water Tower Place, a mall near Chicago’s city center. It was one
    of a spate of pandemic-related retail closures in downtown urban
    neighborhoods that have since become permanent. But the clothing retailer
    had other plans in store.

    At the end of 2021, the company opened a new boutique-style shop in the Lakeview neighborhood of Chicago, where a large customer base was making
    online purchases.

    It’s part of a pattern among US retailers that are abandoning malls and large-format stores in city centers in favor of neighborhood locations
    that aim to serve the work-from-home generation. And while retail presence
    is shrinking in many big cities, apparel retailers’ brick-and-mortar
    locations are growing overall. They’re just moving outward, with smaller footprints in residential neighborhoods.

    At Abercrombie, executives used e-commerce transactions and other location
    data to map out where shoppers are most concentrated, and are basing their store strategy on changing behaviors.

    The purpose of the new store in Lakeview is to make the return and
    exchange process more convenient for the brand's most active consumers.
    Once inside, the location might spur customers to make a purchase, which wouldn't happen if they dropped a package at a UPS dropbox.

    “Specifically with our Abercrombie & Fitch brand, that consumer is maybe
    going to the mall a little bit less,” said Samir Desai, Abercrombie’s
    chief digital and technology officer. “So that really favors neighborhood
    mall streets where there might be a fitness experience or something else
    that they're engaging in and that’s taking them there.”

    Brands including Macy’s Inc. and Kohl’s Corp. have taken on similar
    strategies, experimenting with new formats and neighborhoods. Macy’s Chief Executive Officer Jeff Gennette said in January that customers now want to
    shop in the ZIP code in which they live, noting that “off-mall is quite attractive.”

    While the shift serves the retailers themselves, allowing them to meet
    their customers closer to home, it threatens both metropolitan downtowns
    and traditional malls that for decades benefited from tax revenue and foot traffic generated by shoppers. Cities have already been suffering from a
    steep decline in office occupancy – which is currently at about 50% of pre-pandemic levels – and fewer retail stores in dense urban areas will
    only add to the trouble of luring people back.

    Read more: Remote Work Is Costing Manhattan More Than $12 Billion a Year

    “The shape of the challenge for an economic development entity in a city
    is to now figure out what kinds of businesses are going to work here, what kinds of services are going to be needed in a place that has a different population trajectory,” said Christopher Wheat, president of the JPMorgan
    Chase Institute, which released a report on Covid shocks to brick-and-
    mortar retail.

    Several big cities, including San Francisco, Los Angeles, New York,
    Seattle and Miami, had fewer retail establishments in the last quarter of
    2021 than before the pandemic, JPMorgan reported. But in 2022, while the apparel sector closed 750 stores in total, it saw the second-highest
    number of store openings, a total of 1,395, according to an analysis from Coresight Research. Many of these new stores were in the suburbs.

    City Centers Hollow Out
    Downtowns had the steepest decline in establishment growth following the
    onset of the pandemic


    Source: JPMorgan Chase Institute

    *Note: Growth indexed to a Q4 2019 baseline

    “It's not clear that it means that there's overall aggregate reductions in demand, it may just be more of a mix and shift,” Wheat said. “You may be spending much more time near your home and shopping a lot more in your
    home than you were shopping at places that were near your workplace or on
    the way to your workplace as those patterns change.”

    In some cases, retail store locations have moved just miles down the road
    to be in shopping centers that customers in this digital-forward, work- from-home era are still likely to frequent. That typically means favoring shopping areas that have grocery stores and restaurants rather than
    primarily apparel retailers.

    Macy’s, for example, closed a department store in Chesterfield Mall in the
    St. Louis area, and opened a smaller location, called Market by Macy’s, in
    a shopping center three miles away that has Walmart and Aldi stores and restaurants including Olive Garden and Starbucks.

    Read more: The Sad Desk Salad Is Migrating From the Office to the Suburbs

    The shift is part of a strategy by the company to open "off-mall, small formats," in some cases to replace underperforming stores or open new
    stores where Macy's doesn't have a presence, Macy’s said in a July press release.

    Abercrombie, meanwhile, has seen its strategy in Chicago pay off so far,
    with additional e-commerce demand being generated “because customers have
    a little bit of comfort and confidence knowing there's a location nearby
    where they can go and quickly return or exchange something,” Desai said.
    Sales at the Abercrombie brand were up 14% in the fourth quarter of 2022 compared with a year earlier, according to the company's latest earnings
    report released Wednesday. The company plans to experiment with the
    strategy used in Chicago in other cities in the coming years.

    “We're definitely exploring the strategy further and especially thinking
    about a neighborhood-based store strategy versus just strictly inside a
    mall,” he said. “You’re seeing that strategy work.”

    <https://www.bloomberg.com/news/articles/2023-03-01/as-retail-stores- close-downtown-new-ones-open-in-suburbs>

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