Ode to retail: Death of the traditional mall

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Photo: Getty Images
Nov 07, 2016
Lee Peterson

Through a special arrangement, what follows is a summary of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.

An overstored environment, consumers conditioned for discounts, and Amazon.com have been cited as factors contributing to the death of American malls. But such a colossal and swift end to a ubiquitous and profitable format can, at least for the purposes of focusing future strategies, be lumped under one overarching cause: A massive shift in what consumers want from stores.

Our obsession with dead malls has resulted in too many retail players learning the wrong lessons from the format’s decline. Instead, we should be asking what meaningful insights — not just doomsday scenarios — we can glean from the demise of enclosed malls.

Is the death of the mall in America the end of the mall? No, it’s the end of cookie-cutter and strictly mall-based store growth. Chain store rollouts simply don’t work anymore. Malls will survive but not in the traditional sense. They will be community gathering places first, and places for commerce second.

Can retail’s obsession with comps end? Few physical stores can rake in the kind of profits once possible in the heyday of the mall. Yet, companies hold on to the same expectations for growth and store profits. It’s time to combine online with offline sales and end the two-channel binary. The lesson: fewer but better stores, with a focus on using brand experiences inside the physical store to drive online sales.

Is it time to stop opening new stores? To remain relevant in the lives of consumers, retailers must continue to open new stores, but what constitutes a new store needs reexamination. Stores need more versatility to adapt to tech innovations and shifting consumer demands — something between a pop-up and a massive, capital intensive permanent structure that costs millions, not to mention takes years to plan. More seasonal flexibility is required.

Do real estate location choices doom retail centers? “Location, location, location” doesn’t hold anymore. It’s about creating destinations that are worth the drive. Commerce centers need to adopt the mindset of the concert promoter and hire people who understand promotion and how to create places that play vital roles in people’s lives. It’s not about managing real estate space, but drawing in crowds.

DISCUSSION QUESTIONS: In what ways do you think retail needs to rethink the purpose of the mall? What other questions should retailer ask beyond those mentioned in the article?

Braintrust
"Shopping isn’t dead. Shopping as an activity, especially a shared activity, is alive and well. "
"We have a mall built that was built in 1992 and at one time it had 92 stores and a great food court. Today the anchors are gone..."
"When people say “shopping is not dead” and “the mall is not dead,” we need to be really clear about what we’re actually saying."

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29 Comments on "Ode to retail: Death of the traditional mall"

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Ralph Jacobson
BrainTrust

Sure there are specific locations where malls have died, however I truly believe that’s a failure in location strategy rather than one of malls as a shopping channel. There are plenty of malls that are thriving to this day. Location strategy is critical, and merchants within any mall need to continue to evolve with shopping tastes and trends. I believe that the real estate contributing factors are often missed. Yet malls can be attractions for more social experiences for people. A nice balance of commerce and social activity is key for malls today.

Robert DiPietro
BrainTrust

The mall is not dead. It is evolving into a social event. Consumers still enjoy going shopping and retailers still need to meet that need. The change in the nuance of the mall is that the consumer will demand a more engaged experience and retailers need to embrace the online component. The profits from impulse sale items may go away but will be replaced with an online component.

Dick Seesel
BrainTrust

The original vision of the regional mall was as the “new town square” — see Southdale outside Minneapolis as the prime example. Over time, malls became transactional rather than transformational places to shop and mall anchors suffered from sameness and weakening market share.

I don’t have a crystal ball about the future of the traditional mall, but I know it’s not going to be an easy road as long as the biggest tenants (Macy’s, for example) struggle with their own identities and growth strategies. No amount of tenant-mix tweaking (or adding dining and entertainment) can overcome that challenge by itself.

Doug Garnett
BrainTrust

From other recent reading, I’m struck by the reality that a great many mall problems come from fundamental societal changes (like communities shifting from prosperous to struggling). Yet we, as an industry, are so susceptible to arguments like this that suggest a “concert promoter” approach.

Economic change means there are many depressed communities that cannot be saved by any amount of hyped-up entertainment draw. And where the economy remains strong, the key to mall strength is a good variety of product, well-merchandised and well-advertised, because that’s what draws people to shop.

Charles Dimov
BrainTrust

Yes, the mall needs to adapt to survive — and it will. Malls have become destinations with entertainment and meeting places. To push this further mall retailers need to embrace omnichannel technologies that will engage and draw in more customers. Make sure you have online inventory visibility to get customers to drop in to do a pickup for that instant gratification, or the ability to physically see the product. Certain malls, like SmartCentres, cater to this with special pickup points — making omnichannel easier and less expensive for retailers.

Online shopping is great. But melding the physical and digital world is even better. The next question for malls will be how to do this even more, embracing ever-changing digital entertainment (think Pokemon Go), and finding ways to make it a community center experience.

Are digital and community the two drivers for the mall of the future?

Ori Marom
Guest

People still love going to malls. They just don’t love paying there more than they have to.

What is crucial for the survival of stores is that retailers finally understand what their consumers did a decade ago. The browsing phase of the customer journey is completely decoupled from the purchase stage. While stores are competitive in providing the former they stand absolutely no chance of profitably providing the latter.

Malls and physical stores have much higher costs than online retailers do. Online retailers do not make any money. So how could physical stores’ rent support malls?

Today they cannot. The good news is that once one is free to look beyond the current, obsolete retail model then it is easy to see how physical stores and malls can survive by capitalizing on their service-provision advantages. As Voltaire once said, common sense is not so common.

Adrian Weidmann
BrainTrust

The traditional mall can continue to be a destination for shoppers if both the real estate developers and retailer tenants design their business models beyond traditional leases. The brick and mortar retail landscape has forever changed in the world of online shopping and e-commerce. I believe that retail has always been a consignment business regardless of what contracts and agreements are in place (brands are expected to take back products that don’t sell) one way or the other. This reality is amplified in an “Amazon world.”

Technology and business processes exist today that allow brands and retailers alike to conduct a completely transparent consignment business with 100 percent accuracy. This not only helps brands introduce new products but immediately drops the 3 percent that retailers need for supply chain administration to the bottom line. Retailers that implement this technology and its associated business process into a flexible mall environment will flourish. It simply is the future of brick-and-mortar retail.

Phil Rubin
BrainTrust
1 year 1 month ago

Malls aren’t dead but they have failed, along with their tenants, to deliver a compelling, relevant shopping experience, especially compared to Amazon and innovators like Warby Parker and Bonobos. Mall operators and retailers need to start thinking about customers first, which they are loathe to do, much as they have consistently failed to invest in technology to deliver the aforementioned better customer experience.

Bob Amster
BrainTrust

Malls are struggling because they are home to the chains that are losing marketshare to e-commerce (even if it’s their own e-commerce). That’s the definition of being overstored — customers can get product without so many stores in existence. So while the mall as a concept is not dead, it will shrink. Making malls more entertaining, more of a social attraction and more experiential will help to stem the demise, but it will not help grow the mall concept. Nothing will. It may not be so much up to the stores themselves as it may fall to the mall operators to improve the appeal of the mall.

Mark Ryski
BrainTrust

Historically malls were aggregators of shopper traffic, and while it seems that the nature and intent of mall visits is evolving from what was exclusively a shopping trip to a shopping/entertainment/community gathering visit, I think it’s important to realize that shopping is still the primary purpose for most mall visits. Retail commerce underpins the entire economic mall business model and I don’t believe this will fundamentally change any time soon. Mall operators need to focus on their primary responsibility: driving shopper traffic to the mall. Beyond driving traffic, mall operators also need to do a far better job of providing their retailer tenants with data and insights for them to measure their performance including mall traffic data (which many do not) in addition to shopper demographic and behavioral data.

Lyle Bunn (Ph.D. Hon)
BrainTrust

Malls reflect the priorities that consumers put on their time. When the products and services (such as entertainment, hospitality, repairs, etc,) are more conveniently available in the multi-brand retail mall, malls make sense. And when their need and wants include social interaction, discovery and even some indoor walking, malls are an excellent option. What consumers seek is not dead, but the ways that many malls fulfill these desires are indeed struggling. A focus on visit value and directly responding to this is the mall operator’s way forward.

Jerry Gelsomino
BrainTrust

Making destinations that are worth the drive, would seem to be the most appropriate strategy here. The shopping mall must first connect with the community/region in which it exists as a good neighbor. What are the issues the area is concerned with and how does the mall reflect those issues? It is no longer enough to be the biggest, but rather to be the best option, where the local consumers feel they are catered to. Whether it is industry, schools, religion or politics, the mall must be a reflection of how the vast majority sees the issues. This may cause difficulty with national retailers in the mall who don’t fit in with the local sentiment. Doing this, however, the mall as a destination then becomes an integral part of the neighborhood’s culture and a reason to shop there for locals.

Gene Detroyer
BrainTrust

As you say, “Making destinations that are worth the drive, would seem to be the most appropriate strategy here.” When one considers the total elapsed time to drive to the mall, find parking, walk the mall and drive home just to make a purchase, one is hard-pressed to justify that against opening the computer and ordering something that may even be here tomorrow. The mall must justify the time with alternative attraction. That, almost by definition, will cut down on the the traffic and the number of times the potential shopper will go and therefore the retail portion will shrink dramatically.

Liz Crawford
BrainTrust

Shopping isn’t dead. Shopping as an activity, especially a shared activity, is alive and well. Physical destinations are still relevant for this purpose and likely will be for a long time to come. The reason? Shopping is fun.

So, the question becomes — what form will the “mall” take? To become a sought-after destination today, the shopping destination should include some local “boutiques,” not just national chains. It should incorporate some local architecture, not just a big, windowless box. It should include local restaurateurs and chefs, not just Orange Julius. Finally, the experience needs to have some porosity with the outdoor space — I don’t mean only a semi-landscaped parking lot. Make it a destination.

Cathy Hotka
BrainTrust

Have a look at Westfield Century City, which is nearly doubling in size. Malls in general aren’t disappearing — but bad malls are.

Lee Kent
BrainTrust

Yes, the mall is still a destination as long as it offers what its consumers want. Are we over-malled? Perhaps. The recession has shifted a lot of communities and created tighter wallets and the resulting consumer tends to lean more towards experiences over things. Smart malls are already looking to offer a little of both. And smart retailers are also looking at the customer experiences they offer as well as that sense of community.

People still enjoy the one-stop shopping that malls offer and let’s not forget that more than 80 percent of sales still happen in the store.

But that’s just my 2 cents.

Tony Orlando
BrainTrust
Some very good points have already been brought up here, and for me, the economy in the malls going down is just plain awful. We have a mall built that was built in 1992 and at one time it had 92 stores and a great food court. Today the anchors are gone. We have a Pretzel Time as the only place to eat something and an occupancy rate of 20 to 25 percent. This is the symbol of how the bad economies get worse every year, with major newer cities growing and the rest are left with a few crumbs of retail stores. The new owners bought the entire mall for 10 cents on the dollar and have tried very hard to make it go, but it is not happening. The city planners have tried to recreate the place with staged events that haven’t worked, and our downtown is down to about 80 percent empty. Small business is taking the major hit, with our Supercenter (you know who) owning the lion’s share of our retail,… Read more »
Peter Charness
BrainTrust

Like anything in retail, malls need to give the shopper a good reason to visit. The “assortment of stores” (and entertainment/restaurants) is critical. Done right, major malls continue to thrive. Done poorly and they start to look like derelicts. When do malls start to re-purpose empty space as Amazon Lockers? Would shoppers visiting to pick up purchases spend more time and money in other mall locations while they visit?

Gene Detroyer
BrainTrust

I don’t know how many of the BrainTrustees actually remember “Main Street.” I do. Main Street was the center of town. It was a gathering place. Though there were many stores, it was not a retail center. It was a social center. You would go almost everyday, if just to buy an ice cream cone or a newspaper. You would meet friends as planned or by chance. The merchants knew you.

Main Street disappeared because the mall moved retail to a central loction, killing the Main Street retailers. If you wanted to buy, go to the mall. The mall was driven by retail sales. Today, there are alternatives for the retail sales that don’t require going to the mall. Online is taking away their reason for being. They must find a new structure or they will go the way of Main Street.

Nikki Baird
BrainTrust

Well, there are two points in the article that especially resonate for me. One, that we can’t keep looking at channel sales. Online needs to be combined with stores and success needs to be examined by geography of the customer, not by store location. Two, that mall owners need to adopt the mindset of concert promoters and, relatedly, that malls will be destinations first and commerce will be second.

When people say “shopping is not dead” and “the mall is not dead,” we need to be really clear about what we’re actually saying. Sure the mall is not dead and there will be malls in the future — new ones, even. But they already don’t look like the mall I grew up with and they will evolve even more in the future, pretty much along the lines that Lee talks about here. There are too many people who hear “the mall is not dead” and think they don’t need to change. And that, in my opinion, is a fatal error.

Stu Conroy
Guest
1 year 1 month ago
For me, another way to look at this is to ask, what would happen if the malls were not there? I fully understand the comments about the location of a mall, as it is with the location of any business. It is also critical that there are compelling components within it. The key for me though is why customers will need malls in the future and how they interact with their retail or leisure time. If the same products being shown are online and cheaper on marketplace sites then the behavioral habits of impulse purchasing changes to one of impulse decision making … with delivery later. If the malls were not there this obviously could not happen. How would a brand stand out? How would it reach the local customer base? if between 33 percent and 50 percent of clothing purchases get returned online, does that say something about the lack of convenience of online shopping in certain sectors? In one sector we deal in there are 4.5 million listings on Amazon and if your… Read more »
Brian Kelly
Guest
1 year 1 month ago
Like politics, all retail is local. Later this week we will see the geographic distribution of votes and we will see where malls are failing and where they are not. This election has forced a decision and how the electorate chooses will prove Charles Murray’s view in “Coming Apart.” It also will show Robert Gordon’s view in “The Rise and Fall of U.S. Growth.” Retailers should read both books — customer-centric retailers already have. Tragically this election did not focus on the economy. The harsh reality of wage stagnation and job loss will not go away in January. And so, as retailers square away Q4 and roll out 2017 plans, there will be fewer stores and accordingly fewer malls. The closings will be based upon each trading area’s economic reality on a store-by-store basis. “Location, location, location” remains in effect when choosing to keep a store open or not. Yes new stores will open within areas where that selling model is relevant. The tyranny of comps isn’t going to change as long as shareholders expect… Read more »
Jan Rogers Kniffen
Guest
1 year 1 month ago

“Malls will survive but not in the traditional sense. They will be community gathering places first, and places for commerce second.” If this quote from the article is true, then most malls will have to go through “reorganization” in order to survive, because “community gathering places” are great, but it is really hard to pay the debt service on a mall with the revenue generated by a “community gathering place.” If my prediction, that we will see online penetration of non-bar, non-restaurant sales rise from 11% at the end of last year to 50% by 2030, then about half of the 1100 enclosed, regional and super regional malls probably have to demolished or repurposed over that 13 year period. Perhaps that repurposing will include a lot of malls becoming “community centers,” but it will not be pretty for mall developers/owners if that is true.

Tom Dougherty
BrainTrust

Malls are in trouble because they no longer the serve their original value proposition. They are not convenient and the experience lacks authenticity.

I think the article is correct in saying cookie-cutter anchor stores and satellite small retailers feels unimportant.

However, the investment in the real estate alone worries me. I am not sure that these so called shopping experiences can survive. They lack the ability to redefine because of the real estate itself.

Craig Sundstrom
Guest

I agree with most of Lee’s points — how could I not agree with what seems undeniable? — but not with the fourth: a large percentage of failing malls are in declining metro areas, or at least in sections of stable areas that are “transitioning” (in the wrong direction). The “location, location” mantra, at least in a general sense, makes all the difference, and really isn’t something they can overcome … no matter how clever the promotions may be.

Adrien Nussenbaum
BrainTrust
Weekly, we’re seeing the world’s most iconic retail brands, often major anchors for malls, visibly displaying their financial duress. Whether it’s Nordstrom’s leadership change, Macy’s closing 100 stores, or the fact that Neiman Marcus is looking for a buyer. There’s no mistaking it: retail, especially malls, is in disaster-mode. It’s easy to point the finger towards Amazon and say that they’ve created too much pricing pressure, forcing these retailers to abandon the last precious points of margin in their already razor-thin business. But this is not just about price. It’s the retail business model that’s defunct. While most retailers and brands have moved online, malls have not, and they need to do so to remain relevant. But how do they get there? There is one business model and tech innovation which is underpinning the majority of retail growth — marketplaces. And malls can easily move online using this model. Digital marketplaces allow mall operators to scale their assortment by connecting third party sellers directly with customers. In this model, only a few merchants are needed… Read more »
Kai Clarke
BrainTrust

Malls as we knew them are dying … there are many malls which are thriving, because they have adapted instead of perishing. It takes an open model, a shift in perceptions and a reformatting of stores, requirements and consumer understanding to make this change. Like all changes this is often too painful for the current landlord and tenants to grasp. Instead, they expire. For those that understand this is their last chance at retail success, they change and survive.

Kenneth Leung
BrainTrust

The purpose of the mall is a gathering place for potential shoppers. They can be there for entertainment, dining, services and shopping. I think the key to future mall design is not in terms of big anchor stores in the corners to draw business to the smaller format stores in the middle, but a set of experiences and events that draws people in. The casinos in Las Vegas learnt the lesson well transforming from just a gathering of gambling tables to full scale entertainment complexes.

Matt Henderson
Guest

While malls need to enhance their appeal as a destination, providing a “community gathering place” does not insure success. Landlords and retail tenants both need to earn a profit in order to justify and pay for their expenses. So, I believe that commerce will continue to be the primary focus for them both. Fortunately, people are willing to pay for food and entertainment.

Undoubtedly, many retailers must integrate online shopping into their branding and business strategies. Keep in mind, though, it costs lots of money to package an item and ship it to a sole customer. Despite Amazon’s success, their profits remain low. The instant gratification experienced when one is able to buy a product off of the shelf is also a major driver that sends customers to stores. So, I am very skeptical of the idea that retailers will be more successful by offering experience in effort to drive more transactions to their online platform, while sacrificing more profitable in-store sales.

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Braintrust
"Shopping isn’t dead. Shopping as an activity, especially a shared activity, is alive and well. "
"We have a mall built that was built in 1992 and at one time it had 92 stores and a great food court. Today the anchors are gone..."
"When people say “shopping is not dead” and “the mall is not dead,” we need to be really clear about what we’re actually saying."

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