Retailers say there is a traffic problem at the malls. Equity analysts say there is a traffic problem at the malls. The mall operators say they are all wrong. What’s the real story?
During calls with Wall Street over the past two earnings seasons, retailer after retailer complained about mall traffic:
• “I think it’s been pretty well documented out there that mall traffic overall has been soft over the last probably couple of quarters — we’ve seen some data recently over the last month or two that it was down, approaching double-digits.” — James F. Nordstrom, executive vice president and president of stores, Nordstrom Inc.
• “Given the challenging retail environment and continued declines in mall traffic trends, we are lowering our fiscal 2016 guidance.” — Nancy Walsh, chief financial officer, The Bon-Ton Stores Inc.
• “We had never expected positive traffic, but we didn’t expect deeply negative traffic.” — Sabrina Simmons, cfo, Gap Inc.
• “Although mall traffic was soft, stores held up well.” — Jay Schottenstein, chief executive officer, American Eagle Outfitters Inc.
Bill Taubman, chief operating officer of Taubman Centers Inc., told WWD traffic hasn’t dropped, but that shoppers are instead more efficient as a result of online research. They hit the malls and go straight to the store they need, no longer strolling and browsing.
Taubman did concede that traffic counting is imperfect. “How do you measure multiple entrances and exits?” he said. “We look at fast food for traffic. It’s a good proxy for traffic and we show that it’s solid to up.”
Sandeep Mathrani, ceo at General Growth Properties Inc., said in his company’s most-recent quarterly earnings that mall traffic is actually up.
Mikael Thygesen, chief marketing officer at Simon Properties Group Inc., said that based on their own measurements, traffic was flat year-over-year, not down.
“They are still shopping. Sales are at an all-time high and the consumer is still buying,” Thygesen said.
He also echoed what Taubman said about web rooming, noting, “They visit fewer stores and are more targeted.”
Thygesen said a report from Prodco Analytics is the reason many in the industry believe mall traffic is down and disputes the accuracy of their data. Prodco is a company that publishes a retail traffic index for retailers that are mostly in A and B class malls.
Prodco stands by their data.
“I don’t think it’s a secret that traffic is going down,” said Marc Bienstock, director of accounts at Prodco. “I’ve been in the business for 20 years and for the last two, counts have been going down. It’s pretty consistent.”
Bienstock said the Internet has eaten away at brick-and-mortar traffic. The latest statistics show that retail traffic for the week ending May 14 has dropped 7.41 percent year-over-year and 1.89 percent week-over-week.
Fung Global Retail & Technology also reported that May retail traffic dropped by 9.9 percent year-over-year. They said all regions except the West in the U.S. experienced traffic declines.
“The bottom line is that traffic is difficult to measure,” said Paul Adornato, REIT analyst at BMO Capital Markets. Although he suggests that parking data has shown that traffic is up and sales per square foot are flat to slightly up, he also noted that online research has made shoppers are more efficient.
“The shoppers can skip whole sections at the mall,” Adornato said.
While some critics say malls are dying because of the Internet and declining traffic supports that idea, Adornato disagrees. “Over the long-term, malls are skilled at countering challenges. They have been extremely creative at making the malls a good experience.”
Ultimately, both parties might be right. Too many mall operators agree that traffic is flat or up. And too many stores report a decline in footfall.
The disconnect seems to come from what happens once the shopper comes through the mall doors. Many appear to be simply going to the mall, but skipping many of the major stores.