Photo: RetailWire
Will increasing mall traffic hit a speed bump due to the Delta variant?
Simon Property Group announced that shoppers returned to malls in the second quarter as though it was 2019 and the novel coronavirus pandemic had never happened.
David Simon, CEO of the mall operator, told analysts on the company’s earnings call yesterday that footfall was up around 80 percent from last year and that traffic in some locations was actually higher than it had been during the same period in 2019, CNBC reports.
The mall giant’s 91.8 percent occupancy rate still remains below last year’s 92.9 percent and subsequent store closings tied to retailer bankruptcies. Simon’s occupancy rate two years ago stood at 94.4 percent.
Mr. Simon said his company was digging out of the large hole created by the pandemic but that he was encouraged by a pick up in demand for open space inside its shopping centers.
A potential obstacle facing Simon’s malls is the rapid spread of the Delta variant across many communities. The spread of the variant is particularly pronounced in states where COVID-19 vaccination rates are low.
A CNN report cited a briefing yesterday by Jeff Zients, COVID-19 coordinator for the White House, during which he said that the seven states with the lowest rates of vaccinations accounted for more than 17 percent of new cases in the past week despite only representing 8.5 percent of the national population. He pointed out that one in three cases occurred in Florida and Texas where one governor is threatening to withhold funds from school districts that mandate students wear masks and the other has signed an executive order barring local governments and agencies from imposing mask mandates even in the face of spiking cases.
Mr. Simon said that his company’s malls “would mask up” where it was needed, but cautioned that his company’s properties and others should not be made a scapegoat as cases rise in some places.
He pointed to the spread of the Delta variant in Florida, Yahoo Finance reports, and said there has not been “an uptick in COVID cases for the people that are in the mall, the staff, whether it’s a retail or a management team, period, end of the story. No question about that. So, I personally think that people are just going to deal with Delta. I’m hopeful that people will get vaccinated. We’re not going to mandate vaccines; we’re going to encourage them.”
- Simon Property Group Reports Second Quarter 2021 Results And Increases Full Year 2021 Guidance And Raises Quarterly Dividend – Simon Property Group
- Simon Property Group, Inc. (SPG) CEO David Simon on Q2 2021 Earnings Call Transcript – Seeking Alpha
- Mall owner Simon Property says sales at its centers returned to pre-pandemic levels in June – CNBC
- Malls have been mistreated during the COVID-19 pandemic: Simon Property Group CEO – Yahoo Finance
- Florida and Texas had one-third of all US Covid-19 cases in past week, official says – CNN
- Two Florida school districts drop mask mandates after DeSantis threatened to withhold funding – Fox 13 Tampa Bay
- Texas Gov. Abbott threatens fines again against local officials and businesses that enforce mask mandates, vaccine requirements – CNBC
Discussion Questions
DISCUSSION QUESTIONS: Will the Delta variant cause changes in shopping behaviors among consumers in places where there has been a pronounced increase in cases? How, if at all, do you see this affecting traffic to enclosed shopping malls?
Poll
Loading …BrainTrust
David Naumann
Marketing Strategy Lead - Retail, Travel & Distribution, Verizon
Jeff Hall
President, Second To None
The return of mall traffic is encouraging, but the situation with the Delta variant is still unfolding. If vaccination rates continue to climb, and new Delta case counts moderate, then it’s possible that mall traffic will continue to increase as we head into the holiday season. However we’re not out of the woods yet. China just recently imposed it’s most stringent COVID-19 rules since March of 2020, so we must remain vigilant.
I suspect that we will see the return of mask mandates and maybe some restrictions on shopper capacity coming soon based on the current trend of the COVID-19 Delta variant. A lockdown like we experienced in 2020 is not as likely, as with proper masking and social distancing processes, stores and malls should be able to continue to operate. There may be a dip in shopper traffic, but it shouldn’t be as bad as 2020. Fortunately, retailers and consumers are much more prepared to deal with social distancing.
It would be very interesting to see a detailed segmentation of traffic trends at Simon’s malls. Given they have a mix of properties, I suspect that the outlet centers – what they call Premium Outlets – have driven a lot of the recovery. I have visited quite a few traditional malls in their portfolio and, while there is most certainly a recovery over last year’s precipitous drop in traffic, a lot of those locations remain dispiriting and in need of investment. As with most things mall related, the future is very mixed. Some will thrive and many will die.
So a mall owner says of his properties in Florida that there has NOT been an uptick in COVID-19 cases. Period. End of the story. I’m having a hard time coming up with a printable adjective for that statement.
“Printable” being the limiting factor. 🙂
Precisely. I actually have a long and colorful list adjectives.
We’re in for another long fall and winter in terms of brick-and-mortar retail. The drop in traffic that will come will continue to hasten the move to e-commerce and the relative lessening of the retail footprint in this country. There will be a lot of empty space that can be used creatively, perhaps for regional fulfillment centers?
No worries, Ian, neg hits on e-com vs stores (the obvious track) are a badge of courage. Keep up the good work.
Honestly, the people that are not vaccinated as of now, likely won’t be – and they also likely won’t change their behaviors either. They clearly don’t care how this virus affects others, whether it be retail workers or healthcare workers, so the rest of us will have to change our behaviors. For the vaccinated, some will feel invincible and not worry about masks, and others will be careful and put them back on. Nobody likes masking up but there is a high enough number of breakthrough infections that it is the smart thing to do (especially in states like FL where I live!).
There have been news reports of increased vaccination rates in states where misinformation is high as is the spread of the Delta variant. One report I read even talked about people disguising themselves to get vaccines so that their anti-vaxxer family and friends would not find out. Reminds me of the old Pogo cartoon. “We have met the enemy and he is us.”
Well, given 30-40% of healthcare workers are not vaccinated based on a lot of estimates we are seeing, I think it is a pretty tall statement to say those who are not vaccinated do not care how this virus affects others. Certainly those healthcare workers care. Some who are not vaccinated care how the vaccine may affect themself or others and are not vaccinating for that reason.
Those who are vaccinated and behave as if “invincible” are in just as dangerous of a position as those who are not vaccinated. Given the vaccinated are spreading Delta variant and have the same viral load as those who are unvaccinated per the CDC per that outbreak in MA, clearly when you have an invincible individual who is sick, in a store, and coughing/sneezing without covering their nose/mouth, you have a dangerous situation from a virus spread perspective.
Everyone needs to be careful and mindful of distancing, hygiene, and cleanliness. Vaccine or not.
This will be interesting to watch. Connecting cases back to a mall could be difficult. However we have to remember that these tend to be large spaces that are well ventilated with high ceilings. But this does not change the fact that malls need to become multi-purpose locations where orders are fulfilled along with exploration and actual transactional shopping.
For those that may have thought COVID-19 was behind us and we were “back to normal,” the latest variant (and uncertainty) is causing shoppers to reconsider their choices. That said, I still believe shopping malls can survive this setback as they reinforce safety measures and remind shoppers that they are open for business. Shopper behavior has not completed its evolution — and retailers (and mall operators) must also continue to evolve.
Simon is a PR guy. We all know that foot traffic has been reverse hockey-sticking in malls for 15+ years now with e-commerce headed in the reverse direction. See also: number of malls closing or closed. Yes, people visited malls this past month because they couldn’t before, but don’t fool yourself — the physical retail footprint is going to be much smaller in the future and the march to that end is not even close to finished. To quote Bezos, “if you’re leaning away from the future, the future will win every time.”
We’re a lot more knowledgeable now than in March of last year which has given vaccinated shoppers the confidence to navigate public spaces. We’re also a lot more acclimatized to masks, at least most are, and have seen the proof over the past year of the effectiveness of masking. With this knowledge and experience consumers are making more informed and purposeful visits to stores — less aimless browsing and more targeted viewing of products before purchasing online. This proves out the immense need of shopping centers to adopt the omnichannel model and become a multi-channel marketplace in their own right.
I think we will see speed bumps for the next 12-24 months with variants continuing to cause issues. Mask mandates and social distancing will likely increase again, especially in areas with higher transmission rates and as we saw during the first and second waves, enclosed shopping malls will be less attractive.
I don’t think anyone was surprised at the uptick in traffic as we stepped out from the COVID-19 pandemic. It was like, “school’s out.” My fear is if the Delta variant continues, I do believe we will see fewer footsteps in our stores. So retailers, keep that social media commerce mentality handy!
Comparisons to 2020 will continue to be very favorable, but comparisons to the second half of 2019 will be more revealing. The strong recent spending trends might slacken during Back to School, although many of those sales will move to omnichannel as long as schools are able to reopen safely.
As to mall traffic — not to be confused with outlet centers, power centers and other “mass merchant” locations — that’s just as much an open question as it was two years ago, given the continuing weakness of the “mall anchor” and apparel tenant business even before the pandemic.
Some issues, yes. DiBlasio, just this morning, is making it mandatory that NYC indoor diners and gym users show proof of vaccination. The numbers in Florida are horrendous. The only hope is that this moves through fast because the R naught is so high. Regardless, it is also true that government policy trails the triggering event, so I think there will be restrictions from government and self-imposed.
Too soon to predict. The next 30 days of dealing with the Delta variant will provide clarity on what to expect in the future, not only with malls, but all U.S. businesses and consumers. If there is no slowdown in the Delta variant expect significant impact on enclosed shopping malls.
It’s not going to be much of a speed bump. Whether masked or not, shoppers have a strong desire and a need to return to a normal state of affairs. Most people who wanted the vaccine have been jabbed; the rest are unlikely to do so. That said, to read Mr. Simon’s framing that somehow the Delta virus uptick in Florida has bypassed his company’s malls is highly troubling, if not irresponsible. Even if he offers a caveat by limiting his sample to the mall and retailer-associated staff, their numbers are dwarfed by those of the shoppers.
All 50 states are reporting a marked increase in daily vaccination rates, which is encouraging, and may moderate the impact of the Delta variant on shopper behavior. Given the pent up demand created by extended lockdowns, now that consumers are enjoying a sense of freedom and mobility, it’s not likely we’ll see meaningful pullback on foot traffic, even for enclosed malls. Mall operators should be more concerned with the accelerating long-term shift in shopper behavior to enclosed mall alternatives.
Areas with lower vaccination rates and higher surges are going to be the ones with the least disruption. At this stage, 1.5 years after the initial outbreak, you know who is going to change their behavior and who isn’t. Areas with higher vaccination rates (and therefore a population which is more cautious) will see some decrease in foot-traffic, but probably not as significantly until the spike in cases get much worse (which hopefully does not happen).
I think every business will hit speed bumps due to the Delta variant. Retailers who amped up their e-commerce efforts and deeply embraced selling via social media didn’t walk away when the pandemic was “over.” They will continue on, business as unusual. But I have not seen much effort from the malls themselves to encourage shopping, either in-store or online, the way individual retailers did. Let’s see what they do this time around because malls need to do more to connect with consumers.
Just the news about the Delta variant will begin to alert shoppers that they may not want to go shopping. Many will be comfortable wearing masks and will shop anyway, others will shop having been vaccinated. However, if the spreading Delta variant gets worse, shoppers will begin to pull back on shopping in person. This will be especially true in enclosed indoor malls where the risk is likely higher. The good news is the forecast for the Delta variant is currently for the variant to peak in the August/September timeframe.
It’s not so funny that we are back to talking about masking up. But it is rather absurd, in many ways. For one, as a frontline worker, I am finding it almost unbearably hard going back and forth. For another, to make everyone from associates to customers to all wear masks, only “masks” the problem. Since one’s vaccination status is then rendered somewhat moot, and because (as most companies’ policies go) you can neither inquire about a visitor’s or even a coworker’s circumstance. (I am a fan of asking for vaccination status upon working or shopping/drinking/dining. But try having us hapless public-facing staff do that without extreme blowback.)
Consequently it is then left to what? Instances of transmission going down in certain places where masks are back on. But remaining high (and growing higher) where no such mandates are in place. And who is to stop persons from a high-incidence area from going to a low-incidence area or vice versa?
Further, if one lives in a city like San Francisco, where the vaccination is extremely high — and in the category of “herd immunity” — just how many more need to get vaccinated before it is okay to go unmasked again? One-hundred percent? That is as impossible as thinking the vaccines themselves were absolute cures. It and they are not.
So when will it be okay again? And when cases rise, as they undoubtedly will when it’s “all clear,” how many infections (just one?) will it take for someone to impose restrictions once more, while some have never asked for them to start? Talk about things being divided, not making sense, and each of us fending for ourselves.
To a lesser extent store traffic will be reduced for a short time in heavy virus areas. Most likely just for the Back-to-School season. That does not mean sales will be reduced. Every mall retailer should have a website that processes orders. Expect an increase in online sales over last year.
Mr. Simon’s comments are a perfect example of “quit while you’re ahead.” “We’ll cooperate (if needed)” is all that should be mentioned, not going off on some dubious tangent or victim playing.
That having been said, he’s right to be concerned; everyone is right to be concerned: the surge is almost certain to have a dampening effect, as I noted last week — the last time we were asked pretty much the same thing — the only question is (are) “how big (and how long)?”
All you have to do is look at the video footage on news programs that show people going to concerts, movies, clubs, etc. It’s almost like the COVID pandemic never happened. While many consumers recognize — and even fear — the risks associated with COVID and the Delta variant, they are still willing to live life — to a certain extent — with some sense of normality. Good or bad, whether you agree or not, that is what it looks like is happening. In short, that indicates that what we see today is trending in a direction that should make retailers happy.
Not immediately, nor as much. Most of our country, especially those areas with higher Covid cases, either don’t have the option to change their shopping behavior or frankly just don’t want to revert to a state of masks and precautions. Whatever speed bumps that arise will be at the expense of safety. Tragically, the self- quarantines and in some cases, vaccinations will come when it’s too late. In places with higher vaccination, there might be more caution, but more confidence given the stats we know about how the vaccine reduces the impact of Covid.
The real fear and hence reduction in mall shopping will come with future variants where we might have to restructure and redevelop a vaccine. The unknown always will be a much larger factor than the known.
My area brought back the mask requirement indoors a few days ago and in my store visits over the past weekend I noticed much less traffic in stores than I have been seeing lately. It was also odd given it was the beginning of the month as usually that is busy.
Also, no shortage of folks around who are coughing/sneezing … kind of makes me want to stay out of stores. In some stores it feels like flu season.
It is not only the Delta variant that is going to cause challenges to in-store traffic, but also economic concerns (resulting from what is looking like a stalled recovery resulting from the Delta variant). It is like a one-two punch for retail and especially large enclosed shopping malls.
The other challenge is other things people actually need or have to buy, costing much more than they cost a year or two. Need a new car? You are going to pay much more and have a way harder time negotiating the price down. Need a new appliance? Again you are going to pay more, and wait longer, for it to arrive. Paying more for these things results in folks having less disposable income to go spend at the enclosed shopping mall or other retailer.
The wild card I see is the holiday traffic. Will COVID variants continue or will the holidays bring us a rough cold/flu season (which we haven’t experienced in a couple years) that will scare people off?
Many unknowns. Many retailers have responded with decreased inventories, decreased labor, and when you look at stores you can see many are just in survival mode.