• Americas

Retail Newsline: The Clickbait Conundrum

By Garrick Brown, Vice President of Retail Research, Americas

If you saw the three following retail headlines online, which would you click on first?

Gulf between Strong and Weak Malls to Widen

Department Store Closures to Devastate Weak Malls but Provide Opportunity to Strong Ones

America’s Malls are Rotting Away

Now the Newsline goes to a pretty sophisticated industry crowd, so I am guessing that if this were a poll that the numbers might differ somewhat from the mainstream population, but I think it would still be safe to assume that the last option, America’s Malls are Rotting Away, still might be the first headline that you would click on.  I think it’s safe to say that this would overwhelmingly be the choice of the typical layperson, whose interest in retail mainly stems from being a consumer.

Yet, if you clicked on this article, you would have figured out pretty quickly that these are all leading to the same story.  And this story that ran a few days ago on CNN Money, basically builds a case for the other two headlines.  Yet, the one thing the article does not build a case for is the idea that America’s malls are rotting away. At least not all of them.  And, if you really read the piece (though it did not emphasize this point enough, in my opinion), it really builds the point that it is the weakest one third of the mall world that is feeling the brunt of the pain.

So why run with the most sensational headline?  One that isn’t actually supported by the article itself, which mostly got things right?  Duh.  Which did you click first?

And this is a major problem for retail.

Look, I don’t want to put out a message of, “kill the messenger.” The overwhelming majority of reporters that I deal with usually get it right and when there are mistakes, they usually are honest ones.  A slight misquote here or there, or confusion as to a complex point that has to be expected. Reporters are usually among the most intellectually well-rounded and well-read people you will ever find, but you can’t expect them to be experts in every field.  And this is a challenge for analysts like myself, where we don’t always know the depth of knowledge that any writer has when they call us to get a comment on a story.

And I know first-hand the challenge of sharing challenging news. I have actually in the last few months started to receive the occasional piece of hate mail. Seriously, I got one last week that was so over the top as to be unintentionally hilarious.  I was at ICSC New York getting ready for a session I was hosting on Food Halls, when I opened an email on my phone and read a diatribe against me on the topic of dollar stores.  I had had a couple of reporters speaking to me on the subject in the previous week and this person’s issue was with the belief that I had said dollar stores were banking on a permanent underclass in the United States.  Actually, however, what had happened was I received that question and said, “Someone could look at it that way and there are some things that might support that.  For one, high skilled employment in the US has increased by 7% since 2010 and low-skilled employment has increased by 6% while medium-skilled employment has fallen by about 5%. Plus, lower-skilled employment has seen the weakest wage growth. Though it has picked up in the last few years, adjusted for inflation it had been relatively flat going back the last couple of decades. There definitely has been a trend of middle class consumers trading down and this has been one of the factors fueling race to the bottom discounting.  However, technology has also played a role in creating more savvy consumers and reinforcing this trend of consumers seeking value.  Ultimately, I think the biggest driver of dollar store success has been a mix of trends, with a void of retail in rural America probably being the biggest factor.”

Did all of that make it into the article?  Of course not. But this particular person was happy to tell me that my “opinion of underclass and dollar stores is beyond ignorant and uneducated,” after which he built a compelling case as to the immense value they offer low income consumers (?!) and concluding with the charming advice, “Get a new bleeping job. You bleeping pile of bleep.” And no, he did not use the words “bleeping” or “bleep”.

Nice.  It was enough that one of my panelists saw me reading this and suggested I add a section for hate mail to my presentations, akin to Jimmy Kimmel’s Mean Tweets.  Great idea, actually—it was quite a crowd pleaser.

Regardless, while no one likes getting hate mail and while I am a huge proponent of not killing the messenger when they are sharing honest (and particularly accurate) assessments of challenging situations, there is a real problem for retailers and shopping center owners alike in this current environment.

The issue of sensationalistic clickbait titles even for stories that otherwise get it right is driving me batty.  If you follow the Newsline you know that I have been railing against the “Retail Apocalypse” headline all year.  It’s been a focal point of my presentations and one of the primary points I keep making is that, yes, some sectors of retail are facing major challenges—but certainly not all.  And, yes, some shopping centers are facing major challenges—but most of those are limited to the weakest properties.  Even in the mall world, which is getting killed with negative press, the reality is that it is the Class B- and below properties that are bearing the brunt of the pain.  Somehow, no matter how much I emphasize the fact that Class A malls actually will do well if department store space is returned to them (because those leases were mostly done 20 years ago or more when the practice was to almost give that space away and that if they get the space back they won’t have any problem demising it, tenanting it with more relevant retailers and commanding rents that can easily be 20 times or more what they were earning previously), it either doesn’t make the story at all, or it is hidden away as if this is just industry tripe.  It’s not.  This is real.  The story isn’t that America’s malls are rotting away, the real story is that the gap in performance between Class A and everything else is widening.  But that’s not going to get people to click as easily on a story, is it?

Now, the “retail apocalypse” has become its own thing.  There is a Wikipedia entry and people in the industry are using the term, though we all know it’s not an apocalypse and it’s not Armageddon. It reminds me of an old friend from grade school.  My friend was a heavy kid and somewhere around sixth grade the kids started calling him “Tiny.”  This ironic nickname actually caused him a lot of pain and he was pretty consistently picked on, harassed and bullied until high school.  That’s when he got into weight training and the 250 pound fat kid they called “Tiny” became the 250 pounds of revenge seeking muscle that they still called “Tiny,” but with fear, trepidation and subservience in their voices.  He still goes by that nickname and it doesn’t bother him anymore… the word became its own thing, separate of its actual definition long ago for him.

The same thing has happened with “retail apocalypse.” This is despite the fact that neighborhood/community centers have barely been impacted by this trend and how overall vacancy continues to fall for this shopping center type while rents climb.  Does it matter that this shopping center type accounts for more than three times the retail inventory of malls in the US, but does this get mentioned?  Apparently not.  This description isn’t going to go away, despite the fact that dollar stores are putting up record growth.  Does it matter that off-price apparel, discounters, warehouse club stores and even clicks-to-bricks retail concepts are growing at record levels?  Nope, apparently not.  Does it matter that experiential retail concepts are blossoming and food retail remains hot?  Nahhh.

In fact, somehow even the hottest thing going in retail, Food Halls, still somehow gets a negative spin.  There was an article on Food Halls in the New Yorker a couple of weeks ago that was alright overall. I had a few issues with the article; they picked a few negative stories not typical of the market to tell (they focused on one artisanal sandwich maker who opened as a soup and salad joint and failed) and they made a sweepingly incorrect statement (“Much of the current expansion is driven by property developers grasping for ways to reinvigorate moribund shopping centers, or to gin up interest in new developments.”) This last statement was incorrect because the biggest growth of food halls in shopping centers is not happening in moribund ones.  It’s happening in the elite properties.  But most of all what upset me was yet another clickbait title, “The Inflated Promise of the American Food Hall.”

Really? If you fall back on the old baseball game analogy, in Manhattan maybe the trend of food hall development is in the sixth inning.  It will be around for a while.  There are maybe a couple of markets where you could say this trend is in the third inning.  But the reality is that the game hasn’t even begun in most markets.  And this is no flash in the pan concept, food halls are not going to go away—if anything they will continue radically transform the restaurant marketplace.  But suddenly retail real estate is the Rodney Dangerfield of commercial real estate; “no respect.”

Now, I firmly believe that most of our friends in the media are trying to get it right. It doesn’t help that the majority of Americans (including journalists) equate retail to malls (less than 9% of America’s retail inventory) and iconic department stores (less than 2% of its retail tenancy). And so the current challenges facing apparel retailers, department stores and some malls were bound to have some guilt by association impact on even the best retailers and the most exceptional operators. But this makes getting it right an even greater imperative.  And here is the problem, even when many articles get it right, they are often slapped with some apocalyptic clickbait title to drive internet traffic.

For example, this morning I found out that I was quoted in an article that The Blaze ran, “Shopping Malls Expected to Disappear as Online Stores Take Over Sales.” I found out thanks to an angry email from a mall owner who advised me what an idiot I was for believing that malls were all going away.  Having never talked to anyone at The Blaze I was mortified… until I read the article.  They apparently pulled accurate quotes from some other piece I was in, but the body of the article was not too far off.  It’s just that once again it came wrapped up with a toxic, click-inducing title.

Now one could argue that I am just being hyper sensitive, and that titles don’t mean much. Here is the problem; even if the article gets it right and gives a balanced picture of retail… those toxic and misleading titles lend to the dark clouds hanging over the heads of retailers and landlords alike.  And those dark clouds are unjustly punishing the good retailers and shopping center operators along with the bad.

I spoke at an Urban Land Institute event this morning in Sacramento and in the Q&A portion I was asked by one attendee, “Why would Unibail-Rodamco buy Westfield in the current environment and what was the upside to either party?” Remember, this is a ULI attendee so we are talking about a savvy real estate player (he just wasn’t a retail guy), but like everyone else, he’s seen nothing but gloom and doom from the sector.

But the answer is simple. Westfield, along with most of the other top institutional mall players, offloaded most of their weaker properties between 2013 and 2015. What’s left are nearly all Class A properties.  Those will actually get a boost if department stores are returned next year because these deals were done 20 years ago or more when the model was to lease those spaces for next to nothing.  The real rents came back them from inline retailers.  A vacant Sears store, for example, could be demised and leased to tenants that are more relevant in the marketplace today at current inline market rents. So is this a great move for Unibail-Rodamco? Yes.  Is it a good move for Westfield? Yes, it was a good price.

Do I think that the current challenges facing retail impacted this sale? You bet, but maybe not in the way you think.  Class A mall operators have little to fear from the closures we will face next year. If Sears and/or Bon-Ton go down next year, that real estate will be a boon once demised and reconfigured.  Strategic closures are going to be up next year, but retailers looking to reduce their footprints aren’t going to touch their strongest locations.  It’s the B- and below malls that will suffer.

The biggest challenge facing the best publicly traded retailers and shopping center operators alike is the fallout to their stock prices from the black cloud around retail that has increasingly been stoked by sensationalist articles and clickbait headlines.

Now I am not an industry hack (as one recent article proclaimed those who deny the “apocalypse”), but let’s get real. The story is more nuanced than what is being portrayed. And it is not as bleak.  Yes, there are challenges.  But on a scale of one to ten are they nine (as the coverage seems to suggest)?  Not even close.  Overall we’re talking about more like a four, or five, at worst.  But with some big retail bankruptcies likely next year and a likely wave of strategic closures, I am guessing that this trend will only worsen next year because even when the story gets it right, the headline still gets it wrong.

We just released a piece that looks at the likely impact of the tax bill that is currently before Congress. Click here to check it out.

One last thing… our new Q3 2017 quarterly reports are available! Check them out by clicking here.

 

garrick-brownGarrick serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.

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