Pricing floor space in malls

Mall Owners Push Out Department Stores
by: Suzanne Kapner
Jul 11, 2016
Click here to view the full article on WSJ.com

TOPICS: Microeconomics

SUMMARY: Once the linchpin of American shopping malls, department stores are being displaced by newer types of retailers that do a better job of driving shoppers to the centers and lifting overall mall sales.

CLASSROOM APPLICATION: Students can evaluate the reason for mall owners to set rents based on the amount of mall traffic stores generate. They can also examine the reasons for the decline in department store sales and the decrease in value of department stores to mall owners. One note in the article is that department stores are not closing fast enough.

QUESTIONS: 
1. (Advanced) Why did mall owners set lower rents for department stores than for other retailers? What was the benefit to mall owners of having department stores?

2. (Introductory) What factors explain the decrease in department store sales?

3. (Advanced) Why are department stores not closing fast enough?

Reviewed By: James Dearden, Lehigh University