As someone reminded me the other day, it wasn’t too long ago when people were predicting high volume jewelers would take over the industry. But things have changed, and now that sector is in the dumps. (And I fully expect we’ll see at least one more Chapter 11 filing by year’s end.)
But let’s not look at this in isolation. The problem isn’t just the economy. Many of the big jewelers are heavily in malls, and malls have been having problems for some time – even when the economy was far stronger than it is now.
People have long talked about “the death of the mall” – although I think it’s more accurate to say “the decline of the mall” — but as this article I linked to last week shows, the numbers are stark and the trend is clearly not reversing itself:
“In 2006 there was only one new enclosed mall built in [the United States],” says Ellen Dunham-Jones, director of the Georgia Institute of Technology’s architecture program. “That’s a dramatic drop.” As recently as the 1990s, she says, new malls were going up at a rate of 140 a year. Now, 19 percent of the country’s 2,000 biggest regional malls are failing ….
All this is pretty sad, considering the role mall jewelers have played in our industry. It is hard to imagine the Indian jewelry sector rising to the heights it has without them. Growing up, jewelers were as much a mall fixture as Orange Julius and Spencer Gifts. In their heyday, not only were there several jewelers in each mall, but sometimes the same jeweler would have multiple locations in a mall.
But those locations heavily depended on mall foot traffic. And now that traffic has gone down – well, you are seeing the results. And since these stores generally don’t offer differentiated product, there is not much reason why anyone would go out of their way to see them.
Now I don’t think we should pronounce the malls – or mall jewelers – dead. Clearly there is more competition today. Walmart is an entire mall in one store. The Internet is a mall on your desktop. But as the above article notes, the biggest competition apparently came from other malls, which cannibalized each other:
“With the completion of the interstate highway system, every exit became an ideal shopping mall site,” says Dunham-Jones. “But those prime sites have run out. Retail is always cannibalizing; the next mall is always farther out and will rob market share from the one that is closer in.”
And that may be the biggest lesson. People still like the social aspect of shopping. They like browsing and finding something new. They like a fun place to spend the day.
So Americans still like malls. We just built too many of them.
UPDATE: More mall woes, thanks to the bankruptcy of Steve and Barry’s …
Dozens of malls around the country stand to lose a big anchor tenant … When anchor spaces go dark, clauses in the leases of smaller tenants often permit them to pay lower rents.
Which may be good for jewelers, if not for the malls themselves.