Is Walmart’s (NYSE:WMT) Mall Play a Good Idea?

A while back, we heard about how giant retailer Walmart (WMT) was making a play for shopping malls. The original idea goes back quite a long way, but Walmart recently made it clear that the mall plan was not a passing fancy. To drive the point home, it dropped $32 million for the Monroeville Mall of Dawn of the Dead fame. Knowing what we know about malls, especially these days, it is enough to make one wonder if there is any kind of rationale behind Walmart’s big play for the mall. So let’s take a look at the idea, and what might have prompted a move like this from Walmart.

We know that the Monroeville Mall was not some dirt mall in the back end of nowhere. We also know it was not one of those limping carcasses of a mall known as a “dead mall.” The mall in its present state has a range of stores, local and national alike, as well as a food court and a sushi restaurant. Throw in its special connection as the setting of one of horror’s great classics and we know Walmart did not pick up some pile of scrap bait. No, Walmart bought a going concern, which suggests that Walmart may have larger plans.

We also know that this year, and next year, Simon Property Group (SPG) will put significant investment into its “B” malls. “B” malls are considered close to the lowest-tier, with the typical rating system going A++ for the largest, most heavily-traveled malls, A for large malls with good traffic, B for marginal local malls, and C for malls that are likely on their last legs.

Why Bother?

The immediate question to ask is, why bother? After all, most of us are well aware that online alternatives have been slowly killing most kinds of brick and mortar operations for some time now. So why even bother with the notion of restoring malls? Let them die quietly, some might say, and they would likely be right except for two major concepts: Generation Z and showrooming.

Showrooming was a marketing principle that used to be the bane of physical retailers everywhere, until they finally figured out how to harness it. Basically, with showrooming, customers would go to a physical store to interact with a product. That was not hard; anyone who has ever considered shopping for a couch online knows that you cannot sit on a couch you bought online.

But instead of buying the product at the store, they would instead buy it online, where it was in many cases cheaper. But now, stores are using showrooming as a way to get customers interested; the online store is setting up a physical location in a bid to get more customers to interact with their products and buy them. This time, though, the store does not lose sales that way, since the physical store and the online store are the same brand.

Then there is the matter of Generation Z. Coming into its own as the new generation with all the disposable income, this generation of digital natives is starting to wonder what all the fuss was about online, and is turning to physical stores to shop instead. In fact, 56% of Gen Z shoppers are “…willing to spend more to purchase sustainably sourced products.” Malls open up such opportunities by allowing for more local sourcing. Plus, Gen Z wants “an in-store luxury experience,” reports note. That cannot be done online, so physical becomes the way to go.

Thus, Walmart—and Simon, potentially—may be looking to take advantage of these trends to drive sales at their own locations. With Walmart eager to beat Amazon (AMZN), and Simon having a slew of malls that it needs to do something with, revitalizing shoppers’ interest in the mall becomes, therefore, vital.

Is Walmart Stock a Good Buy Right Now?

Turning to Wall Street, analysts have a Strong Buy consensus rating on WMT stock based on 27 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 79.6% rally in its share price over the past year, the average WMT price target of $107.85 per share implies 3.66% upside potential.

See more WMT analyst ratings

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