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The Shopping Mall - Reinvent or Retreat?

Once a symbol of consumerism, status and new-found freedoms, the beleaguered shopping mall faces a precarious future. The sprawling, land-hungry mall that we’ve come to know and love as part of weekend recreation has been losing favor with consumers long before a global pandemic hit. Trends such as the growth in online shopping, sustainability concerns and urbanization are converging and as the pandemic then pushed reluctant retailers and consumers into the e-commerce realm more quickly than they would have liked, we’re at a pivotal point in the future of shopping malls.

Time to Reinvent or Retreat?

E-commerce spending grew 72.7% in Canada in 2020, making it the fastest growing market in the world. With a figure like that, it’s hard to see in-person shopping catching a break. After the last lockdown ended however, there was a surge in mall shopping as customers craved something different and welcomed the sheer novelty of being able to see and feel their purchases again. Supply chain shortages aside, retailers are forecasting a strong Christmas season too but once this new-found novelty wears off, mall owners must still confront a number of lingering challenges head-on if they’re to feature in the future of retail.

Enticing Visitors

Working from home empowered consumers to analyze every part of life and encouraged a greater awareness and respect for how we use precious personal time which meant less tolerance for those things that drain that time; this includes the hassle of mall shopping such as finding parking, waiting in lines, lack of availability of the right size or item and being able to get help in store when needed.

Savvy retailers will continue to evolve technologies that have advanced during the pandemic to solve customer pain points and make the experience as streamlined and stress-free as possible. We’re imagining a world where a customer can pre-book parking or fitting appointments, drive-through and collect orders from multiple stores, view line-up times for stores and be notified when they can enter and mobile applications where customers can shop a store live online with a sales associate, get personal shopping recommendations and have products ready to try in store as needed. The smartphone will be the glue that reconnects the consumer to the modern-day mall through the Internet of Things (IOT), allowing retailers to collect customer data about shopping preferences and habits, send messages and emails to customers when they’re in the vicinity of the store and incentivize return visits with customized offers and reward programs.

A Deloitte survey of Canadian consumers between May and June 2020 found that the number one reason for people to visit a shopping mall post-pandemic was a first-rate food experience with a variety of top restaurant offerings. This is not all that surprising; most will have felt frustration at not being able to find something healthy or more premium to eat or be able to meet a dietary requirement with the dubious selection that’s often on offer in the food hall. Addressing that need will support customers staying on-site longer.

Progressive Approach to Tenant Mix

The pandemic also spurred consumers to shop and support local vendors who were disproportionately affected by lockdowns. Malls have never been known for independent small businesses, nor were business models for long-term leases able to accommodate them but times are changing and so too is landlords' inclination towards attracting a new era of tenants.

Giving customers a reason to return over and over requires receptiveness to the needs of smaller vendors who can only commit to short-term leases. It also means paying more attention to designing spaces that can be used by a number of different vendor types. Flexibility in space design will also open doors for seasonal vendors, pop-up stores and demonstrations or even ‘market’ type events.

Historically the shopping mall was anchored by one of the leading department stores that we’re all familiar with such as Hudson’s Bay or Simons. The purpose of having that one big store with broad appeal was to attract a big cross-section of society and guarantee visitors for smaller retailers. As consumers demand a more personalized experience from their trip, aligned with their values, the role of the ‘anchor’ store will arguably be a less prominent one in the future or at least other large contenders will emerge as viable contenders for the ‘anchor position’ including fitness chains, upscale restaurants, movie theaters and spa facilities. The creation of specific ‘zones’ within the mall that cater to niche interests will also pave the way for smaller, more specialty tenants while streamlining the customer’s journey.

Demographics Above Geography

Global management consultants Kearney talk about their vision of different ‘types’ of malls materializing; there are those that target specific demographics in society, tying in housing with services and stores tailored to a specific age group and others that center on a particular value or idea held close such as supporting local vendors, organic and sustainable products and services.

When you think about it, this makes a lot of sense, malls can’t be everything to everybody, they need to offer something that online shopping will never be able to and that’s a shopping experience. If you’re only interested in sustainable clothing from brands with ethical business practices, why not have them all in one place along with other service organizations of interest and sustainable eateries so that the shopping trip becomes more experience than chore. Furthermore, integrating housing on site provides a steady stream of income for investors and a captive market for ensuring footfall to the mall and surrounding businesses.

The retail footprint of the urban mall development is likely to be smaller but more tailored with additional space dedicated to housing, offices, entertainment and leisure and the shopping element defined by experiential stores that demonstrate an exceptional level of customer service. In this respect, the role of the sales associate will become even more pivotal to mall retailers; if it was ever a passive service before, that can no longer be the case.

Revive and Survive

To survive, the mall will be much less functional and more fun, less commodity and more resource that enhances lifestyle and well-being. Maybe it won’t even be known as a mall? The label doesn’t quite fit the physical-digital blended space that it needs to become to remain relevant but whatever name it goes by, the outlook is bright for investors that embrace revitalization and reinvent their spaces as personalized live-work shopping sanctuaries.

Reach out to Private Capital Group for more insight into the future of retail and other commercial real estate opportunities.

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