How the Hudson Valley Mall can survive the ‘retail apocalypse’

(Photo by Arthur Zaczkiewicz)

Anyone who reads business news regularly has likely seen headlines about the “transformation of retail” or the “retail apocalypse.” The latter, doomsday-type headlines are derived from mass store closures across the U.S. — 5,000 last year alone, according to WWD. And this year, another 3,800 are expected to shutter their doors.

Some of the closures are reductions in the total store base, such as the case with Sears. Others are tied to bankruptcies and liquidations, and include stalwart retail brands such as Toys R’ Us, Nine West, Claire’s and The Bon-Ton Stores.

But the headlines often don’t tell the full story. People are still shopping. They’re just doing it differently than they used to.

The so-called Great Recession is one of the key drivers of retail’s transformation. People were financially traumatized by it. They pulled back on spending. And now, over 10 years later, consumers remain frugal — often despite the level of their household income. Another factor reshaping the retail landscape is the growing canyon between “the haves” and “the have-nots.” As Bernie Sanders’ campaigned showed, income inequality and the evaporation of the middle class is a pertinent issue among Americans as it reveals the real struggle many people face. According to a recent report from CNBC, about 75 percent of U.S. households are living paycheck to paycheck.

However, consumers continue to spend. While the savings rate has declined, consumer confidence as measured by the Conference Board remains high. In May, the most recent government data showed that retail sales rose a robust 5.1 percent. Excluding food and beverage, retail sales gained 6 percent year over year. By segment, apparel sales jumped 5.9 percent while spending on electronics gained 1.9 percent.

What exactly is going on? People are having financial struggles, and have been set into a pattern of cautious spending — yet they keep doling out money. But stores are closing. Confused?

The answer lies in another key factor that is transforming retail: the growth of online shopping. The ease of use and convenience as well as the value proposition of online shopping is, I believe, the underpinning cause of why retail has changed over the past decade. Let’s go back to May’s retail sales. While economists were pleased that the numbers were strong, what is often overlooked is that if you exclude online sales, retail sales would have shown a steep decline. According to an analysis by Internet Retailer, online sales rose 17.7 percent in May.

And while online sales only garner about 11 percent of total retail sales, that 17.7 percent gain was enough to offset declining sales and foot traffic at physical stores — which is why retailers are closing stores. The dirty little secret that’s hard to discuss in the industry is that online sales (and its variable, direct costs such as shipping) is cannibalizing sales at physical stores.

Of course, Amazon has a lot to do with this shift in spending. The online giant took half of all online sales during 2017’s holiday shopping season, and it keeps growing. Amazon’s sheer size and ongoing hunger for market share is what makes it so formidable. Retail analysts note that companies simply can’t compete against Amazon because they don’t have the scale and speed. All smaller retailers can do is outrun other competitors. That requires being a top-notch operator, one that can be nimble and react quickly to changes in the market. But that doesn’t guarantee success.

Remember those other factors transforming retail? That’s also what makes the market so challenging. With the thousands of store closures last year and the ones on deck to shutter this year, one retailer is opening stores: Dollar General. In 2017, the dollar chain opened over 1,000 units, and it is poised to open 900 more this year. The retailer caterers to low-income consumers by having a broad offering and a small footprint that makes it an easy fit in any neighborhood.

It’s no wonder that “b” malls (as industry experts call it) such as the Hudson Valley Mall here in Ulster are having a hard time. It’s a hot mess. The mall has lost three anchors: Sears, Macy’s and J.C. Penney. And with these, many smaller specialty stores too.

Let’s add some context.

In June, the National Retail Federation (NRF) released its annual list of top retailers, which had Walmart at number one with $362.8 billion in annual sales. Amazon, though, is catching up and it took the number three spot with $85.8 billion. Supermarket chain Kroger was number two at $110.2 billion. What was interesting is that Amazon’s year-over-year sales rose over 45 percent, which is another indicator of where consumer dollars are going. The gain and market share increase came at the expense of companies such as Macy’s, Sears and J.C. Penney — retailers on the NRF list that all showed year-over-year declines (and also happen to be anchor stores that have closed here in Kingston).

There’s also another consumer trend worth noting: the shift toward spending on experiences versus “buying stuff.” According to data from Mastercard’s Spending Pulse report shared at a recent WWD event, half of the monthly food expenditures of Millennials was on meals eaten in restaurants. Dining out is an experience. And the “experiential economy” is boosting sales not only at restaurants, but at boutique hotels, B&B’s and at campgrounds. The trend is buoying online sales of camping and hiking gear, bikes and outdoor apparel and footwear.

Indeed, the outdoor products industry is growing rapidly. Sales of kayaks and boats are up as consumers crave adventure. The National Marine Manufacturers Association is expecting another year of double-digit growth. And this past February, the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) released data about the outdoor recreation industry that showed a market worth more than $370 billion, and that is growing at a faster pace than the GDP.

There are some caveats with these numbers. Not all restaurants are seeing sales soar. Consumers are picky. And not all outdoor retailers — online and with physical stores are doing well. Sports Authority closed. Gander Mountain flopped, but has reopened as Gander Outdoors. Locally, Kenco seems to be thriving. And the food scene in Uptown Kingston seems to be vibrant.

So, stores are closing, malls are empty. People are shopping, but not in the same way. They want experiences. At this point, the end game for traditional malls and retailers doesn’t look good. As consumer spending on goods and services make up about 70 percent of the GDP, retail clearly plays an important role in the economy — especially local economies.

But I think it’s not too late for communities to address these macroeconomic changes on a local level. Let’s take a look at the Hudson Valley Mall, for example. Its main anchor stores are gone. The mall does have a Target (number seven on the NRF list, by the way) and it’s in good shape, structurally. It also has one of the best views of the Catskills — a real plus.

If you apply some retail analytics and look at longer-term trends, maybe the Hudson Valley Mall would be better suited as something else. Last week, Foursquare, the social app turned data company that was founded by Dennis Crowley (chairman of the Kingston Stockade FC soccer team), came out with a way to measure retail success – and failure. Using massive data points from 1,000 malls, analysts at the firm learned that malls which tend to do well have the right contextual fit amongst its tenants – meaning that there was the right blend of traffic-driving brands such as Warby Parker and Peloton along with more traditional brands.

My guess would be that today’s hot retail magnets who might eye the Hudson Valley Mall likely turn it down because the broader demographic profile of the area is not enough to support profit margin and sales goals. There’s just not enough household income in the area to maintain these types of businesses. That doesn’t mean Kingston should just roll over, and accept its Walmart/Target/Dollar General retail fate. It means Kingston and the Town of Ulster need to be active partners with developers, and perhaps work with community members to re-imagine the area not as separate, segmented commercial and residential spaces. But via a holistic perspective that leans into the future.

For the Hudson Valley Mall, that might mean re-casting the site as a community hub that includes low-income and/or senior housing in place of stores. The empty teen apparel space? Turn it into an Ulster Town Library Annex. The empty J.C. Penney store? How about making it an indoor sports venue for youth soccer or baseball — or an indoor stadium for Crowley’s semi-pro team. The mall’s vast indoor space can also be redesigned to create indoor fitness courses and walking tracks.

And the roof! How about a community garden up there? And an elevated linear park. A green roof that people can use and also enjoy spectacular views of the Catskills. There would be stores too. And eateries. Perhaps a bodega or two. And a community center, and a playhouse. Maybe even some space for adult learning classrooms or workforce training. I could see SUNY New Paltz offering advanced manufacturing classes there too. Of course, there would need to be improved walkways outside as well. And bike lanes that can connect the mall with Hannaford and the Kings Mall.

It would be a place of connectivity and community. And purpose, too.

Arthur Zaczkiewicz is executive editor at WWD, which covers the $1.2 trillion global retail, apparel and fashion industry. A co-founder of the Kingston Land Trust, he lived in Kingston for 10 years before moving to Highland last year.

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