All eyes are on retail as we continue to read the headlines of accelerated e-commerce sales and significant store closures. The pandemic compressed years of e-commerce adoption/growth into months, much to the dismay of unprepared physical retailers.
With many of these stores being mall anchors and specialty retailers, it is no surprise that 25 percent of all enclosed malls are expected to close within the next five to seven years. However, these trends have also created an opportunity for surviving malls to self-correct and thrive.
The pandemic has forced an expedited evolution for the mall owners with a greater investment in technology, better merchandising of tenants, improved logistics, and a significantly elevated customer experience.
From early on, enclosed malls dominated the retail landscape by providing the customer with many big box and smaller retailers under one roof, promoting convenience, selection, and competitive pricing.
As e-commerce and specialty retail exploded, the relevancy of enclosed malls came into question. Mall owners began to shift their focus towards delivering a high-quality customer and brand experience while balancing electronic and physical retail performance attributes.
For example, Macy’s, a major mall tenant who recently announced the closure of 125 stores, is giving its better locations multiple upgrades such as self-checkout kiosks, personalized marketing, and the addition of unique brand experiences. With this shift, Macy’s concluded that promoting personalized items with a heightened customer service resonates with today’s consumer rather than its historical practice of regularly discounting its merchandise.
There are a large number of malls that will survive and thrive. These properties will have the following common characteristics:
- Location, location, location- the higher-performing malls are in prime locations with superior demographics and strong traffic;
- Densification- office, hospitality, and residential properties around the malls contribute to greater customer traffic, stronger sales, and higher rents.
- Experience is key- the repositioning of the mall category is focused on the inclusion of experiential and entertainment concepts, thereby providing today’s customers with the required service and experience. These uses are becoming the new anchors for the malls.
- A strong balance of in-store sales with an omnichannel presence. These offerings include buy-on-line/pick-up in-store capabilities, augmented and virtual reality to allow the customer to digitally test product, pop-up shops, and order aggregation.
The mall owners who have pivoted to the above changes will continue to see greater traffic, higher sales, and well-leased centers. Malls are not dead. They are simply evolving with the rest of the consumer world and will remain a critical part of the successful retail industry. Yes, “I’m a believer. I couldn’t leave her (the mall) if I tried.”
