Earlier this year a new dress shop opened at our local mall. It was one of those high-end boutique dress shops. My own assessment of the situation was that it would never last ? the last thing this or any other mall needs is another boutique dress shop.
Yesterday morning I walked by the same shop. It was being dismantled. It lasted no more than six months.
Did I have inside knowledge when I made the prediction earlier this year? Was my crystal ball finally up and running? Or did I just get lucky?
Actually, it was none of the above. We keep hearing about the crisis in retail, but it seems as if it?s because they keep making the same mistakes. And retail can?t keep blaming Amazon.
The Dress Boutique Dilemma – Why Retail Can’t Keep Blaming Amazon
I?m certainly no fashion maven, but there?s one thing I think is totally obvious ? women aren?t wearing dresses anymore.
First, there?s business casual. The exact definition of that varies from one employer to another. But whatever it is, fewer women than ever are wearing dresses to work. The is true for men ? it?s rare to see men going to work in a jacket and tie.
Second, women don?t seem to be wearing dresses much in non-business situations either. Unlike when I was a kid, no one dresses up to go out to dinner. And formal parties? Does anyone do those anymore?
Perhaps the best example is church. You don?t see women wearing dresses even to go to church on Sunday anymore.
And anecdotally, the women in my life say they don?t like wearing dresses period.
But the retail industry seems to have missed that transition. It?s like dress boutiques exist mainly for the very short prom season.
There was another irony involved in the closing of this dress boutique. It opened at about the same time a Gymboree store at the mall shut down. That should have been a clue. Gymboree, as best I can tell, sells boutique clothing for very young children, from birth to perhaps Kindergarten.
I remember marveling at why that closure took so long to happen.
As a very hands-on dad, my recollection of that age includes generous amounts of poop, barf, and boogers. And spills ? usually something red that doesn?t come out in the wash. Clothing for kids that age needs to be simple, readily changeable, and affordably replaced. Quantity over quality is the preferred strategy.
That means cheap. Gymboree is anything but.
Is that Amazon?s fault? Or is it an industry that doesn?t want to face reality?
The Big Picture Mall Dilemma
The dress shop boutique is part of a bigger pattern common to malls. They favor higher end stores, particularly boutiques. But increasingly, malls are designed for a clientele that no longer shops there.
In more robust times, high-end was part-and-parcel of shopping malls. Young people in particular, often armed by their parent?s credit cards, used the malls as a place to hang out. They still do that, but it looks like they?re mostly doing it without their parent?s credit cards.
Yes, Amazon is making inroads. But the bigger ?enemy? of America?s malls is the wholesale shift in consumer spending. While malls are on life support, big box discounters like Walmart and Target are thriving. Then there are the specialty discounters. Marshalls and T.J. Maxx are expanding and adding hundreds of stores. They feature clothing people actually wear at prices they can afford ? what a revolutionary concept, huh?
This message has been lost on malls, whose management continues to pretend it?s still the 1990s. They pretend upscale is the way, and the well-heeled consumers of yesteryear will once again reassert themselves.
A big part of the reason for that delusion is cost. Malls are premium buildings constructed on premium lots. The high acquisition cost of such a building requires a very large income. The discount chains won?t pay the kinds of rents malls demand. This is why you don?t see them in most malls. That leaves malls with one option ? to continue to solicit high priced boutiques.
It?s a losing strategy. It seems only partially credible because the economy has been in at least a slow growth mode for the past several years. But we should suspect the entire strategy will unravel in a major way when the next recession hits.
Selling to a Market that Isn?t Buying
The entire enclosed mall concept was always based on selling to the upper crust, and to the upper crust wannabes. They squarely target the top 10%.
There are a few problems with this strategy. The first is that not nearly everyone in the top 10% are spendthrifts. Many are surprisingly frugal, which has at least something to do with why they?re in the top 10% in the first place.
A second is that they?re an incredibly fickle market. These are people who have choices as to where they can spend their money. And tastes change rapidly within the group. Today they?re scooping up Product A. But tomorrow, Product B is the new hot item, and they can?t get enough of it. Product A falls into the dustbin of history, never to return again
Third, is the fact that everyone is competing for the business of the top 10%. And fourth, there?s evidence the upper crust are even more likely to shop online.
And what about the top 10% wannabes?
This is the group that doesn?t have the financial wherewithal of the top 10%, but they frequently stretch to get in with the ?in crowd?. They can do this through a combination of debt and those times when they?re flush with cash.
But this group can?t be counted on to sustain buying from boutique shops. And bigger picture, this group is not as financially secure as it was 20 or 30 years ago. Many of what used to be considered middle class would be better described today as the working poor. There?s simply no money available to support premium purchases.
Meanwhile, the malls and their boutique shops continue to pretend that all is as it was in the 90s. That won?t be a winning strategy over the long-term.
Why This is Not Likely to Get Better
The dying of America?s malls is a real phenomenon that seems destined to take down hundreds of malls before it?s done. It may even permanently alter the ones that survive.
If there was to be a renaissance of America?s malls, it would certainly have happened by now. Statistically speaking, at least according to the government, we?ve been in a sustained economic recovery for over nine years. If that doesn?t resuscitate the malls, nothing will.
In the end, America?s malls are tied to the fortunes of the American consumer. Unless that gets suddenly and substantially stronger in a hurry, the malls are unlikely to get healthier.
As they continue to cling to outdated economic and business strategies, they?ll continue to decline. Expect to see many more boutique closings, especially when the economy officially declines.
If You?re Going to Open a Store Be Very Careful What Kind You Open
I often advocate self-employment on this website, since it?s working well for me. But it?s also clear that you must be careful what kind of business you go into.
The mall boutique stores are a cautionary tale, especially if you plan open a store or shop of some type. Rest assured if you see too many of the same type of stores, your chances of surviving in that industry are slim.
I see the retail decline as a potential windfall for small business. Don?t under-estimate this possibility. Big retail is in a serious contraction, even during relatively good times.
But consumers are buying more on the web all the time, and not just from the giants like Amazon. Many small independent internet merchants are thriving. It?s even possible to attach a website or online store to a physical store to expand sales, particularly well beyond your geographic location.
As a small business, you have the advantage of radically lower overhead. There?s no chain of shops ? most of them financed ? and the expenses and payroll needed to keep them staffed and open for business. You can also shift with consumer trends more quickly, or even concentrate on specific niches the big guys are too big to exploit.
In 1959, John F. Kennedy said the following:
?The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.?
We?re seeing a lot of changes taking place all around us. Yes, there?s plenty of danger lurking in these events. But we should also take a deep look at these shifts to find the hidden opportunities. They?re out there waiting to be discovered.