Experiential Retail Reinvigorates Malls
The plight of the shopping mall, once an entertainment destination, communal congregating point and convenient locus of shops, has been widely publicized. But the broad portrayal of all shopping malls as in decline or obsolete is at best misleading, and at worst inaccurate.
Many malls have suffered from the effects of overbuilding, a younger consumer demographic with rapidly evolving preferences, online retailers with low fixed costs, the digitization of modern life and the closing of traditional anchor stores like J.C. Penney and Macy’s. Some malls have closed, but others have pioneered innovative ways to engage shoppers, redefining the mall, its identity and its place in the country’s landscape.
What are these transformational malls doing to re-engage shoppers? RSM National Real Estate Consulting Leader Michael Schwartz and National Practice Leader for Retail and Restaurant Sectors John Nicolopoulos shared their observations.
Successful malls are copying the prolific mixed-use development model. These community-centric hubs are master planned to incorporate a complementary mix of boutique and experiential stores, interesting restaurant concepts and a variety of entertainment options. The best developments use placemaking to command high pedestrian counts, appealing to shoppers by maximizing the experience.
“Millennials enjoy lifestyle centers that can offer a variety of selections, from boutique shopping to entertainment choices. It’s a matter of convenience for these consumers,” Nicolopoulos said.
Retail in malls, especially large chains, can update by taking a locally tailored approach. Emulating and reflecting this shift, the entire mall is evolving.
“Some newly constructed malls offer lifestyle centers and destination places for not only traditional retail shopping but experiential uses like eclectic restaurants, grocery marketplaces, entertainment, live events, music, nightlife and more,” Schwartz said.
Malls and stores are changing their layouts and offerings to feature the things e-commerce cannot.
“Efficient store spaces translate into improved sales per square foot. Given increasing rents, it’s key to maximize every inch of the store,” Nicolopoulos said.
Brick-and-mortar retains a competitive edge in apparel, which people want to try on. It also has the advantage of knowledgeable employees who can listen to shoppers’ needs and match them with the appropriate product.
Retailers are personalizing the shopping experience, adopting the one-size-fits-me mindset.
“Retailers are still looking to leverage physical store spaces for a variety of uses such as pop-up stores, seasonal shops as well as traditional retail space.”
By integrating technology, stores can complement and enhance shopper experience. Combining the capabilities of mobile devices and inventory management systems, employees can quickly locate items in store and check availability.
“Beacons built on the Microsoft cloud can direct shoppers to open fitting rooms, show additional offerings or send customers to express checkouts,” Nicolopoulos said.
Big data collected through sensors, cameras and transaction records allows in-house or third-party teams of analysts to monitor consumers. Analysts can determine shoppers’ habits and identify inefficiencies or sources of frustration.
Mall REITs outperformed the REIT index after commercial and retail real estate companies Simon Property Group and GGP both indicated on their earnings calls earlier this year that demand for Class-A malls remained robust, according to Barron’s.