In recent times, the mall retail landscape has undergone cultural shifts. Beyond the rise of e-commerce, the profitability, relevance, and allure of physical malls are being questioned. Hence, the ongoing exodus of brands can’t or don’t need the synergies of other retailers.
In their heyday, suburban malls were known as destinations with clusters of novel retail stores centered around department stores known as anchor tenants. Entertainment abounded in many forms, including theatres, gaming arcades, playgrounds, and other outlets designed to entice demographics at both ends of the age spectrum. Mall food, while not gourmet, offered choices for everyone in the family. They were often in the suburbs, requiring consumers to drive; it was the logical post-WWII destination.
The Experience Economy: A Visionary Perspective
The concept of the experience economy was introduced in 1998 (https://hbr.org/1998/07/welcome-to-the-experience-economy), foreseeing a market where customer experience becomes the primary product. That vision became a reality, as evidenced by the evolution of retail spaces. Consumers today seek immersive experiences that offer more than just goods. They desire places that provide leisure, learning, entertainment, and social interaction. Mall of America was the embodiment of the emerging experience economy.
Fast forward to the 2020s, between COVID-19, rising supply chain costs, and the significant technological changes to entertainment in your hand (streaming, gaming stations, mobile as record stores, etc.), the allure of the suburban mall wanted. Retailers are leaving for more economical standalone or strip mall locations. Costs and changing lifestyles override the once-all-important synergies.
As pointed out in this Pymnts article, https://www.pymnts.com/news/retail/2024/retailers-rethink-malls-as-other-locations-report-stronger-sales/, all is not lost. In select high-end and tourism-centric malls, some have survived and thrived.
Why? They are a point of destination, and the experience is tailored to their consumer demographic.
Success is a complex mix of what consumers want in their experience, property managers learning to say no, and the investment retailers willing to put into the store.
How much will a retailer invest in making the store a shopping experience? It is why you don’t see Michael’s, Best Buy, or grocery stores inside the mall. People buy and then move on because the experience is in-store and goal-oriented. Some grocers go so far as to provide an in-store experience to keep consumers engaged, thus earning a larger wallet share. Jungle Jim’s International in Ohio has a “Plan Your Trip” page on its website.
Beyond picking out goods and services, the location needs to be activity-centric. They should serve as a modern social space where experiences, rather than products, are the primary commodities on sale. Malls as venues for returns, community events, classes, and activity-driven events draw consumers back to the destination.
Leveraging Technology for Enhanced Interactions
Integrating technology can elevate the consumer experience. Omnichannel apps and test drive showrooms like the Apple store become table stakes. Essentially, they have experiences that cannot be replicated at home.
Click and Collect services for specialty retailers. In their inception, Tesla dealerships (stores) were in high-end malls equipped with ready-made parking structures for car pickups until pricing drove them to find more reasonably priced venues.
The tenant mix should include experience-driven brands and services. This provides entertainment options like movie theaters with 3D or other immersive viewing and experiential dining, health and wellness centers, educational spaces, and art galleries. A diverse tenant mix caters to a broader range of interests and needs, making the mall a destination for various activities.
The Evolution of Mall Retail: From Selling Products to Being the Product.
To thrive, malls must become products that are well-curated destinations and be the answer to critical questions:
- Can the mall property manager curate stores that offer an experience, something unique or synergistic with the brands around them? For example, Claires (reinventing itself after Chapter 11) complements higher-end jewelry stores by offering affordable accessories for younger patrons and being one of the only places where ear piercing is available.
- Are they a destination as a social space?
- Do they have modern necessities like EV chargers?
- Can their tenants make up the cost of premium pricing with additional services?
The future of malls is for some and not all retailers.
Conclusion: Embracing the Experience Economy
The transformation of malls into experiential destinations is more than a survival strategy; it's an opportunity to redefine the role of physical retail spaces in modern society.
In summary, the future of malls lies in conscious curation, offering what cannot be found elsewhere – unique, personal, and memorable experiences that engage and are memorable for consumers.
If you have physical locations, what is your destination strategy? What is keeping you up at night related to your placement in a city?
