NEW YORK ( TheStreet) -- The traditional shopping mall, long an iconic symbol of American consumerism, is facing significant challenges. But while rumors of its demise may not necessarily be greatly exaggerated, they certainly don't tell the whole story.
The reality is many high-end malls are doing quite well, while other mid-tier and lower-end shopping centers are struggling mightily or closing altogether. And those dying malls are taking some retailers down with them.
"Retail is undergoing a transformation. It's always been a business of creative destruction, but the pace is accelerating due to the introduction of e-commerce," says Tad Philipp, director, CRE Research, Moody's Investors Service.
Trouble for Traditional Anchors
In addition to, or perhaps because of, the competition from e-commerce, malls have been pressured by the poor performance of high-profile national mall anchors. Philipp mentions J.C. Penney (JCP) and Sears (SHLD) , which have both been struggling for some time, as examples. "[Moody's has] them rated in the Caa category, which is deeply into speculative grade. Between the two, we think J.C. Penney has the more established recovery strategy."
Trouble at these anchor chains has meant trouble for stores that rely on them for traffic. Philipp says the business model for malls used to be, and still is in many cases, that the anchors would draw customers to the mall and landlords would make money by renting out the space between the anchors to smaller stores. "So the traditional mall is shaped like an 'X' with a big box anchor on the sides and maybe a food court in the middle, and the people walk back and forth," he explains.