The shopping mall needed a facelift even before the pandemic – the rise of e-commerce and the consumer desire for novel experiences has made the traditional shopping concept seem unmemorable and out of sync with the times. With COVID-19, this trend has picked up pace, causing retailers to reconsider their delivery model and high rent prices. So, are the “rumours” true? Is the shopping mall on life support?
In this Roundtable episode, Level5 Strategy’s Principal Laura Richard, Director Rob Gizzie and Senior Consultant Andrei Flueraru, share their perspectives on how changing consumer behaviour and competitive pressures are transforming the dynamic of the shopping mall. Discover how these shifts are compelling retail brands and commercial real estate to reinvent the consumer experience in order to harness this disruptive moment and set the stage for future relevance.
The traditional shopping mall concept anchored around two department stores, featuring a mix of retail stores, food court and movie theatre, is eroding with major consequences in commercial real estate. What do you think is the future of the shopping mall?
Our Roundtable participants agree that the mall will have to evolve into a broader mixed-use destination where people can socialize, work, explore and learn. It must transform itself into a place of entertainment, innovation and active leisure rather than a transactional destination for people to buy commodity goods.
Laura: The shopping mall will fade into irrelevance unless it reinvents its business model and role in the consumer’s life. This is driven off changing consumer behavior, needs and desires. Historically, the shopping mall was the place where people went for entertainment. Now, when people are bored, they go online. They browse the web for items they’re interested in and go to the store with a good idea of what they want to buy. Due to ease of information access, consumers increasingly possess more knowledge about the products they’re interested in than the retail employee.
Aside from having to revamp its customer experience, the mall is going to have to reinvent itself into a mixed-use destination that meets people’s needs around social and cultural exploration. For example, it could feature pop-up shops or the latest product launches, exhibitions, art shows and performances. Malls should think about shifting some of their capacity to coworking spaces, daycares and fitness facilities. They need to align their offer with what people are seeking in their daily lives if they want to pull them in.
“Historically, the shopping mall was the place where people went for entertainment. Now, when people are bored, they go online. They browse the web for items they’re interested in and go to the store with a good idea of what they want to buy.”
Rob: At this moment, the shopping mall’s value proposition is out of step with consumers. Retailers need to consider whether paying high rent is cost-effective and if they’re getting the ROI they expect. Both must reinterpret their value proposition in order to revitalize the shopping experience. This calls into question whether consumers need to physically visit their grocery store to grab their almond milk and dry goods which provides no additional experience or benefit. But if they’re going to a place that has a number of diverse, engaging stores, then that journey becomes an event and an experience. It becomes a place that people can visit with friends and where they can try and learn new things. People are asking themselves whether going to the mall is worth their time, energy and effort. If the trip is just a transactional experience, what’s the point?
Andrei: Consumers used to go to malls for a variety of reasons – to be entertained, spend time with friends or visit a single store. But malls were already losing their allure as a social destination before COVID hit, which affected their ability to drive stimulus and generate traffic. With the rise of e-commerce during the pandemic, more and more people are buying commodity products from giants like Amazon. I believe that the future of the mall is mixed use. Malls need to offer a wholesome experience that dramatically differs from selling just day-to-day products. Because, how many times are people going to go (to the mall) before they get bored? Malls need to evolve their identity as a destination for a variety of meaningful customer experiences, like tasting authentic street food and enjoying Cirque du Soleil shows.
What are the key imperatives for the mall to achieve this so that it meets consumer expectations today and in the future?
The mall will have to offer shared services on behalf of retail tenants, modernize its aesthetic and restore its reputation as the heart of the community.
Rob: Not many urban malls have enough space to feature skating rings and roller coasters but they should incorporate spectacles into their offering, or a more modern aesthetic that drives additional experience for shoppers. Although Toronto’s Distillery District isn’t a traditional mall, it has a cool architectural ambiance, unlike most malls whose post-war design is generic and considered archaic from today’s perspective. The Distillery District also features pop-up stores so shoppers don’t get bored with the same items on offer.
“Not many urban malls have enough space to feature skating rings and roller coasters but they should incorporate spectacles into their offering, or a more modern aesthetic that drives additional experience for shoppers.”
Andrei: Real estate developers need to reevaluate their partnerships in an effort to build communities within, and around shopping centers. They need to involve the municipal government and assess economic gains of building the malls in residential areas as there are win-win opportunities for both sides to do that. The developers must reflect changing expectations that will continue to benefit the public in the long run. This has to be a major overhaul, not a short-term fix.
Laura: The first imperative for the mall is to build a direct customer relationship by offering a personalized customer relationship and experience. The way it can achieve this is by delivering shared services that are provided on behalf of its retail tenants. Creating a relationship where the mall owns customer data and personalized communication will create an enhanced value proposition for their retail tenants. The potential for shared services exists around the growing customer appetite for convenience. Think of services such as Click & Collect and curbside pickup that have resulted from retail restrictions during the pandemic. In the future, we can envision a mall whose employees pick up purchases for shoppers and deliver them to their car, or even their home. These types of shared services are shifting the relationship dynamic: the relationship between the retailer and the customer, which has been the historical imperative, needs to change to the relationship between the mall and the customer where the mall provides additional value for the customer and the retail tenant.
The second imperative is to change the real estate rental model so it provides different tiers of leases, depending on whether the lease is for a new business opportunity, a retailer or a shopper experience, such as an event. This will drive specific retail or shopper experiences that pull consumers to the mall as a destination, while delivering value for all tenants and the property owner.
Most importantly, the mall must restore its reputation as the hub of the neighborhood. The mall was conceived as a replacement for the Main Street that built a variety of stores into a single destination. But the mall had stopped incorporating a unique flavour of the local area long before the pandemic. Expanding its purpose so it delivers on the broader needs of consumers through the lens of the local area is fundamental to the mall’s comeback.
“In the future, we can envision a mall whose employees pick up purchases for shoppers and deliver them to their car, or even their home.”
The pandemic, new technologies and changing consumer expectations are forcing shopping malls to reinvent their value proposition, architectural design and consumer experience. Once they undergo a transformation to better suit the post-pandemic normal, they’re unlikely to look like the malls people used to visit for day-to-day shopping. In order to reclaim their place in consumers’ lives, they’ll have to become experience-driven destinations where people can work with friends, learn, stay fit, explore culture and be entertained.