A new department store opens in your town. Nothing like it existed before. It stands alone for many years and prospers, selling a mixed variety of goods and services to cater to its local populace.
Another investor sees the profitability to be had by a store of this type and decides to open their own department store in the same town. It flourishes and causes the original store to flutter. The original store panics, and is now forced to reinvent itself to be like more the new store, if not better than. It spends money and adds departments and more services, and the tug of war continues.
Either one of these stores, at some point, finds that it's not worth continuing to pump money into versus the overall value of their store, and gives up. They let the store decay to the point where shoppers don't feel safe or limit inventory and selection, until finally announcing closure.
But why would the owner choose death? Another anecdote.
I own a 1985 Chevrolet Caprice. It was my first car, and I loved that car. When I got it, it was ten years old. A used car, but in decent enough shape. No warranty.
As things went wrong, as with all cars when driven regularly, I spent the necessary funds to keep my beloved chariot in motion. But I never spent more than absolutely necessary; no wasteful spending.
Fast forward, five years later and I am older, and money is tight. There are many more miles on the odometer and something major breaks. My choices are to cut my loss and junk the car, or take a chance and fix it, ever so tightly keeping my fingers crossed that something else doesn't break. I take a chance because I still think the life that remains is worth the investment.
A year later brings with it another problem, and another decision. I love the car too much to get rid of it, so I fix it again, and lose out even more. Its okay though because I know what I will get out of this is more profitable transportation. But...I don't.
Now, I'm caught in the middle. I don't have enough for a new car, but don't want to use what little I have to fix this one. At some point, we all have to decide which option is more economically viable and profitable. So this time, what do I do?
I go and buy second car! This new car is awesome. I still love my old one, but I don't have to fix it up as spic-and-span as before because I'm not relying on it as much. Years pass, and now this car is dying. I try to use the original one, but it is unreliable. The new one is also now unreliable. What do I do now?
These are the same practices, and questions mall owners face on a regular basis.
Malls all over the U.S. are now closing for the same reason I had to consider getting rid of my cars, and the same reason department stores, jewelry stores, restaurants, and banks have to close: negative equity.
A Dead Mall is just a store that's going out of business because it can't compete, does not want to take a chance where the end result would be losing its fight, or the owner gets greedy and cashes out.
That's all a mall is: a store that is competing for your business. It is not a communal center, it's private property.
It's a store that sells stores. A specific chain within a mall is just a product sold at the store, but like most products, it can be sold in other stores. And it may sell better at the newer, more popular store. "Products" leave dying malls and go to live ones. Or, they leave because the free market drives them out. People don't like the product, and don't buy it anymore. Whatever the reason, less product means less traffic. Less traffic causes other "products" to pull themselves from the store, eventually leading to a store that can't offer you very much selection.
Just like T.G.I.Friday's that has been eclipsed by Chili's, Flingers, or Chotchskis, or another T.G.I.Friday's, the mall of yesteryear failed to reinvent itself, or, did not want to. There simply was too much competition and not enough value and enticing variety, or interest by its owner to make it worth the investment.
Many malls ended up in the hands of wealthy real-estate investors. An investor in the game simply to make a quick buck is the one who bails on their mall as soon as possible if they don't have the latest and greatest winning formula for a mall. They walk away with their pockets full, and the community is stuck with a shell of a building and a lot of unemployed people. They don't care about the long term impact of their investment when it goes bad.
Investors artificially boosted our economy into the stratosphere with a super-sized slingshot that perhaps they did not care to understand, or did but didn't care about the consequences, and now we're
all facing the harsh reality of the physics of gravity. Large firms and banks spent years spending money on projects that lose money in the grand scheme. They kept bailing themselves out and painting pretty pictures, then reached a breaking point so big they couldn't continue. The stores
they shop at succumb to the same practice! It started small, and has made its way up the monetary food chain.
We despise the practice of spending money we don't have, so how can the government give all this money to irresponsible companies that, if truly in a capitalist open free-market, would have failed a long time ago? And, logically, that makes the federal government just as irresponsible as the companies they're trying to save.
In addition to bailing out banks, auto makers, and in that mix surely companies that own and develop malls, each state government is receiving money to spend on "shovel-ready" projects that are meant to bolster the economy.
In particular, I read a disturbing article regarding one of New York State's plans for their share. Since driving and highways are a hobby of mine, the fact that this can tie into my pastime and the history of retail and malls only makes me more ticked that I have to live in this state of decline.
New York is going to take millions of dollars of its stimulus money to improve handicap access to its existing Upstate New York train stations.
Let me tell you about our train service. The train station is ten miles from downtown. It's only served by Amtrak, which costs a small fortune to utilize, and takes hours longer than driving a vehicle to the locations it serves. Our tracks are extremely antiquated and cannot support high-speed rail travel on much of their length, and is not directly connected to the state's major cities. If only I could hop on a train in Glens Falls and get a fast trip to Rochester or Binghamton, I would most certainly take advantage of it. There is no commuter service in our small towns, and most cities... and there will never be.
A new interstate has not been constructed in New York since the early 1980s. While improvements to existing rail lines are part of this package, no mention has
ever been made of building new rail lines, or highways. Money is being pumped into an archaic and outmoded system. New York's roadways and bridges are crumbling, its rail system inconvenient and overpriced, and neither have any redundancy. Parts of the interstate system that were on the original drawing board were never completed, and the communities they would have served suffer today as a result.
New York adamantly refuses to spend money on new infrastructure. This is the other spin on a dying mall - the lone mall that has been allowed to crumble to disrepair. Its the department store above, but that never got competition, and never improved. Profits were pocketed and not reinvested into the business.
States can be compared to stores that sell themselves to their citizens. New York would be out of business if not for its parent company bailing it out on a regular basis. The coffers are always empty, but when money does come in, it goes right to projects that remind you why we're in such a dire strait. There are some other states do think ahead, and are building new roads and rails, creating new opportunities for communities. They find ways to raise positive equity... as should
all stores, whether the novelty store, jewelry store, department store, malls, state, and federal governments. They don't rely on loans, and they shouldn't, because as we've learned, there is no guarantee.
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The system we are all stuck in has been built up so large that there doesn't seem to be any easy way to fix it.
It's a loose comparison between malls owners, corporations, and the government corporations that are supposed to spend our money in our best interest. Spending decisions have been and continue to be made with little or no basis on the long term impact on the property, its effectiveness, or its people at the heart of the operation. One mall is left to ruin, either alone or having been replaced by another, just sitting to rot. An infrastructure is ignored while money is pumped into the bureaucracy, and when an opportunity to expand is presented, money must be spent to rebuild the original, failing system that if planned correctly in the first place, wouldn't need it.
Chain goes out of business, malls close, banks close, states suffer, people suffer, and money still doesn't grow on trees.
Welcome to the world: the next dead mall.
Labels: dead malls, decline, economy, money, new york, planning infrastructure, retail, stupid decisions
