NRF 2014: Malls need to embrace social connections
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."
Discussion Questions
Do you agree that social has become a much more integral part of the shopping experience than in past decades? Are indoor malls quickly losing their relevance with shoppers? What suggestions would you have for reinventing the indoor mall? What do you think malls should be borrowing from successful urban retail locations?
Two words: diversity and experience.
Indoor malls all look essentially the same … concourses of small shops, a few anchor stores, food court, and maybe a movie theater. The store brands are “homogenous” … same exact apparel brands and shoe stores merchandized across the indoor malls in the same ways.
What the new outdoor malls and reconverted shopping districts with closed streets create is an experience. There is more of a diversity of store brands as well as store configurations. Most importantly, there is a quality of consumer experience and interaction not found in the sterile marble halls of indoor malls.
“Shopping” is a social experience which transcends the “purchase.” Always has been, always will be.
There are few who have looked at the score card of shopping malls in America with the honesty we see in Rick Caruso’s statements. The dwindling support by the consumer is continuing at a pace that shows no sign of relief in the near future.
Two additional reasons for supporting change in the market plan of shopping malls is the decline of family incomes since fiscal year 2005 and the security issues only discussed in news paper local police reports. So it is surly safe to agree that malls need a complete makeover.
WSJ had a great article this past summer, “Mall Owners Entice Hispanic Shoppers” where they profiled a collaboration between real estate broker Jos Legaspi and mall owner Macerich Co. that was reinvigorating “dead malls” by targeting the growing Hispanic population with a “combination of live entertainment, children’s rides and adjustments to the mix of retail and food options”. The program is called Vanguardia and they are seeing very a high success rate.
Rick Caruso argues that we’re always been social. As far back as cave drawings of people gathering around a fire there is a human need to connect, share, and create community. Retailers today need to tap into those basic emotional needs to provide an immersive experience for their customers that reaches the mind and the heart.
Today’s malls – to remain relevant – need to redefine their value by shifting from a transactional and an efficiency model to one that is experiential and connected.
Mr. Caruso speaks of a need for retailers to have a hospitality mindset that is focused on delivering magic to their customers. Maybe that can be a starting point.
Yes, malls, retailers, business operators should embrace social to help create a sense of community for and with their patrons. Will indoor malls go away? Yes, the poorly operated ones. But fortunately there is a lot of creativity being applied to the concept. Malls’ flexibility offers a variety of retail formats, restaurant concepts, in-mall attractions and entertainment to deliver a social experience that can not be translated digitally, enhanced, surely. And if an indoor mall can’t figure out how to drive traffic in the East during the winter, or in the scorching South during the summer, then they just aren’t trying.
Most malls have suffered because they’ve lost their way. In an attempt to appeal to everyone, their core customers have found that their needs are no longer being met and they’ve taken to other shopping outlets.
For example, one mall in my community, a ‘Mills project’ started as a high fashion outlet malls with outlets for Saks, Neiman Marcus, Nordstroms, Eddie Bauer, etc. But because they had difficulty filling spaces, they’ve since allowed ‘flea market’ retailers and kiosks with vendors pitching cheap Asian trinkets to carnival rides for kids to 10 minute massages to discount cell phone covers. Shoppers have to dodge kiosk vendors spraying cheap perfume on them and offering to shine their rings, and those high end marquee retailers are packing up and moving out.
For Malls to remain relevant, they need to know who they are and, more importantly, who their customers are, and then appeal to both of their demands.
The social component of mall appeal has had some interesting variations in the evolution of this market place. Young folk still hang out and old folk still mall walk (well, maybe only in northern climates).
Whether it be completely enclosed or more along the line of the Omni Center, any big market place needs to retain and refresh its sense of community in order to survive.
I think Chris Petersen hit the nail right on the head. Malls need to realize what individual stores have started to realize: good products and customer service are not always enough. Consumers want an experience – otherwise they would shop online!