Online shopping really is killing shopping malls

Recently Jonathan Glancey at the BBC and Nelson Schwartz at the New York Times have taken a look at the apparent death of the full-scale indoor shopping mall in the United States. Very few new malls have been built, and a large (and seemingly growing) share of the malls that exist are approaching a state of "death" with vacancy rates above 40 percent.

This is a complicated phenomenon, but one important factor is the rise of online shopping. Schwartz dismisses this too quickly with the observation that "less than 10 percent of retail sales take place online." This is true, but a large share of the Commerce Department's retail sales series consists of food and car dealerships, which don't really compete with online retail. Here's e-commerce as a share of non-automotive, non-food (or restaurant) sales:

That's a lot more than 10 percent. It's not a full explanation for the phenomenon, but it's a really important part of the story. The shopping mall is a complicated ecosystem, full of implicit subsidies and agglomeration effects, and the ecosystem is being shocked by competition from online that's growing at an incredibly pace.

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