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.

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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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There are 10 comments

  1. What Will You Do?

    Great article, however the picture painted is not necessarily accurate. I’d also take to task the lumping of
    Dollar General, WalMart and Target into the same pool. Target stands out clearly as ‘the new department store’ model, bettering the offering of affordable design as compared to Dollar General, WalMart, Khol’s even JCP and Sears. That is one of the reasons why Target is gaining sales against Amazon and WalMart. Target has launched in-house brands over the past 12-months that are pushing sales upward AND are 100% in line with the fashion offering of brands such as Madewell, Best Made, even ACNE…yes, ACNE.

    The household income here as well is under-estimated in this article. that’s a pure WWD-NYC view of the reality here. Between 2nd home ownership in the region, and permanent home ownership in the region, HHI in Ulster – Dutchess is actually quite high when compared to the national average.

    The difference here, regarding HVM, is that a mall that is more than 50% vacant instantly loses ‘the draw’ to come and stroll and shop. And yes, online shopping for busy lives adds to that. But one of the real substantive issues in dying malls is the very good thing of a return to street-based, downtown retail and experience. Cities and towns across the nation are seeing the largest and strongest resurgance in downtown rehabilitation since the 1950s. And the prevailing attitude of most consumers is that walking around in an enclosed retail environment has simply lost favor. Trends change. This is one of them.

    Truth is Ulster-Dutchess Counties account for a regional full-time shopping population of more than 500,000 permanent residents. That’s larger than half of all US cities. The illusion that we are a rural area just is not true – it is an illusion. And other than the Poughkeepsie Mall, Hudson Valley Mall is the only other mall in this retail area. Another 200,000 visitors and tourists roll through the region on a regular basis – the people and the
    money are here. Its just how they choose to spend and where.

    The success in cities and towns across the nation is that malls exactly like HVM are being torn down, either partially or in full, and being redeveloped as mixed-use centers. HVM could easily be torn down at about 2/3 of its footpring. Keep the Target, Best Buy, Dicks. Theatre portion – it is doing well – and completely redevelop the rest of the foot print including the vast paved parking.

    Similar malls in similar sized areas today look like this:

    A central parking structure of 2-3 levels (invisible from the outside because they are typically then surrounded by new open-air retail; office and medical space; and apartments. Parking lots are gone and replaced with extensive landscaping and less hostile setting. Let’s be real here, HVM is about as hostile and uninviting as it could possibly be.

    The developer and the town need to meet face to face – not over email – and set a true master plan through
    direct conversation. (It is the same with the old IBM Site – we are NOT being aggressive enough in our demand and expectation that it be torn down, cleaned up, and redeveloped.)

    Fundamentally, there is absolutely no reason HVM can’t be redeveloped as a lively neighborhood as well as IBM across the street. What we are actually suffering here, is owners trying to squeeze the last penny out of tax reassesments, and the least possible investment. That’s the real problem.

    Many of our localities are in the midst of positive growth, new business, and new tourism, but that does not draw people to shop in a bland white bunker surrounded by an empty hot parking field on top of a hill.

    There’s plenty of analysis and talk but absolutely no action.
    Time for action.

  2. Paul

    The best thing leadership can do for its future towns is to retain, promote, and grow its talent pool (ie people and families). Invest in people by re-purposing the Mall to be geared towards the future. Affordable housing should not be considered as it fails in elevating living standards and generating job growth. The mall is at a geographical crossroads and should become a destination point worthy of competing with NYC. Think Aquariums, zoo, natural history, art museum, convention centers, etc. Local leaders should also tirelessly seek corporate investment to market the space for jobs creation in order to stay ahead of the skill shortage tsunami that threatens all economies in the next decade .

  3. dave tutankhamun

    “According to a recent report from CNBC, about 75 percent of U.S. households are living paycheck to paycheck.”

    If this is true than much of it is people living beyond their means. Consumerism and status anxiety make people feel like they should (or shouldn’t feel guilty about) spending pretty much all they have on things like clothes, vacations, late-model cars, the best new smartphone, etc. Incomes in America are very high but savings rates are very low. These are choices.

  4. Janet B.

    Some interesting ideas in this piece! I especially love the idea of using the vista as part of the attraction, with a rooftop public space & kiosks for noshing ~ like a “High Line of the Hudson Valley”.

    1. Rosemary M

      Janet, yes i agree. I think the author has some great ideas! We in Red hook and other villages on the east bank of the river might be able to add our ideas and thoughts, because we have been shopping at the Hudson Valley Mall pretty regularly over the years and are saddened by the loss of retail options.

  5. JamaicaonHudson

    Well, glory Hallelu…I agree.

    The Hudson Valley Mall is a property that can, if redeveloped properly, thrive: It’s near outdoor recreation sources (i.e. Catskills, Hudson River, local lakes, state parks), in-between two large MSAs (NYC Metro & the Capital District), and has that view. However, it cannot realize its potential if it relies on an old model which has no link to reality–it has to reflect our evolution. Personally, I’m all for an indoor soccer stadium (or year-round ice arena) w/ retail shops and specialty supermarkets. Slap some solar panels on the (living) roof of that ‘sucker, “The Mall” could be a real income generator (and pay hommage to Victor Gruen’s true vision).

    P.S. Desperation being the enemy of proper development, I’d avoid placing noisy and polluting/smelly industries in close proximity. Nobody’s going to visit a sports complex/aquarium/botanical garden/ice arena if it’s in the shadow of a smelting plant (run on fracked gas). The whole “pig-in-a-palor” thing…

  6. Peter Zorin

    Content of your P.S. projects hypocrisy of your position toward “fracked gas”. If you are against it, why don’t you give up driving and stop using gas or oil furnace where you live? You are beneficiary of that technology as many in the state who are stubbornly opposing to it, rather than looking for a compromise. Then, I would take your, and of others like you, stand seriously and consider it as truthful.

  7. JamaicaonHudson

    I also drink water, breathe air, and have functioning eyesight/olfactory glands. I can, if need be, go without the Prius and switch to solar–but clean air and water are essentially for human life.

  8. A Grant

    You can’t shop in the stores, if there are no stores.

    And no one wants to go to HVM as it currently is… there is nothing to do.

    It’s pretty ridiculous.

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