Retail: Is the American Shopping Mall Dead?

There's something growing in the New Jersey Meadowlands, the marsh just nine miles west of Manhattan—and it isn't the gentle ferns that the bucolic name suggests. Instead, what's emerging is a man-made behemoth, the largest and most expensive mall ever built in the United States. Originally slated to open this month, Xanadu is now scheduled for completion next summer. Lawsuits, political grandstanding and construction delays have nearly doubled the mall's cost to $2.3 billion. When it's finished, the half-mile "retailtainment" center will be a Vegas-meets-Disneyland pleasure dome with the country's tallest Ferris wheel and first indoor artificial ski slope. There will also be a two free-fall skydiving jumps, indoor surfing, a mini-city for kids, a digital media river on the ceiling—and, oh, some 200 shops.

The scale and scope of the project would be breathtaking in its own right. But what makes Xanadu extraordinary is the fact that it is emerging just as the American mall—that most quintessential of American institutions—is in its dying throes, if not already dead. Moribund malls have not gone unnoticed amongst industry analysts and Web sites like that feature photos of hundreds of now-abandoned sites. But what were once just worrying signs appear to have finally flat-lined. Last year was the first in half a century that a new indoor mall didn't open somewhere in the country—a precipitous decline since the mid-1990s when they rose at a rate of 140 a year, according to Georgia Tech professor Ellen Dunham-Jones, coauthor of the forthcoming book "Retrofitting Suburbia," which focuses on the decline of malls and other commercial strips. Today, nearly a fifth of the country's largest 2,000 regional malls are failing, she says, and according to the International Council of Shopping Centers, and a record 150,000 retail outlets, including such mall mainstays as the Gap and Foot Locker, will close this year. Xanadu, whose officials declined NEWSWEEK's requests for comment, has named just nine tenants for its 200 spaces.

So what's the cause of this malaise? After all, malls have been part of the national landscape for more than 50 years, spawning their own indigenous culture (mall rats), native cuisine (Cinnabon) and home-bred pop sensations from Tiffany to Timberlake. Prior diagnoses have pinned the mall's decline on retail cannibalization, the repopulation of cities and suburban gang problems. The current economic skid certainly isn't helping to fill shops and attract vendors.

"The mall at the end of town is dead. Amen," says Bill Talen, a.k.a. Reverend Billy of the Church of Stop Shopping, a secular movement dedicated to exorcising consumerism from everyday life. The reverend's tactics may be unusual—he's been known to leap on shop counters in order to "exorcise" cash registers—but his message of modest spending is increasingly mainstream. This month's Buy Nothing Day—an annual holiday from shopping sponsored by Adbusters magazine (it's the day after Thanksgiving)—is expecting to attract millions of participants, according to Kalle Lasn, the co-creator of the event that is now in its 16th year. His magazine, meanwhile, has grown from a local Vancouver zine to a $9 international glossy that's mainstream enough for Whole Foods supermarkets, and it has more than 100,000 paid subscribers.

Just as people are flying from malls, many are landing at a series of offbeat, alternative trading posts. The Salvation Army has seen sales jump 15 percent at some locations, while The Freecycle Network, a clearing house for second-hand goods has grown from 40 people to around 6 million since its founding in 2003. Each day, the group says, it keeps 500 tons of stuff out of landfills and in use. Another second-hand movement, known as The Compact, where members commit to buying nothing new for an entire year (underwear excluded), has grown from 10 friends to 10,000 members since 2004. Even those who are still buying new are viewing shopping through a changed lens: almost 40 percent of people between the ages of 18 and 30 prefer to use brands that are "socially conscious"—environmentally safe and produced through fair labor—according to research by Alloy Media and Marketing, a youth-focused ad agency.

"It's about manners," explains Donna Daniels, a former Duke University anthropologist now at Iconoculture, the retail consultancy. For years, she and her colleagues have been tracking the rise of what they call the "socially frugal" consumer class—people who buy less to escape attention and respect the constraints of others rather than because they have a cash-flow problem. Other experts, including pollster John Zogby, point to a "great transition" in the needs and expectations of average Americans, particularly those under the age of 30. In his recent book, "The Way We'll Be," Zogby argues that the same people who might well have become mall rats just a few years ago are learning to "make do with less and find a subdued peace in the process."

To survive this new age of austerity, many malls are trying to recast themselves as centers of thrift—hyping low-cost retailers if they have them and trying to add them if they don't. And it's about time, says Stuart Ewen, a City University of New York media professor who studies the social roots of consumer culture. He sees the 20th century as a "100-year barbeque" of resource-burning in an otherwise largely unbroken history of sustainable and thrifty living. "The word consumption used to be a pejorative, meaning death, destruction and waste," he says—now "more and more people are aware of that."

The consumerist backlash has become so mainstream that it's even popping up in politics, business and big-screen entertainment. John McCain and Barack Obama both talked frankly during their presidential campaigns about the need for Americans to dial back their spending habits, borrow less and save more, while Disney's best chance for an Academy Award nomination this year is "Wall-E," a film about robot love on a planet left sterile by human wastefulness. Marketers, ever sensitive to new opportunities to name a demographic, have done just that; many now see a group on the fringe of the "green" environmental movement they call "dark greens" and "very dark greens."

Developers, too, are adjusting to the times. They're trying to win back reluctant shoppers with "life-style centers," retail hubs that boast residential apartments, parks and promenades—the better to blend shopping seamlessly into everyday living. Such structures are going up faster than ever, with 37 new lifestyle centers—almost 40 percent of the form's total square footage built in the last decade—going up last year,according to Portfolio and Property Research, a Boston-based retail consultancy. One such break from the fashion-and-food-court formula cropped up this past summer in southern California, where a development called The Americana at Brand looks more like a movie set than a $400 million outdoor mall. The un-mall is laid out to resemble a small town, with a trolley car, chemist and car-free streets that resemble the quaintest quarters of New Orleans or Boston.

All of which makes the overt branding and commercialism of Xanadu stand out—for all the wrong reasons. The mega-mall has drawn fire from an unusually large and strange set of bedfellows: the Sierra Club, which sued to save environmentally protected wetlands; the Federal Aviation Administration, which has complained that the 287-foot Ferris wheel might disturb planes landing at nearby Teterboro airport; and former New Jersey governor Richard Codey, who has called it's design "yucky-looking." More recently, according to a person familiar with the matter, Xanadu's architects at the Rockwell Group have stopped returning the developer's calls and may remove their name from the structure, citing aesthetic concerns. Not that Xanadu entirely lacks believers. Its own personal Kubla Khan, developer Larry Siegel, has staked his career to the deal, while Pepsi has sufficient faith in the venture that it has bought the naming rights to the Ferris wheel (now the "Pepsi Globe") for a reported $100 million.

Still, with a move towards a quieter, more retrained way of life, New Jersey's Xanadu may yet find its dreams of leisure and retail success are as fantastical as the mythical world for which it was named.