Where the retail giants of the late 20th century once stood, soon will stand the retail giant of the 21st century. To understand the irony of this turn of events, you only need to look at the history of retail shopping.
In a major city, to go shopping once meant you got dressed up, boarded a street car and went downtown to where major department stores stood as shining statues to capitalism. You would ride the elevator, with the elevator attendant announcing the floors — "second floor, women's clothing and shoes." Mixed in with the large department stores were locally owned retail establishments.
If you did not live in a major city or lived removed from the city center, you could rely on catalog shopping from companies like Sears and Montgomery Ward that would send items to your home. Often these retailers would have large buildings close to, but not in, downtown.
Following World War II, as suburbs began to develop, the major department stores often would open a branch in a shopping center or standalone building to serve those who had moved further out from downtown. Suburban shopping was born, and shopping centers started to sprout across the landscape. Shopping moved closer to where you lived, and downtown shopping began to suffer.
But shopping centers were outdoors, and weather would play a role in deciding whether you went shopping, and the idea took root to create malls. Beginning in the second half of the 20th century, malls were being built with major department stores as anchors and national chains filling in-between. Malls were costly to operate as you need to heat and cool them, but they became centers for not only shoppers, but for people just looking to walk when the weather was uncooperative.
As we moved through the second half of the 20th century, another dynamic hit shopping — cheaper shopping alternatives. First it was places like Kmart that built buildings across the United States, then Target and Walmart quickly followed. Target was the spinoff of a major department store chain — Dayton-Hudson — while Kmart was born from S.S. Kresge.
The old department stores started to suffer and later closed their doors or merged with others. Many did not change with the times, were not innovative and could not sustain themselves with new markets, new ways of pricing or better logistics. As they closed, malls that relied on them began to struggle. And as other national retailers also began to suffer, the malls started to deteriorate and close.
How the U.S. population shopped also changed as we entered the 21st century. You could now shop on your computer from the comfort of your office or living room. Cyber Monday became as big, if not bigger, than Black Friday.
As someone who looks at this history, I am struck by the lack of innovation of the established companies that continued down paths that were most comfortable for them and did not change with the times and thus became dinosaurs.
How Dayton-Hudson launched Target should have been the model for others to follow. Management guru Tom Peters has a slide that says, "It was too hard to change Sears so we created Kmart." Moving from that slide, Kmart and Sears combined and together they rank behind Walmart. Those who do not embrace change are doomed.
One more word on Sears, which was selling from catalogs. It had the infrastructure in place to take over web commerce. It had the logistics. But sadly, early on, it did not see or embrace the opportunity, and along came Amazon, which now is a retail leader.
So where those mighty malls once stood in the Cleveland area will soon be Amazon distribution centers employing thousands at higher pay than retail. While I find this ironic, the true lesson is every business must innovate and cannot rely on its past or current situation. All must look to the future and embrace it.
Innovation should not be a scary word to businesses; it should be where they spend at least 25% of their time and resources. The world changes; you cannot stand still. To paraphrase Nobel laureate Bob Dylan, "Where have all the malls gone, long time passing gone to distribution centers." The question is, "Where have all the distribution centers gone, long time passing gone to ______________? (You fill in the blank.)
Sudow is the director of the Burton D. Morgan Center for Entrepreneurial Studies at Ashland University and an adviser to eHealth Ventures and to SCI, a Chinese investment group.
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