Brookstone’s bankruptcy woes don’t mean the mall’s dead

FORTUNE — Brookstone, everyone’s favorite massage chair retailer, is on the brink of bankruptcy. That news last week came on the heels of pizza chain Sbarro’s Chapter 11 filing. While Brookstone and Sbarro failed for lots of reasons (like lots of debt and food that tastes like cardboard, respectively) their downfalls have given consumers good reason to resume the death of the shopping mall drumbeat.

Sure, there are some shopping mall staples that are suffering. You can add Dots, Disney Stores (DIS), and Radio Shack (RSH) to the list. And yes, it’s somehow entertaining to point and laugh at vacant, decrepit shopping centers — icons of American consumerism gone bust — but it’s wrong to write off the shopping mall altogether.

The shopping mall is changing; it isn’t dead.

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Here’s proof: Total shopping center sales for 2012 topped $2.4 trillion, up 2.8% from 2011, and shopping centers account for more than half of all retail sales in the United States, according to a report by Nielsen.

How do you reconcile those figures with the notion that shopping malls are disappearing? What’s happening is that the shopping mall is transforming from the junky teenage hangouts of yesteryear to luxury shopping and entertainment destinations.

Nielsen reported that the biggest decline in shopping centers came from its more traditional, product-focused regional and super-regional centers. Regional centers decreased as a proportion of all shopping centers by 7% between 2009 and 2013, and super-regional centers decreased by 4% in the same time period. Those kinds of malls are closing and will continue to close — 15% of all malls are projected to fail in the next 10 years, according to Green Street Advisors — because of the struggles of traditional shopping mall anchor tenants like J.C. Penney (JCP) and Sears (SHLD). Earlier this year, J.C. Penney announced 2,000 layoffs and the closure of 33 stores. Sears, meanwhile, is set to close its flagship Chicago store.

You can blame those two stores’ troubles on penny-pinched customers who are trading down when it comes to shopping because the economy keeps squeezing the middle class. The traditional J.C. Penney or Sears customer has flocked to cheaper chains like Wal-Mart (WMT), Target (TGT), or discount retailers like T.J. Maxx (TJX) and Marshalls.

“The mid-level mall is getting crushed,” says Howard Davidowitz, chairman of Davidowitz & Associates, Inc., a retail consulting and investment banking firm. “If you’ve got a dunky mall with a Penneys or Sears, say bye-bye.” Those malls’ would-be shoppers are instead opting for lower cost and more convenience. They’re simply driving to Kohl’s (KSS) for a set of bath towels instead of traipsing across a massive parking lot and wandering a mall maze to get to Sears, Davidowitz says.

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And here’s where the American shopping mall industry splits, because for as poorly as mid-level malls are performing, high-end shopping centers are doing just fine.

What Nielsen calls “lifestyle centers” — locations with mixtures of traditional retail stores and upscale “leisure uses” such as movie theaters, spas, and high-end restaurants and coffee shops — made up 15% of the mall landscape in 2013, up from 9% in 2008. Pairing entertainment with retail is key because while Americans’ average expenditures on apparel are still below pre-recession levels, spending on entertainment is up, from $2,376 in 2006 to $2,572 in 2011, according to Mintel Group, Ltd. Lifestyle centers are typically anchored by upscale department stores such as Nordstrom (JWN), Saks Fifth Avenue, and Neiman Marcus, and attract higher-end specialty stores like Brooks Brothers, J. Crew, Ann Taylor, and Louis Vuitton, according to Davidowitz.

So in this sense, the much-touted death of the shopping mall is really a thinning out of the industry’s ranks. It’s further evidence of the bifurcation of consumer spending and of Americans’ livelihood in general. After all, since 2009, spending by the top 5% of earners has risen 17%; it’s risen just 1% among the bottom 95% of earners. That makes sense since as of September 2013, 95% of income gains since 2009 have gone to the top 1%.

“We’ve really got about 400 good malls in the United States. They’re good because they’re an upscale experience,” says Davidowitz. “That’s what works, and it’s going to keep working because the customers who like it keep getting wealthier.”

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