January 30, 2012
Mickey Drexler Takes on Shopping Centers
At Financo’s 22nd annual Retail & Consumer Industry Seminar and CEO Event held on the first night of the recent NRF Convention, Mickey Drexler, the legendary apparel merchant who runs J. Crew, urged shopping malls to "get more creative" to reverse the weak traffic trends amid the increased discounting options at retail and online.
"The onus is not just on the retailers," said Mr. Drexler, citing the gains online made this holiday season as well as encroaching competition from off-mall concepts such as Uniqlo and Joe Fresh. "We are so dependent on every village in America called the shopping mall and I don’t see any exciting improvement in 98 percent of them and I’ve said this to all of them."
Mr. Drexler complained that malls "have an obligation to get rid of some of those kiosks" to applause from the audience of apparel industry insiders. He also lamented that a popcorn shop opened directly underneath a J. Crew in one mall. Exclaimed Mr. Drexler, "Grown ups don’t like the smells!" Finally, he noted that in measuring ROI, full-price brick & mortar ranks third with online first and outlet centers second.
In retort, Robert Taubman, chairman, president and CEO at Taubman Centers, noted that sales per square foot for tenants of Taubman — excluding anchors — was up 13.3 percent year-to-date through September, driven by both higher prices per transaction as well as traffic. He further cited Apple as an example of a chain "with the ultimate online product" that has more than thrived by using retail as a branding vehicle. He elaborated, "Dell went online only. Michael Dell famously announced many times that they were never going to be brick & mortar, especially in their industry. So where is Dell today? And where is Apple today?"
His brother, William Taubman, COO at Taubman Centers, noted that the spread between the traffic and sales levels of the dominant centers and weaker centers continues to widen. He also agreed with Mr. Drexler that consumers are more sales conscious.
"The time between when something is special that she’s willing to pay for and when it becomes basic that she wants a discount on continues to narrow. … And I think that one of the things that a lot of the stores find difficult is it’s just so easy to continue with what was last year’s best seller as opposed to driving and finding out what’s new and fresh."
"We’re in the theater business," said Bloomingdales’ longtime CEO, Michael Gould. "I think the challenge in the mall — and it’s not just [the shopping center’s] responsibility, it’s us too — is: What’s the theater in the mall? And what’s the quality of those malls? Does that mall reflect an Apple Store? So that’s part of both our challenges going forward."
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Discussion Questions
Discussion Questions: What steps should shopping malls be taking to differentiate themselves from heightened online and off-mall discount competition? How may malls have to be reinvented?
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Vibrant is not a word I would use for a mall. Especially as Mr. Drexler noted with the legions of kiosks that have popped up with a bored employee holding court on their stool while customers try to avoid them. This forces attention straightforward towards the exits.
Shoppers are jaded, the browsers are congealing online, so those who go to a mall deserve to be wowed by everyone from the physical structure, the shops and most important, the employees and merch. It’s a multi-headed challenge — glad Mr. Drexler took the lead.
People has just so much time to invest in those things that are of the greatest importance their lives today. The trend is increasingly to be in tune with the times and to feel cool. Technology is the vehicle that has taken control of the younger generations of customers, the source of the future sales success.
Give them what they want to surround themselves in. Shopping malls must be reinvented to accommodate the desires of this growing movement. What is needed? A contemporary sense of theater that can become a strong magnet to draw people into the malls of tomorrow.
The culture of mall owners is to see themselves in the real estate business. OK, we all can go along with that thought process.
However, mall owners have to position their thinking along the lines of seeing their business through the eyes of their customers. They have to then see through to their customers’ customer — the end consumer. That has been a challenge for too many mall owners.
In the process, they pay lip service to consumer insights, a pittance to marketing (until they feel the financial pressure), and an inflexibility to adapting to a need to effectively mass-customize centers. Making these centers more than “pieces of dirt” with roads around buildings, mall owners have to follow Michael Gould’s thinking, and see themselves in the “theater business.”
If malls fail to do that, you see the strong centers get stronger, and the weak get weaker.
The position of Bloomingdale’s (“We’re in the theater business”) is telling. JCPenney is now going down the path with their announcement of creating a “town square” concept in the store with attractions and encouraging dwell time.
Right now it seems to be just the retailers taking these steps, with very little movement from the mall operators. The kiosks and bazaar approach should give way to some smart design of creating more appealing “third place” gathering centers in the mall. This was what brought young shoppers to malls in the past. Now they need to do the same for grown ups by giving people a compelling experience (i.e. not the food court) to meet and socialize.
Why do we continue to try to go backwards? Retail has never moved backwards. When stores replaced the catalogs, there was no going back. When malls replaced Main Street, there was no going back. When Barnes & Noble, Home Depot and Staples, et al replaced small and independent stores, there was no going back. Why do we even want to rejuvenate malls? The future in not in the past. The malls were a Baby Boomer phenomenon and today’s shoppers are different.
A recent study out of Europe indexes mobile retail users by age:
55+ @ 29
45 to 54 @ 58
35 to 44 @ 116
25 to 34 @ 175
18 to 24 @ 202
It is time to consider knocking down a whole lot of malls.
It would certainly be a nice thing if malls somehow found techniques to amplify traffic to the benefit of non-anchor tenants. I regret to observe that tweaks of technique are not likely to be the answer. A more foundational consideration is why shoppers will want to spend time visiting any shopping mall, regardless of its features.
It’s possible that superior “theater” might do the trick, but take a cue from Hollywood: Each production appeals to its own narrow demographic. A mall environment that is compelling for some audience slices may prove off-putting for others. Tough world.
Robert Taubman, I’m afraid, had a key fact wrong. Michael Dell’s pronouncements notwithstanding, his company did indeed try its hand at brick & mortar, opening more than 60 Dell Direct Store mall and airport kiosks as of 2003. It launched a prototype in-line store the following year, before abandoning the test. Dell’s effort may well be characterized as half-hearted compared with Apple, but it happened.
Once the subconscious has ‘locked in’ an image, it’s almost impossible to change it. And so we repeat and repeat the same old experiences and look. We stick a roller coaster and a shark tank into the middle of our ‘mental mall image’ and think we’ve created a breakthrough.
I was approached by a city re creating a “health and wellness park” on 40 acres and my mind raced to images of organic, hydroponic and aeroponic farming, senior’s facilities where seniors could manage those farms and gardens, a world-class alternative health center, a unique charter school, the world’s most advanced fitness track, playing fields and so on. The idea was to make this a ‘destination’ for happy healthy people. The city, it turned out, wanted more medical office buildings and clinics meaning you had to be sick or dying to go there.
Not that my concept was divinely inspired, but getting the officials to see anything past the ‘doctor’s office’ they’d grown up with was impossible. Same is true for the question “What’s a mall and what does it do?” The biggest hurdle is mindset.
Since category killers started to disintermediate the colossal regional mall from its shopper, the jig was up on these dinosaurs of urban planning. Drexler is right. Where have all the regional department stores gone? And between anchors there is room for way too many Apples. After all aren’t most Apple Stores really Gateways?
Or as we like to say, “retail ain’t for sissies.”
This is one of those discussions where everyone is correct. Some malls are doing well and showing growth. These are typically what has always been referred to as the “A” malls. It also doesn’t hurt to have an Apple store, which is so productive that it raises the sales productivity for the entire mall. The B and C malls are failing.
The harsh truth is that the biggest problem for the mall is that there are simply too many of them. In the last study I read, there was 46 square feet of retail selling space for every man, woman, and child in America. In Europe, the equivalent number is 2.5 feet. More deadly is that most malls are carbon copies of each other – same stores, same product, same promotions. The internet now commands 8% of total retail and is growing rapidly. Unless the malls can figure out how to offer value different from the internet, either through unique products and/or exceptional service, the ultimate answer is to close the B and C malls.
I recently visited a rather remote home location for a somewhat well-known confectioner. The company’s location was and is so remote that it is obvious they should no longer be in business. As I continued my visit the company freely informed me how they chose to market the products. This was accomplished by moving into mainstream locations using temporary facilities where they provided free samples as well as sales of their confections for the consumer while encouraging their visitors to ask for more at their local stores. Communities with enough sales were rewarded with a store where the customer could try and vote for new product as well as resupply.
Perhaps the property management companies with so much space and so few takers should consider offering temporary as well as permanent facilities to legitimate companies from all over the world needing a means to get in the spotlight. There are many small, medium, and large companies all over the world with something new for everyone that have difficulties getting product in the hands of customers. The opportunities and benefits to all are only limited by the imagination of those that participate and what they are willing to venture.
When I visit the large malls here in the Los Angeles Area, I think to myself, “WHAT recession?!” Of course, this situation varies across the US and internationally. What I find most compelling to drive the traffic in the busy malls are the visual characteristics. Visual merchandising, frequently-refreshed decor, pop-up merchandising and pop-up stores all add to the need to return to the mall to see what’s new.
I have seen scant evidence of malls being creative on this front. Since the “anchor store” notion is suffering, it is time for mall operators to make the center court the “anchor,” i.e., the center court as town square. But what do people want a town square to be in the modern world?
If I were a mall operator, I would start by thinking about the consumer’s social unmet needs in a world of social media. Opportunities to interact with online friends — convert online friends to real-world friends? Opportunities for business interaction? Opportunities for American Idol like stars in one’s own community? Family fun interactions? I don’t know. It likely differs by daypart and by mall location. But I do believe that if operators can get the community into the center court, then retailers will bend over backwards to convert the sale from there.
First let me say I completely agree with Mr. Drexler’s comments about the kiosk. I am so happy to see that Forum Shops have finally done that, and what am improvement!
I think malls have to take more responsibility and action for driving incremental customer visits which hopefully will lead to incremental sales. The build it and they will come days are long gone. Now it is “build it and give them a reason to come.”
It’s time for shopping malls and their tenants to become even closer partners than they have been. Brick and mortar stores are indeed challenged by online selling, and the upscale malls need to generate some of the “treasure hunt” atmosphere of the outlet malls. Neither mall management nor retail management can do this on their own. Malls have a lot to overcome. Parking can be a pain; the larger the mall the more difficult it becomes for shoppers to traverse it; as well as many other drawbacks. And most certainly brick-and-mortar retailers need to leverage new technology in reaching customers, but also need to do the basics — providing shoppers with products that will appeal to them at competitive prices. Any gulf that may exist at a mall and separates the lessor and lessee needs to be closed.
Yes, by all means let’s share secrets of how we’ve differentiated ourselves … so everyone else can do the same thing! One hates to be critical, but when did developers ever show innovation? OK, Country Club Plaza brought us scale in the ’20s, Northgate brought us the mall — literally — in 1950, and Southdale added a roof 6 years later, but since then, the model has seen little change. Sign up a few anchors, fill in the usual (national) chains in-between and resurface your parking lot every few years. What passes for innovation today (i.e. adding non-retail uses, moves implicitly criticized by Mr. Drexler ) are usually signs of desperation from weak operators.
One suggestion I had in mind is to install disco mirrorballs in the food court to show more dazzle. Okay, I’m trying to be funny.
I agree with almost every comment above. We have too many malls and almost every mall has the same nationwide chain stores!
Shopping malls should be more flexible in their leasing arrangement to encourage pop-up shops like Toys “R” Us has experimented with for the past few years, with relative success.
But focus on more local and unique stores to open pop-up shops. This would add a level of excitement.
The downsizing of big boxes and the slow-but-steady expiration of long-term mall leases presents a big opportunity for malls to reinvent space. When it was announced that Bloomingdale’s was departing the Mall of America, I posited that sub-dividing the space would make sense (especially since the list of potential non-tenant takers was sitting at zero). Lo and behold, that’s exactly what is going to happen — five to-be-announced retailers are set to move in at a cost of $30 million. Two are said to be major international fast-fashion retailers which I see as a move in the right direction. Sub divide cavernous spaces, give it to those who would otherwise show their wares in major urban flagship locations, pull from across the pond, and repeat.
Retailers and mall operators do not mix. They don’t like each other and in fact more or less tolerate each other. The mall operator makes an effort to “enhance” or improve the experience only if pushed. When was the last time a mall operator did something unique for Easter (meet the bunny and take pictures), Santa and how about those thrilling fashion shows and talent searches?
Tired, boring, copycat marketing effort with the best they can come up with is rewards when you buy their mall gift card or MasterCard/VISA. The “A” malls will survive, the B and C malls will die a slow death. As smart real estate managers, the major mall operators were brilliant in assessing the potential for traffic flow and population growth. “Build it and they will come” doesn’t hold water any longer.
The question isn’t so much what they need to do to differentiate and encourage preference vs. web or strip center/off-mall competition as it is to build a marketing capability in-house and likewise source an agency partner that can help build an effective bridge to the tenants, plus leverage their marketing strengths and data insights to drive traffic.
Create first choice centres by choosing first choice retailers, not me toos. Create an environment within the centre — and the community — which permeates the primary, secondary and tertiary catchment areas where consumers feel that they will not get the range or service by going elswhere to spend. Make sure that the consumer has some input in the centre, regarding security, safety, and any other matter that touches the consumer.
Hold focus groups to obtain the feedback from consumers and reward them for the feedback. Don’t be obtuse or non negotiable with tenants who want to expand their consumer services when leases are close to renewal. Tenants are the landlords’ customers. Educate and train centre managers to interact with tenants. What if you don’t train centre managers and they stay in the centre ad infinitum? They are the potential for poor tenant and consumer relations.
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Vibrant is not a word I would use for a mall. Especially as Mr. Drexler noted with the legions of kiosks that have popped up with a bored employee holding court on their stool while customers try to avoid them. This forces attention straightforward towards the exits.
Shoppers are jaded, the browsers are congealing online, so those who go to a mall deserve to be wowed by everyone from the physical structure, the shops and most important, the employees and merch. It’s a multi-headed challenge — glad Mr. Drexler took the lead.
People has just so much time to invest in those things that are of the greatest importance their lives today. The trend is increasingly to be in tune with the times and to feel cool. Technology is the vehicle that has taken control of the younger generations of customers, the source of the future sales success.
Give them what they want to surround themselves in. Shopping malls must be reinvented to accommodate the desires of this growing movement. What is needed? A contemporary sense of theater that can become a strong magnet to draw people into the malls of tomorrow.
The culture of mall owners is to see themselves in the real estate business. OK, we all can go along with that thought process.
However, mall owners have to position their thinking along the lines of seeing their business through the eyes of their customers. They have to then see through to their customers’ customer — the end consumer. That has been a challenge for too many mall owners.
In the process, they pay lip service to consumer insights, a pittance to marketing (until they feel the financial pressure), and an inflexibility to adapting to a need to effectively mass-customize centers. Making these centers more than “pieces of dirt” with roads around buildings, mall owners have to follow Michael Gould’s thinking, and see themselves in the “theater business.”
If malls fail to do that, you see the strong centers get stronger, and the weak get weaker.
The position of Bloomingdale’s (“We’re in the theater business”) is telling. JCPenney is now going down the path with their announcement of creating a “town square” concept in the store with attractions and encouraging dwell time.
Right now it seems to be just the retailers taking these steps, with very little movement from the mall operators. The kiosks and bazaar approach should give way to some smart design of creating more appealing “third place” gathering centers in the mall. This was what brought young shoppers to malls in the past. Now they need to do the same for grown ups by giving people a compelling experience (i.e. not the food court) to meet and socialize.
Why do we continue to try to go backwards? Retail has never moved backwards. When stores replaced the catalogs, there was no going back. When malls replaced Main Street, there was no going back. When Barnes & Noble, Home Depot and Staples, et al replaced small and independent stores, there was no going back. Why do we even want to rejuvenate malls? The future in not in the past. The malls were a Baby Boomer phenomenon and today’s shoppers are different.
A recent study out of Europe indexes mobile retail users by age:
55+ @ 29
45 to 54 @ 58
35 to 44 @ 116
25 to 34 @ 175
18 to 24 @ 202
It is time to consider knocking down a whole lot of malls.
It would certainly be a nice thing if malls somehow found techniques to amplify traffic to the benefit of non-anchor tenants. I regret to observe that tweaks of technique are not likely to be the answer. A more foundational consideration is why shoppers will want to spend time visiting any shopping mall, regardless of its features.
It’s possible that superior “theater” might do the trick, but take a cue from Hollywood: Each production appeals to its own narrow demographic. A mall environment that is compelling for some audience slices may prove off-putting for others. Tough world.
Robert Taubman, I’m afraid, had a key fact wrong. Michael Dell’s pronouncements notwithstanding, his company did indeed try its hand at brick & mortar, opening more than 60 Dell Direct Store mall and airport kiosks as of 2003. It launched a prototype in-line store the following year, before abandoning the test. Dell’s effort may well be characterized as half-hearted compared with Apple, but it happened.
Once the subconscious has ‘locked in’ an image, it’s almost impossible to change it. And so we repeat and repeat the same old experiences and look. We stick a roller coaster and a shark tank into the middle of our ‘mental mall image’ and think we’ve created a breakthrough.
I was approached by a city re creating a “health and wellness park” on 40 acres and my mind raced to images of organic, hydroponic and aeroponic farming, senior’s facilities where seniors could manage those farms and gardens, a world-class alternative health center, a unique charter school, the world’s most advanced fitness track, playing fields and so on. The idea was to make this a ‘destination’ for happy healthy people. The city, it turned out, wanted more medical office buildings and clinics meaning you had to be sick or dying to go there.
Not that my concept was divinely inspired, but getting the officials to see anything past the ‘doctor’s office’ they’d grown up with was impossible. Same is true for the question “What’s a mall and what does it do?” The biggest hurdle is mindset.
Since category killers started to disintermediate the colossal regional mall from its shopper, the jig was up on these dinosaurs of urban planning. Drexler is right. Where have all the regional department stores gone? And between anchors there is room for way too many Apples. After all aren’t most Apple Stores really Gateways?
Or as we like to say, “retail ain’t for sissies.”
This is one of those discussions where everyone is correct. Some malls are doing well and showing growth. These are typically what has always been referred to as the “A” malls. It also doesn’t hurt to have an Apple store, which is so productive that it raises the sales productivity for the entire mall. The B and C malls are failing.
The harsh truth is that the biggest problem for the mall is that there are simply too many of them. In the last study I read, there was 46 square feet of retail selling space for every man, woman, and child in America. In Europe, the equivalent number is 2.5 feet. More deadly is that most malls are carbon copies of each other – same stores, same product, same promotions. The internet now commands 8% of total retail and is growing rapidly. Unless the malls can figure out how to offer value different from the internet, either through unique products and/or exceptional service, the ultimate answer is to close the B and C malls.
I recently visited a rather remote home location for a somewhat well-known confectioner. The company’s location was and is so remote that it is obvious they should no longer be in business. As I continued my visit the company freely informed me how they chose to market the products. This was accomplished by moving into mainstream locations using temporary facilities where they provided free samples as well as sales of their confections for the consumer while encouraging their visitors to ask for more at their local stores. Communities with enough sales were rewarded with a store where the customer could try and vote for new product as well as resupply.
Perhaps the property management companies with so much space and so few takers should consider offering temporary as well as permanent facilities to legitimate companies from all over the world needing a means to get in the spotlight. There are many small, medium, and large companies all over the world with something new for everyone that have difficulties getting product in the hands of customers. The opportunities and benefits to all are only limited by the imagination of those that participate and what they are willing to venture.
When I visit the large malls here in the Los Angeles Area, I think to myself, “WHAT recession?!” Of course, this situation varies across the US and internationally. What I find most compelling to drive the traffic in the busy malls are the visual characteristics. Visual merchandising, frequently-refreshed decor, pop-up merchandising and pop-up stores all add to the need to return to the mall to see what’s new.
I have seen scant evidence of malls being creative on this front. Since the “anchor store” notion is suffering, it is time for mall operators to make the center court the “anchor,” i.e., the center court as town square. But what do people want a town square to be in the modern world?
If I were a mall operator, I would start by thinking about the consumer’s social unmet needs in a world of social media. Opportunities to interact with online friends — convert online friends to real-world friends? Opportunities for business interaction? Opportunities for American Idol like stars in one’s own community? Family fun interactions? I don’t know. It likely differs by daypart and by mall location. But I do believe that if operators can get the community into the center court, then retailers will bend over backwards to convert the sale from there.
First let me say I completely agree with Mr. Drexler’s comments about the kiosk. I am so happy to see that Forum Shops have finally done that, and what am improvement!
I think malls have to take more responsibility and action for driving incremental customer visits which hopefully will lead to incremental sales. The build it and they will come days are long gone. Now it is “build it and give them a reason to come.”
It’s time for shopping malls and their tenants to become even closer partners than they have been. Brick and mortar stores are indeed challenged by online selling, and the upscale malls need to generate some of the “treasure hunt” atmosphere of the outlet malls. Neither mall management nor retail management can do this on their own. Malls have a lot to overcome. Parking can be a pain; the larger the mall the more difficult it becomes for shoppers to traverse it; as well as many other drawbacks. And most certainly brick-and-mortar retailers need to leverage new technology in reaching customers, but also need to do the basics — providing shoppers with products that will appeal to them at competitive prices. Any gulf that may exist at a mall and separates the lessor and lessee needs to be closed.
Yes, by all means let’s share secrets of how we’ve differentiated ourselves … so everyone else can do the same thing! One hates to be critical, but when did developers ever show innovation? OK, Country Club Plaza brought us scale in the ’20s, Northgate brought us the mall — literally — in 1950, and Southdale added a roof 6 years later, but since then, the model has seen little change. Sign up a few anchors, fill in the usual (national) chains in-between and resurface your parking lot every few years. What passes for innovation today (i.e. adding non-retail uses, moves implicitly criticized by Mr. Drexler ) are usually signs of desperation from weak operators.
One suggestion I had in mind is to install disco mirrorballs in the food court to show more dazzle. Okay, I’m trying to be funny.
I agree with almost every comment above. We have too many malls and almost every mall has the same nationwide chain stores!
Shopping malls should be more flexible in their leasing arrangement to encourage pop-up shops like Toys “R” Us has experimented with for the past few years, with relative success.
But focus on more local and unique stores to open pop-up shops. This would add a level of excitement.
The downsizing of big boxes and the slow-but-steady expiration of long-term mall leases presents a big opportunity for malls to reinvent space. When it was announced that Bloomingdale’s was departing the Mall of America, I posited that sub-dividing the space would make sense (especially since the list of potential non-tenant takers was sitting at zero). Lo and behold, that’s exactly what is going to happen — five to-be-announced retailers are set to move in at a cost of $30 million. Two are said to be major international fast-fashion retailers which I see as a move in the right direction. Sub divide cavernous spaces, give it to those who would otherwise show their wares in major urban flagship locations, pull from across the pond, and repeat.
Retailers and mall operators do not mix. They don’t like each other and in fact more or less tolerate each other. The mall operator makes an effort to “enhance” or improve the experience only if pushed. When was the last time a mall operator did something unique for Easter (meet the bunny and take pictures), Santa and how about those thrilling fashion shows and talent searches?
Tired, boring, copycat marketing effort with the best they can come up with is rewards when you buy their mall gift card or MasterCard/VISA. The “A” malls will survive, the B and C malls will die a slow death. As smart real estate managers, the major mall operators were brilliant in assessing the potential for traffic flow and population growth. “Build it and they will come” doesn’t hold water any longer.
The question isn’t so much what they need to do to differentiate and encourage preference vs. web or strip center/off-mall competition as it is to build a marketing capability in-house and likewise source an agency partner that can help build an effective bridge to the tenants, plus leverage their marketing strengths and data insights to drive traffic.
Create first choice centres by choosing first choice retailers, not me toos. Create an environment within the centre — and the community — which permeates the primary, secondary and tertiary catchment areas where consumers feel that they will not get the range or service by going elswhere to spend. Make sure that the consumer has some input in the centre, regarding security, safety, and any other matter that touches the consumer.
Hold focus groups to obtain the feedback from consumers and reward them for the feedback. Don’t be obtuse or non negotiable with tenants who want to expand their consumer services when leases are close to renewal. Tenants are the landlords’ customers. Educate and train centre managers to interact with tenants. What if you don’t train centre managers and they stay in the centre ad infinitum? They are the potential for poor tenant and consumer relations.