The New Retail Wasteland: How Shoplifting and Supply Chains Broke the American Mall

You get the distinct impression that something is in suspended animation when you stroll through a struggling regional mall on a Tuesday afternoon. Three of the eight food court stalls are operational. A massive hollow cube behind a chain-link fence serves as the anchor at the north end, which was formerly a Sears. A Foot Locker is passed by a few teenagers. The lighting is adequate. The floors are spotless. However, the vacancy is evident everywhere, as evidenced by the storefronts covered in paper and the security guard who appears to be watching a slow-motion ending rather than safeguarding merchandise. This scene is not uncommon. It is the typical one in many American cities and suburbs.

Southdale Center, the nation’s first enclosed, climate-controlled mall, was established in 1956 by Austrian-Jewish architect Victor Gruen in Edina, Minnesota. Gruen had a lofty and somewhat idealistic vision: he wanted to replicate the atmosphere of a European town square, a public meeting spot where people could congregate, trade ideas, and make purchases. The stores were significant, but they weren’t the main focus.

American Retail & Mall Crisis — Key Statistics

He envisioned shopping centers with public art, housing, schools, and medical facilities. Instead, he received something more purely commercial that spread throughout the nation at a pace that unnerved him. Gruen was openly rejecting the organization he had founded by the time he appeared in an interview in 1978. “I refuse to pay alimony to those bastard developments,” he replied. “They destroyed our cities.” In ways that took several more decades to fully materialize, he was correct.

In the decades after Southdale’s launch, more than 1,200 shopping centers were constructed in the US. They concentrated commerce behind large parking lots that were mostly reachable by automobile, removing it from downtown main streets and city centers, which had previously held about 80% of the retail market share.

Retail planning specialist Robert Gibbs has meticulously monitored this displacement. Main streets’ share of the retail market fell to roughly 5% after the arrival of the malls. Only about twenty-three cities ever made a partial recovery. In addition to competing with downtowns, the malls hollowed them out, and the damage was so severe that most of them never recovered. The malls then started to deteriorate after destroying what had come before them.

The collapse comes from several directions at once and is layered. Online shopping is the most obvious force, accounting for between 10 and 20 percent of traditional mall sales and continuing to rise. However, the department stores that anchored malls, such as Macy’s, Sears, and JCPenney, have been structurally declining for years.

The same casualization of dress codes and dual-income time pressure that started undermining clothing sales decades ago have also undermined their model. Macy’s declared that 100 of its stores would close. Sears closed over 150 stores. The mathematics of a mall are drastically altered when an anchor leaves: foot traffic declines, smaller tenants lose the passing customers that anchor stores created, and the spiral becomes challenging to reverse. More than 300 malls in the United States have received a C+ or lower rating from Green Street Advisors, indicating a significant risk of closure in the near future.

Then came shoplifting, which is a more complicated issue than the name suggests. According to industry data, retail theft losses in the US reached $94.5 billion in 2021 and surpassed $100 billion in 2022, or about 1.4% of total retail revenue. Target calculated that theft cost it about $600 million in a single year. When losses were too great to continue operating, CVS closed its stores. Before closing those stores as well, Walgreens emptied its shelves into locked security cabinets in San Francisco stores, a visual that became its own kind of commentary on the state of urban retail. The CEO of Walmart publicly threatened to close stores if things didn’t significantly improve. They succeeded in closing. Doug McMillon did not issue a rhetorical warning.

It’s difficult to ignore the mutual reinforcement between the mall decline and the shoplifting crisis. Approximately 1 in 150 shoplifters are apprehended. Theft under $950 is considered a misdemeanor in California and is almost never prosecuted.

Without facing any repercussions, organized crime groups have broken into pharmacies and cleared the shelves. The end result is a brick-and-mortar retail environment where the cost of preventing theft, which includes locked display cases that slow customer service, increased security that lessens the pleasantness of the shopping experience, and location closures that completely eliminate options, is eroding the advantage of physical stores—the ability to touch merchandise and leave with it immediately. Shoplifters do not exist in online retail.

Sorting is what’s left. The malls that remain won’t look like they did in 1990 or even in 2005. The most resilient are transforming themselves from pure retail spaces into something more akin to Gruen’s original idea of a community hub by adding dining, entertainment, fitness centers, and medical offices. This is an irony worth considering.

A number of abandoned shopping centers are being demolished and rebuilt as walkable mixed-use complexes with residences, jobs, and reduced retail. Two years after redevelopment, a $1 million property sold for $30 million. Reinvention has attractive economics. The economics of stagnation—keeping a deteriorating mall in a deteriorating area while theft increases and anchor stores depart—are much less so.

The result, which is still developing, is a retail environment that is becoming more concentrated and distinct from its previous state due to survival pressure. The strongest shopping centers are competing and investing in the best locations.

Closing or hollowing out are the weakest. The class B and C malls in mid-sized cities, which had enough business to survive one cycle of disruption but might not have enough to survive the next, are where the uncertainty resides. It’s still unclear if they can change quickly enough. However, data on theft, anchor closures, online competition, and demographic changes are all pointing in the same general direction.