Is off-mall where it’s at?

Discussion
Photo: Sephora
Mar 02, 2021
Tom Ryan

Sephora and Bath & Body Works last week announced plans to aggressively open off-mall locations in 2021. The moves come as traffic woes impact enclosed malls and retailers turn to open-air locations that offer a social distancing advantage.

Sephora’s largest store expansion in its 21-year history in the U.S. will include over 60 freestanding locations and 200 shops inside Kohl’s. The Kohl’s partnership was first announced in December.

Sephora wrote, “Following a year in which e-commerce dominated the retail landscape, this move signals Sephora’s confidence in the future of the brick-and-mortar shopping experience and continued creation of welcoming spaces for all. With a focus on growing its presence in off-mall locations, the retailer also aims to make Sephora more accessible to beauty shoppers across the country.”

L Brands plans to open 49 new Bath & Body Works stores in North America that are “almost entirely off-mall,” while closing up to 40 mall locations.

Andrew Meslow, CEO, said on L Brands’ fourth-quarter investor call that only 35 percent of Bath & Body Works’ sales now come from malls, with the remainder representing digital and off-mall. Off-mall’s profitability rates, he added, tend to be “on par or better than an average mall store” given their lower operating costs. In 2020, Bath & Body Works’ off-mall stores saw a “pretty substantial outperformance” versus mall locations, in part due to the pandemic.

“As Bath & Body Works has become much more of a destination in and of itself, what we see in our off-mall locations, not surprisingly, is significantly higher conversion rates than we see in mall stores,” added Mr. Meslow. “If someone is coming into an off-mall location, they almost certainly have already decided before they made the trip that they intend to make a purchase.”

Among other mall stalwarts, Gap is shuttering many mall locations in favor of strip centers and outlets, and Foot Locker is opening a number of community-driven freestanding locations. Nordstrom is aggressively expanding its Rack off-mall concept, while Macy’s is testing smaller off-mall stores.

On Macy’s fourth-quarter call, Jeff Gennette, CEO, said, “Adding off-mall locations will provide customers with a fuller omni experience by providing more convenience, selection and speed whether they are shopping the digital or stores channels.”

DISCUSSION QUESTIONS: Will the shift toward off-mall locations outlive the pandemic? Why have off-mall locations become more attractive real estate options in recent years for many retail banners?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This shift has already started, the pandemic has just hastened the demise of traditional indoor malls."
"Off-mall is definitely the future. Malls are not only hotbeds of germs and teenage shenanigans, they are also quite old-fashioned."
"This trend has been going on for decades, not just for the past year, and it’s past time for mall-based specialists to figure it out."

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27 Comments on "Is off-mall where it’s at?"


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David Naumann
BrainTrust

Off-mall and strip-mall retail locations were a growing trend before the pandemic and will continue post-pandemic. There are many benefits to off-mall locations, including lower rents, more visible branding from the street and more convenient parking. As consumers continue to value convenience, many prefer the quick in and out access to stores that aren’t in traditional malls.

Di Di Chan
BrainTrust

It depends on location, location, location. If the off-mall places are next to cute restaurants and exciting theatre experiences, then it’s a brilliant move that would generate enough success to keep that strategy. If the off-mall locations have nothing else exciting or fun nearby, then the plan will likely not generate a huge success.

Kathleen Fischer
BrainTrust

The ease of parking and ability to quickly shop one or two stores without walking through an entire mall will continue the shift towards off-mall locations. This shift has already started, the pandemic has just hastened the demise of traditional indoor malls.

Dave Wendland
BrainTrust

Today, off-mall locations make the most sense. That is, of course, until malls reinvent themselves as destinations that customers will once again flock to.

Although I do not have a crystal ball, I can foresee mall locations re-emerging in an entirely new form within the next decade and retailers may be considering how to realign and regain a foothold.

That’s what’s cool about the future — nobody knows if today’s decisions will be the right ones. However retailers must act with the knowledge available at the moment and if a mall-based retailer asked me what they should do, I’d advocate for off-mall relocation.

Neil Saunders
BrainTrust

Off-mall is growing faster and coming back faster than enclosed malls. Some of this is because people are more comfortable shopping in the open. However some of it is because there are are some very good quality off-mall locations boosting growth and some very dire tier 2 and 3 mall locations that are dragging down growth. A lot of high growth off-mall locations also have a strong mix of retailers, including staples like Target or a grocer which help to drive footfall. All that said, there are still opportunities and growth in tier 1 malls, so the covered mall concept should not be completely discounted!

Ben Ball
BrainTrust

Social distancing is about more than just the pandemic — it is human nature to be able to control our own space. Stand alone locations, whether in an outdoor shopping plaza or other space, also offer a much more effective billboard for the brand than a storefront buried on the third floor of Mall of America. Look for traditional mall sites to be replaced/repurposed to more flexible and inviting outdoor shopping plazas with mixed use tenants combining entertainment, dining and shopping. The key to understanding the future of malls is to remember that it is the real estate — not the brick and mortar that matter.

Bob Amster
BrainTrust

Certainly the typical weather of a geographic location will play an important role in making that decision. Whereas off-mall locations appear to be the trend, one cannot ignore the regions of the country that are highly-populated, but experience inclement seasonal weather.

Richard J. George, Ph.D.
BrainTrust

Shoppers have gravitated toward open air and freestanding locations as the pandemic endured. An additional benefit of free standing retail locations is the ability to use the store as a convenient pickup point for online orders. Going forward, the primary impediment to this concept is the weather factor. Temperate climates will do well. Not so sanguine about the extremes, particularly the cold side.

Dick Seesel
BrainTrust

As a former Kohl’s executive, there is no doubt in my mind that part of that company’s growth in the past was based on off-mall locations. They proved more cost-effective and also drew convenience-based shoppers. The typical regional mall anchored by department stores and apparel specialists was at the time less value-oriented than outlet malls or big box stores.

This trend has been going on for decades, not just for the past year, and it’s past time for mall-based specialists to figure it out. The decline or outright death of multiple anchors (J.C. Penney, Sears, Bon Ton and others) has only added to the “zombie mall” phenomenon. It becomes a vicious cycle of increasing vacancies followed by declining traffic and share.

Dave Bruno
BrainTrust

I believe the “stores within stores” trend is just beginning to accelerate. The benefits of shared marketing, shared customers and shared expenses are just too compelling to ignore. I think the Sephora/Kohl’s partnership will be an important bellwether of this trend. However I also believe that malls are poised for a rebound in the next three to five years. As more and more developers recognize the consumer appeal of mixed-use spaces, I suspect that retailers will be looking to get back into the next-generation mall before too many more years go by.

Brandon Rael
BrainTrust

The days of spending an entire day in a shopping mall are clearly behind us. Even before the pandemic, there were significant shifts to off-mall and downtown locations. There are clear advantages for the retailers of accessibility, convenience, and being closer to local communities by setting up off-mall sites.

Additionally, the town center trends that Apple started a few years ago resonate as many cities are building significant mixed-use residential and commercial developments. Who wouldn’t want the convenience of having a pharmacy, Sephora, cafe, and restaurant steps away from your modern apartment?

Cathy Hotka
BrainTrust

The Sarasota Square Mall will be repurposed into residential units later this year. Both of the malls within walking distance of my home in DC are effectively empty. It’s hard to imagine what could possibly bring malls back from the dead.

Liz Crawford
BrainTrust

Off-mall is definitely the future. Malls are not only hotbeds of germs and teenage shenanigans, they are also quite old-fashioned. They are very ’80s. Stopping into a quick single category destination can fit in anyone’s itinerary.

Gene Detroyer
BrainTrust

Exactly. Convenience, convenience, convenience!

Gene Detroyer
BrainTrust

I will add to my first comment … “They are very ’80s.” Hmmm, how about they are very ’60’s?

Lisa Goller
BrainTrust

Yes, off-mall locations will outlive the pandemic. They allow efficient, easy service like curbside pickup as physical stores evolve to support omnichannel retail.

For years, malls have faced a decline in traffic and a 2020 report predicted 25 percent of malls would close within five years. Chains like Godiva are closing stores and retailers like Apple, Sephora and Gap have looked beyond the mall for growth.

Steve Montgomery
BrainTrust

The call of the mall was fading even before the pandemic. You can blame it on e-commerce, anchor stores that no longer were great places to shop or a number of other factors. Off-mall locations offer several benefits that the mall can not provide. As is always true in retail, it is about the location, products, pricing, customer experience, etc. and execution once the store is open.

Gene Detroyer
BrainTrust

Malls developed as people developed a taste for entertainment shopping. That no longer exists and will not likely return.

It is not caused by the pandemic. The trend has been in play for over a decade.

Mohamed Amer
BrainTrust

Off-mall needs to be part of your real estate portfolio — this adds optionality to your customer and merchandising strategy: from creative shopping experiences to curated assortments and treasure hunts. The move to off-mall is here to stay, and customers will continue to flock to off-mall retailers.

Peter Charness
BrainTrust

It depends — if you are a destination store then convenience is critical, so off-mall with easy parking works. If you need drive by/walk by traffic not so much. And as others have pointed out there’s a weather dependency in the mix.

Ricardo Belmar
BrainTrust
“If someone is coming into an off-mall location, they almost certainly have already decided before they made the trip that they intend to make a purchase.” That statement says it all – it’s about intent to buy vs shopping. Mall experiences were designed to foster shopping trips where the stores themselves generated instant intent to buy based on having products shoppers felt an urge to buy, or, they provided the convenience of having multiple stores consumers wanted to visit in one trip. While the pandemic accelerated the demise of both of those situations, the writing was on the wall for many years prior. No one issue is the cause of the demise of malls, except for maybe complacency on the part of both mall owners and mall anchors. Consumers are busy people these days and convenience is king. It’s simply not convenient to visit an enclosed mall if you know what you want to buy. When you can visit an open-air shopping center, buy what you want from the stores you want, plus pick up… Read more »
Gene Detroyer
BrainTrust

Yes, and those “shopping trips” are a thing of the past. They were on the wain well before the pandemic. I doubt what was once a common conversation even exists today.

“It’s Saturday afternoon, what will we do today?”

“Let’s go to the mall.”

Lee Peterson
BrainTrust

The real disruptor of the pandemic is work from home, everything else was just an acceleration of elements already underway. And with the huge shift in the workplace, there needs to be a movement in how retailers think about how to best address this new environment, especially from a physical perspective. Smaller formats, mobile units, neighborhood stores, showroom stores, dark stores, and small strip centers all come to mind for starters. Thanks to e-commerce and now WFH, the sunset of huge malls out in the cornfields that took an hour to get to is upon us. In a way, a painful way, this is a really good thing: moving back to what retail was before the great bubble. Welcome back to the 15-minute city.

David Adelman
BrainTrust
The move away from the mall has been ongoing long before the pandemic. While once it was the main gathering place for families in the suburbs, malls themselves have unfortunately been the cause of their own demise. Just as e-commerce soared during COVID-19, so did brick-and-mortar’s move to more affordable and localized locations. As retailers continue their move to smaller store footprints, we will see a continuation of localized retailers who will create a more personalized experience for their customers. Not only will it be more convenient for all shoppers, but these new stores will also double as micro-fulfillment centers where customers can access instant product pickup whether in-store or curbside. Additionally, due to smaller square footage and staffing requirements, these smaller experiential stores will have much lower rent and expenses. This will allow retailers to allocate marketing funds where they are greatly needed; online and customer experience initiatives. Although malls are struggling, I feel that with a renewed strategy they will withstand the pandemic and beyond. Whether it be additional entertainment venues, office rental,… Read more »
RandyDandy
Guest
1 month 19 days ago
At times, these discussions conveniently forget certain details to make a general point, other wisely. As such, let’s all remind ourselves that suburban malls started out mainly as open-air retail destinations. They then sought to enclose, to make bad weather irrelevant to shoppers shopping. But as time wore on, they were built more as uninviting fortresses. Which begat needed inviting remodels. With more come hither entrance attractions, like a Cupcake Factory, near the newly remodeled and expansive main entrances to these once foreboding constructs. Then, when “street access” starting make even more “customer traffic” sense, along with speciously intended “Main Street” nostalgia, we saw the deliberate creation of open-air shopping destinations, that pushed aside even mere talk of making a new enclosed mall. Meanwhile, it’s ironic that now excessive traffic to and fro, finding convenient parking near, in back of, or, miraculously, in front of your favorite store — as rain threatens to soon fall upon you — is a headache long forgotten to those used to pulling into a protective multi-story garage. Which then… Read more »
Carlos Arambula
BrainTrust

While I believe older malls will fall out of favor with consumers, the newer, modern, more cavernous indoor/outdoor combo malls will survive.

Some retail brands are destinations. Most are not. Most benefit from the traffic created by destination retail brands. B&BW is on the latter group. Betting the brand’s survival on the performance during the pandemic is myopic. Instead, B&BW and all retailers need to become innovative and develop a vision of how they will survive moving forward — especially a retailer that relies so much on in-store sampling and impulse purchases.

William Passodelis
Guest

Off mall was a growing trend before the Pandemic affected everything and that is not going to change. Let’s face it — so many malls are tired and haggard; they are becoming awful places people have zero interest in. Sorry, just reporting things I have been told! The A malls have a future, but the entire idea of the “Mall” has to evolve and perhaps not in the way things were heading in the time of 2008 to 2015.

Off mall, meanwhile, means convenience and ease, and in some cases is also seen as a safer alternative –again, reporting things that I have been told by customers.

Also, I agree with Ms. Chan: Location, location, location — and also there needs to be a good mix of retailers or great results may not follow. Know your market, serve your market. Developers need to do a better job in planning and vision, which some strip centers seem to have by luck and others seem poorly planned.

wpDiscuz
Braintrust
"This shift has already started, the pandemic has just hastened the demise of traditional indoor malls."
"Off-mall is definitely the future. Malls are not only hotbeds of germs and teenage shenanigans, they are also quite old-fashioned."
"This trend has been going on for decades, not just for the past year, and it’s past time for mall-based specialists to figure it out."

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