Rural malls hit hard times, leaving shoppers adrift as more stores close

Rural malls hit hard times, leaving shoppers adrift as more stores close

Donnelle Eller, Des Moines Register Published 4:30 a.m. ET June 8, 2018 | Updated 9:27 p.m. ET June 8, 2018

National retail distress is emptying rural regional malls such as in Ottumwa. Rodney White,

OTTUMWA, Iowa -- This city's Target store is gone.

So is Kmart, MC Sports, JCPenney, Vanity and soon Herberger's, a department store.

"The mall is pretty sad," says Amanda Cain, a teacher and mother. "Once Herberger's closes, we'll have no anchors."

About two-thirds of Ottumwa's Quincy Place Mall will be empty with Herberger's loss.

Bon-Ton Stores, of which Herberger's was a part; Toys R Us; MC Sports and others are bankrupt. JCPenney, Kmart and other department stores are closing unprofitable stores in their struggle to survive against growing online competition.

National retail distress is emptying rural regional malls, experts say. But long-term economic deterioration is driving their inability to bounce back: Fewer jobs and fewer people mean less money spent on TVs, couches and clothes.

Ottumwa and most other small Iowa cities have failed to recover the jobs lost in the recession, said David Swenson, an Iowa State University economist.

Wapello County, where Ottumwa is the biggest city, with 24,450 people, had 3% fewer jobs last year than in 2008. Even with mostly steady employment over the past two years, the city's retail sales have tumbled 6.8%.

Buying power follows workers, who are moving to metro areas for jobs.

"They're going where the economies are stronger and they can make more money," Swenson said. "The only alternative left in many of these rural areas is Walmart."

Cain, who's not a Walmart fan, does most of her shopping at Kohl's in Ottumwa.

"Whenever we can, we'll do an out-of-town shopping trip, spend a Saturday and do our shopping in Des Moines. ... We make it a fun outing," Cain said, whose family hits Jordan Creek and Valley West malls, TJ Maxx and other Des Moines-area stores she wishes were closer.

"It would be nice just to run to the mall whenever we want and find the stores we like," she said.

A mall shakeout is coming

Many small urban centers are suffering, said Liesl Eathington, an ISU economist.

Fort Dodge, Mason City, Clinton, Spencer and Keokuk are among small Iowa cities that posted annual retail sales losses, based on Iowa State University's inflation-adjusted data.

"It’s too soon to say the mall is dead," Eathington said. "But we may see a shakeout when there are fewer and fewer of them."

Swenson said retail in small cities is likely struggling because manufacturing has suffered, both statewide and in rural Iowa. Plus, more consumers are ordering goods from Internet sites.

Total online sales spiked 16% last year over 2016, while total sales climbed 4.4%, the U.S. Commerce Department reported. Amazon and other e-commerce businesses made up about 9% of total sales, an ever-growing percentage, the data show.

"These are challenging times for retailers. ... There's a clear shift in power from the retailer to the consumer," said Mark Mathews, the National Retail Federation's vice president of research and development.

"When I was younger, when I wanted to buy something, it was a question of what was open within driving distance. Now you can buy anything, anywhere," he said.

New hope for downtown?

There's one bright side of the troubles facing rural malls. It's giving new hope to struggling downtown shopping districts.

Even though it has a ways to go, downtown Ottumwa is moving from blighted to revitalized.

Ottumwa has snagged about $10 million in state and federal grants to change it, mostly over the past three years, said Fred Zesiger, the city's Main Street director.

They'll have about 100 apartments when the work is completed. "People thought these buildings were worth saving, and they were right," Zesiger said.

Redevelopment of downtown gives Ottumwa leaders some opportunity to boost shopping, when most of the control lies with large corporations, said Holly Berg, an Ottumwa council member.

"This is something we can take into our own hands, instead of being at the mercy of national chains," Berg said.

Tough to find replacements

Replacing big retailers becomes more difficult in smaller communities, said Scot Snitker, national portfolio manager at Lexington International Realty, the New Jersey company that owns the Ottumwa mall.

His company is looking to attorneys, doctors and other service providers to help fill space. And it's recruiting entertainment providers — mini golf in Ottumwa, paintball in a Minnesota mall and a hockey rink in a South Dakota mall.

"There are plenty of retailers that are expanding. But they require a bigger population base, higher earnings," Snitker said. "So we just have to get more creative" in smaller markets.


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