In a time long ago and far away, before teenagers began to walk around absorbed in in a handheld device all the time, they went to the mall.
They met their friends there, played in arcades there, grabbed a snack and – perhaps most importantly for the economy – they shopped there. And so did their parents and their grandparents – well, maybe not the arcade part. The grandparents might even have been spotted walking the mall early before the stores opened in the morning to get their exercise.
But changing demographic and consumer patterns, much of it owing to the onslaught of easy online shopping led by mega-retailer Amazon, is forcing brick-and-mortar malls to rethink themselves in order to grab a share of the consumer dollars and time that are being spent elsewhere. Some experts say the changes may even drive a difference in the way mall real estate business is conducted.
“On a macro level, there’s no question that online commerce has created a headwind for brick-and-mortar sales,” said Dennis Wilmot, senior vice president for leasing and development at Wilmorite Corp. The company owns Eastview Mall, Greece Ridge Center and Marketplace Mall in the Rochester area, as well as malls in other parts of the country.
Online activity has also shaped how people interact – in malls and elsewhere. Teenagers communicate with their friends by Snapchat and other online apps. They shop for their prom gear online. Parents might go to the mall to return the items they ordered online in multiple sizes, but they stay home to watch movies through streaming services instead of visiting the mall multiplex. And even the grandparents – aware they can get a better buy on Zappos — might be buying their walking shoes online instead of in long-gone local mall stalwarts Altiers or Thom McCann.
“The value of the store and the value of the shopping experience is going down,” said Raj S. Murthy, the J. Warren McClure professor of marketing at Rochester Institute of Technology.
The economic impact of that trend is substantial: “2017 was one of the worst years for brick-and-mortar retailers,” Murthy said. Approximately 8,000 stores closed nationally, he said, a 220 percent increase over 2016. “It’s an accelerating trend.”
“There’s no doubt there is a shift in consumer expenditures,” Wilmot agreed. “However, I think the notion that Amazon is going to be the death knell of brick-and-mortar is grossly overstated.”
Across the globe, owners of retail malls have already been adapting to the new reality, just as Wilmorite’s Marketplace Mall is evolving into an entertainment and outlet mall. Eight traditional stores have converted to a discount model, Wilmot said, but that doesn’t preclude full-price stores from operating. Other options, including non-retail, are a possibility.
“The good news with Marketplace: we’ve got a few things we’re working on that could be transformative for the property,” Wilmot said.
And as for a certain Scandinavian homewares and furniture store coming to Henrietta? Wilmot only said anything’s possible, but deals take time. He noted it took 15 years between the time Wilmorite pitched to L.L. Bean and the venerable New England-based company opened a store at Eastview Mall.
Retail and mall experts say the following trends are shaping the malls properties of the future:
Entertainment playing a bigger role. Researchers for McKinsey & Company, a marketing and retail consulting company, wrote in a 2017 report that “malls of the future will be less about in-store shopping and more about giving people novel in-person experiences they can’t get on their smartphones—what some call retail-tainment.” Examples include the amusement park in Minnesota’s Mall of America, or the Michigan Women’s Hall of Fame at the Meridian Mall. Locally, this trend has been seen with RPM Raceway and Dave and Busters taking over space formerly used by Bon-Ton department store at Marketplace Mall in Henrietta.
Shrinking apparel stores, or smaller apparel sections of department stores, so space can be devoted to other uses, particularly restaurants. “Apparel occupies less square footage in a mall,” as more experiential tenants take up more space, Wilmot said. McKinsey reports that some Chinese malls are devoting 40 percent of their space to food and beverage options now, leading a trend that Americans are starting to follow. At the Greece mall, Wilmorite remade one wing to feature restaurants and bars a few years ago. With the recent addition of furniture retailer Ruby Gordon, Wilmot said, “in terms of occupancy, we’re in the best position we’ve been in in years.”
Click-and-collect shopping. This is a hybrid of online and in-person shopping in which the consumer orders on-line, but is able to get purchase more quickly by picking up at a local store. European consumers have been doing this for more than six years, while most American shoppers are still neophytes at shopping this way, according to a September 2017 report by the International Council of Shopping Centers. Murthy’s all in. “Once you know your brand and your fit, what is the point of going to the store?” he asked. A Gen-Xer with a 3-year-old child, he enjoys the ease of curbside pickup provided by online ordering service from Wegmans. Murthy trades a service fee for buying groceries in one-tenth of the time. He also avoids having to buy a Hot Wheels car to occupy his son, “and anything he could throw into the cart or throw out of the cart.”
Fewer national retailers or anchor stores driving mall traffic. Click-and-collect shopping, Wilmot said, “is driving traffic to the stores. But what it’s also doing is it’s eroding the store’s productivity.” As a result, he predicted national stores will chose to have just one store in a community of Rochester’s size instead of three or four. The current online shopping model sees about 40 percent of purchases returned, and customers would prefer doing that without shipping charges. With more and more people entering malls for returns or purchases that take place online, McKinsey suggests, malls may have to offer a different kind of rental price structuring that relies on footfalls rather than store sales.
More local and unique stores and experiences. “More people go to public markets now and it’s not just because of price. It’s also for the public experience,” Murthy said. McKinsey reports that public space in malls is growing to as much as half in some places. “When this happens, these expanded public spaces will need to be planned and programed over the year much like an exhibition.” Hipster shoppers expect a more curated experience, willing to spend more on a single shopping trip or restaurant meal that’s special, even if that means less frequent expenditures, Murthy said. Local malls have started looking regionally to help create these unique experiences, bringing in the Village Bakery from Pittsford, Happy Earth Tea from the South Wedge.
Malls that no longer strive to be one-size-fits-all. Within the three malls Wilmorite manages in the Rochester area, Eastview is trending toward luxury brands, Marketplace is evolving to an outlet mall, and Greece Ridge “really is everything under one roof in terms of big-box stores,” Wilmot said. “Every mall is taking its own course.” Nationally that trend is also underway, with some malls proving the luxury experience, particularly with higher levels of service, and others catering to the value-driven customer. “I think retailers have become more skewed to value these days because of the pricing transparency that has been created by the internet,” Wilmot said.
Most experts seem to agree that retailers who embrace change are those who are most likely to navigate the whirlpools and eddies of consumer trends successfully. Wilmot, in particular, remains optimistic.
“Malls still have very powerful locations in terms of draw and convenience that will provide the platforms for these concepts to come into the market,” Wilmot said. “The malls that are still standing will be … in an even better position than they were before. A flight to quality, if you will.”