Simon Says ‘E-Commerce Is Flatlining’ as Mall Sales Soar

The largest U.S. mall owner is once again doubling down on a strong outlook for brick-and-mortar retail.

Speaking with analysts in a third-quarter conference call on Tuesday, chairman, president and CEO of Simon Property Group David Simon said that retailers need to invest more heavily in brick-and-mortar stores to be able to grow as e-commerce sales slow down.

“The brick-and-mortar retailer is strong and e-commerce is flatlining,” Simon said, explaining how his company has become more profitable over time, paying out $39 billion in dividends to shareholders.

In Q3, Simon Property Group reported that momentum in sales at its malls across the country has continued, with the shopper remaining “resilient.” Occupancy at U.S. malls and premium outlets was at 94.5% as of September 30, 2022, compared to 92.8% at the same time last year. The company said it is on track to achieve pre-COVID occupancy in 2023.

When it comes to new store openings or lease renewals with different retailers, Simon said there has been little slowdown, despite the current macro-economic environment. However, the same cannot be said for retailers’ e-commerce business, according to Simon.

“The flight towards bricks and mortar is real,” Simon said. “The returns on e-commerce just aren’t quite what everybody talked about.”

Simon said he’s had a front-row view to the decline in e-commerce by observing the performance of the brands the company owns with through its partnership with Authentic Brands Group. Simon Property Group also backs a discount luxury retailer Rue Gilt Inc. and owns JCPenney through a joint venture with Brookfield Asset Management Inc.

Simon said that the future of retail lies in brick-and-mortar, and more brands have begun to take note.

While many retailers are focused on strengthening digital presences, they are also investing more heavily into physical locations. In the last few months, Forever 21, Ross Stores, Ralph Lauren and more companies have announced investment in expanding their store fleets. Some, such as Clarks, are specifically leaning into mall-based locations.

Even digitally-native companies are making the leap to a strategy focused on physical store expansions. For example, Rihanna’s lingerie brand Savage X Fenty is opening five stores across the U.S. this year. Digitally native glasses company Warby Parker has also embarked on a store opening store spree in the last few years.

“It’s been a difficult year for e-commerce,” said Simon. “And bricks is where the action is.”

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