Hot Topic, Journey’s, Victoria’s Secret and others are exploring alternative store formats

January 12, 2024 | By Sasha Jones

Two in five Americans live near two or more dead malls, and retailers hope to save themselves with different store openings Joe Raedle/Getty Images

Stores have always benefited from the mall’s wormhole effect on shoppers — come to buy just one thing, stay to spend money at Hot Topic, Bath and Body Works and Forever 21. And just try to avoid temptation from Auntie Anne’s.

But as foot traffic slowly dies, the retailers that define a classic trip to the mall are looking for ways to outlive their homes. It’s led them to explore new real estate formats.

“Many of these brands that are operating in enclosed malls are really good retailers,” said David Hinkle, principal of The Outlet Resource Group, who advises shopping center developers. “They may not be the primary reasons someone says, ‘Hey, let’s go shop today,’ but when the customer gets there, the stores are typically well merchandised, visually fantastic and they do a lot of volume.”

Shopping center vacancy rates ended last year at an all-time low, according to a report by commercial brokerage Cushman and Wakefield. Though malls saw brighter days compared to the doom days of the pandemic, foot traffic is still 13% below 2019 levels.

And that’s just for the malls that are still operational. Two in five Americans live near two or more dead malls — defined as having a high vacancy rate, low traffic level or completely abandoned — according to a report by real estate consultant group IPX1031.

Among the retailers fleeing malls is Journey’s, known for selling shoes like Heelys and Vans. At the end of 2023, it shut down 100 mall stores, replacing them with 25 off-mall leases, the company said in its second quarter earnings call. Those new locations will be able to carry a larger assortment of adult and kids shoes and accessories.

One of those is in New York’s Cross County Center.

The newly opened Journey’s at Cross County Center Marx Realty

Craig Deitelzweig, CEO of Marx Realty, which owns the center, said that the mall environment has pushed shoppers away, not the retailers. In new spaces, the brands are able to experiment with layout and design, he said.

The landlord added that hosting events and activities on the lawns outside the shops brings customers into the center for longer.

“The ability to [entertain] kids and families — that’s what malls used to be like,” Deitelzweig said. “Now people don’t want to be stuck, for lack of a better word, in that environment.”

The giant 100-store open-air shopping center is also home to mall staple Cinnabon. However, instead of being secluded to mall kiosks, the bakery operates in a standalone store with seating.

In a move of self-awareness, both Journey’s and Hot Topic — remembered as a dimly lit store blasting 2000’s pop punk, always equipped with an emo, teenaged cashier — have launched collaborations with online resale platform thredUp to sell their, now nostalgic, 2000’s band tees.

Hot Topic has also popped up in outlet malls, which have appealed to inflation-pressured shoppers in recent years.

For many companies, the plan to leave malls behind has been in the works for years.

By the end of this year, Gap and Banana Republic will complete a real estate restructuring that will result in 80% of its stores being outside of malls, according to previous investor reports.

Macy’s similarly plans to triple its fleet of small-format stores in 2024 and 2025 — an initiative that began in 2020.

In August, Victoria’s Secret CEO Martin Waters outlined the company’s three strategies moving forward: opening smaller stores, its “Store of the Future” modernizes its layout and embracing digital sales.

“If you think about new competitors that have come into the market in recent years, they tend to be digitally-native players,” Waters told investors. “We’re doing okay in digital.”

In moving outside of the mall, brands will find out whether they still resonate with shoppers or if it’s time to admit defeat, The Outlet Resource Group’s Hinkle said.

“At the end of the day, I always say the consumer votes with a checkbook. These brands who migrate their way into the outlet sector, they have to be good,” Hinkle said. “If they don’t perform they’re not going to stay there nor will the landlord want them.”

View the Full Article