What’s Happening at the Mall?

By Glenn Brill, glenn.brill@fticonsulting.com

The recent announcement that Ron Johnson of Apple will become J. C. Penny’s new chief executive is a clear indication of the need for many retailers to revitalize the shopping experience. It is also a clarion call and symbolic of the challenge to mall owners, developers, and investors to create and/or revitalize shopping environments that can effectively complement and promote a retailer’s brand.

The rapid growth of online sales has demonstrated that the shopping experience itself has become a commodity that is valued in part for convenience and economy. The mail-order catalogue has been enhanced as an interactive experience, while the rising cost of gasoline, reduced or no sale taxes on out-of-state purchases and free shipping on threshold sales amounts have opened a floodgate for rising online sales. No doubt, as a retailer’s percentage of online sales continues to grow, greater demands will be placed on store margins and corresponding site selection strategies will focus on top-tier locations to meet those demands.

Today’s consumers are in a cautious mood while they try to decide if the glass is half empty or half full. Under these circumstances, call it a consumer hang-over, what will it take to get consumers, and for that matter tenants, back to the mall? While “virtual living” has its moments, malls offer the opportunity to provide real social and civic engagement. In this respect, if malls replaced “Main Street”, what will replace the mall?

As primary tenant demand has shifted to mini and junior boxes, their good credit and requirements are driving the design of the next generation of retail development. Many proposed lifestyle projects are being redesigned as an all-in-one hybrid mix of a community center, power center and fashion mall as operators seek to expand the length of the shopping day, increase repeat visits and offer retailers greater exposure to consumers earlier in the week. “Town Center” planning concepts enable developers to segment the offering and define varying shopping environments to meet the needs of particular retail segments as part of a larger mixed-use environment. While “inspirational” shoppers may be in shorter supply, tenants seek quality of life environments that correspond with consumer values.

As retailers look to invent the next generation retail environment, malls need to complement those efforts by providing an experience that will get people out of their homes and invigorate consumers with a sense of anticipation, adventure, and ease. Retailers will seek out properties that offer programming “incentives” that add value to the shopping experience. Just as urban planners have succeeded in revitalizing many central business districts, developers and owner’s need to create “attraction strategies” to expand a property’s social utility. 

Event driven programming promotes a property as a gathering place, community space, and an integral part of the local and regional communities. Diverse entertainment with strong promotional tie-ins offers retailers the opportunity to actively participate. Whether it’s a “county fair” or a “Roman circus”, malls need to compete more effectively in the leisure-time experience and entertainment venues by offering an interactive social and civic environment that expands the utility of a property beyond purely shopping to become a greater part of people’s lives. As a measure of success, people need to start asking themselves and their friends “what’s happening at the mall.”

Glenn Brill is a managing director in the Real Estate Solutions group at FTI Consulting, and is based in New York City. He can be reached at glenn.brill@fticonsulting.com or (646) 731-1511.

The views expressed herein are those of the author and not FTI Consulting, or its other professionals.

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