At the first keynote session at NRF's Big Show yesterday, Rick Caruso, founder and CEO of Caruso Affiliated, the shopping center owner and developer, predicted that the American suburban mall "unless completely reinvented" will become a "historical anachronism" within 10 to 15 years. The reason: it's no longer meeting the needs of local communities.
Beyond the discarding of B and C mall properties, Mr. Caruso noted that no new indoor mall has been built since 2006. He added, "Any time you stop building a product is normally the greatest indication that the customer doesn't want it anymore."
Retailers also have more options, whether street locations, outdoor centers or stand-alone spots, that are providing a more "compelling place" to meet shoppers needs.
Those needs are more social in nature and have been met for centuries by such mainstays as the Champs-Elysées in Paris, Tokyo's Tsukiji Fish Market and the Marrakech's souks, which have all survived "wars, depression and the internet." It's also evident in the Strøget in Copenhagen, Florida Avenue in Buenos Aires, Boston's Newbury Street and San Francisco's Maiden Lane and not surprisingly at Caruso Affiliated's two premier properties: The Grove in Los Angeles and the Americana at Brand in Glendale, CA.
The Grove is a closed-to-traffic street — about an eighth of a mile long — that's best known for its trolley car that connects the central shopping area to L.A.'s old Farmers Market. Other attractions include the Dancing Fountain, Los Angeles-inspired architecture, and a 14-screen Art Deco-inspired theater that's become a popular place for Hollywood premieres. But The Grove particularly borrows from the community connections observed at many of those classic urban shopping districts with al fresco cafes and unique restaurants and storefronts. First built in 2002, it now attracts 18 million visitors a year, outpacing Disneyland.
Mr. Caruso said malls, which started opening in the fifties and sixties, were originally focused on "getting people in and out as quickly as possible," emphasizing parking lot efficiency. By contrast, Caruso Affiliated's venues aim to keep "that customer on the property as long as possible and also give the customer reasons to come to the property that are more than shopping."
With their acclaimed concierge centers on site, the properties also aim to "put them in a happier state of mind. When people are happy, they buy more."
Today's shoppers, he argued, need "human-scale, multi-use, livable projects" that embrace and support local communities. While the internet and social media are valuable tools to engage with customers on multiple fronts, online retailers can't "invite [customers] in and make them feel welcome and warm" like face-to-face interactions with stores can.
"People want to engage and feel a sense of community," concludes Mr. Caruso. "They are driven by the experience. Embrace the four walls you have, regardless of whether you are in a mall or on the street, and physical retail will thrive in years to come."
What's the likelihood that indoor malls will become a "historical anachronism" over the next 10 to 15 years?