September 12, 2008
The Future of the Regional Mall
By Tom Ryan
Regional shopping malls, the stars of retail real estate in the eighties, have long been losing share since the arrival of supercenters and power centers. And with the economic downturn, regionals are only expected to lose more ground.
According to a survey conducted by TNS Retail Forward, about 30 percent of primarily household shoppers now visit a regional mall on a monthly basis, down a whopping 4 percentage points from just three years ago. The leading traffic driver by a wide margin is the power center, with 60 percent of shoppers visiting monthly. That’s followed by strip malls with supermarket anchors, at 49 percent; and online shopping sites, 42 percent.
Of the retail formats, only power centers, strip malls with supermarkets and e-commerce captured a larger share of monthly shoppers in 2008. With tough economic times and rising food prices, consumers are gravitating more to retailers such as Walmart and Target at power centers for value, according to TNS Retail Forward. At the same time, with gas prices also surging, convenience has become more important to consumers. And with Walmart and Target adding food to their mix, power centers are only increasing their one-stop appeal.
By comparison, regional malls are not only lacking one-stop shopping, but are selling too many discretionary items.
“With the economy, consumers are focusing a lot of their spending on needs rather than wants,” Mary Brett Whitfield, SVP of soft goods at TNS Retail Forward, told RetailWire. “And a lot of what’s at the mall, particularly a lot of apparel, is more in the wants category. So that’s what’s exacerbating the trend that we’ve seen in the last year or so.”
On the positive side, regional malls are still attracting many younger consumers. Fifty-one percent of respondents between the ages of 18 to 24 said they visit a regional mall monthly, and 39 percent between the ages of 25 to 34.
But what’s also affecting traffic is the consolidation and considerable loss of market share in apparel at department stores – the traditional anchors driving traffic to the mall.
Some regionals have redeveloped their formats by partnering with an upscale or more unique retailer than found at the traditional mall. Some hybrids combine elements of enclosed malls with open-air shopping popularized by lifestyle centers. In a few cases, a Walmart or Target has replaced a defunct department store as an anchor. But a glut of retail space across the shopping mall market is expected to limit real estate opportunities for stores reliant on the regional mall.
“Any retailer dependant on mall locations for a significant part of their growth needs to be thinking about how they’re going to grow going forward because there are very few, if any, regional malls in the pipeline,” said Ms. Brett Whitfield.
Discussion Question: Do you see regional malls continuing to struggle with weak traffic? How should they redevelop themselves to improve traffic? What’s a smart strategy for the many apparel and other specialty stores reliant on regional malls?
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There are a number of factors that have lead to the downturn of regional malls. One factor which is overlooked is that locally owned anchors have been acquired and re-named under national banners, which have less appeal. Another factor is that these malls are cluttered with repetition of the same types of businesses. Regional malls have lost character.
The malls are muddled with cellular phone service hawkers, blighted food courts, and atmospheres that attract hordes of teens hanging around and causing everyday shoppers to be uncomfortable.
Regional Malls, and for that matter department stores, are on a slow path to their demise. Their days are limited, and will be replaced by Superstores, which truly have better positioning, as well as offering a clearer shopping experience for their consumers. The major retailers spend much time and money, as well as focus an incredible amount of resources on getting the correct product, pricing and environmental mix together to maximize their appeal to their consumers.
Walmart, Target, Meijer, Costco, etc, have all designed their shopping experiences to maximize their customer experience while in the store, and minimize any issues which would take them away from the store. This includes store within the store QSRs, Banks, Dry Cleaning, Barbers, Opticians, Pharmacies and even basic medical care. Why go anywhere else?
We saw Target go from 600 stores over the next five years down to 500 and now it’s 350. One reason they site is the withdrawal of financing (tenants and shoppers for that matter) for regional shopping centers. Record gas prices, the credit crunch and the onslaught of “exurbs” make traveling less attractive as well.
Our grandparents cash and carry mentality is making a comeback as credit limits shrink and real estate geniuses go back to being school teachers. The focus on price at any cost has put our food and children at risk and Americans are taking a flight to quality. The law of large numbers makes these mega-retailers completely unattractive since they have no chance of doubling revenue at these levels in an economic slowdown (until 2010 when it becomes a meltdown).
Speaking of growth, whatever happened to Tesco’s Fresh and Easy and Walmart’s Marketside?
Overbuilding is the real killer here. Next in line is the demise of the regional department store. Repetition is boring. I really don’t need five Macy’s and five Dillard’s in one city. What I need is one location that is centrally located with a full variety of products, services and atmosphere. I have just described the downtown stores of 30+ years ago. My, how retailers have let accountants and MBAs ruin their trade.
In the long run, profit is a good thing but it certainly isn’t the only thing. Will regional malls have a place in America? Yes–but in a far smaller number than today.
Acres of increasingly-cheap empty space surrounded by lots of parking…someone is going to figure out what to put in that space to make it work again! Maybe it’s just Walmart (in some communities, it probably is). Maybe it’s something completely new and different (something more “lifestyle” oriented, I’d think). But someone will figure it out, and they will get very rich doing it.
Regional malls have to position themselves as destinations–not a cluster of stores.
Malls and other retail center concepts evolved from the peddler’s wagon but some arrived on the scene in more timely fashion than others. Today, with so many forces in play that affect how the ever-diversifying consumer spends a buck, shouldn’t we expect convenient “retail places” that offer the biggest value, most contemporary excitement together with the “best” prices to win this current round in retailing?
I was in Steubenville, Ohio a while back and a Walmart Supercenter anchored the regional mall. I can see this repeating itself in other places as well.
I think there is a future for the regional malls. The tired old anchors like Sears will be replaced with newer concepts. Sure, in old declining neighborhoods the mall is doomed but in the nicer areas, I think we will continue to see the malls evolve with new concepts. I’d like to see concepts like the newer 200,000 square foot grocers like Woodman’s supermarket anchoring more malls. Where else can they open and still have a regional location with abundant parking?
Regional malls expect to draw consumers from a larger area than the neighborhood stores. As such, they have to be destinations but destinations for what? Discretionary items? To see and touch products? To attend special events? For entertainment? The regional malls need to carve out a reason for consumers to spend the money on gasoline.
For instance, having a movie theater and interesting eating places might make the mall a destination for entertainment and then live performances could be added at times. Then while there, consumers may also visit stores for discretionary items.
Another approach might be doing what was mentioned earlier–having a Walmart or Target as one of the anchor stores so the destination really offers everything and a consumer only has to go to one location to buy everything on their list. Having a collection of nationwide chains connected by a roof with no other draw is not likely to be very effective in the immediate future.
It is far too soon to declare the regional mall dead. Like many retail formats they are going through a period of transition that will eliminate some malls and allow others to reinvent themselves. Yes, some, but not all of the several thousand regional malls across the country are no longer needed; others are thriving even in this economy.
If you think regional malls are dead, next Saturday I would like to invite you to visit Woodfield Mall in Illinois, Cherry Hills Mall in New Jersey, Aventura Mall in Florida or Fashion Valley Mall in San Diego. If traffic is like a usual Saturday in these malls, you may very well have a difficult time finding a place to park.
Clearly, the party is over for the Regional Center. The U.S. is more than over-stored with 25,000 square feet of retail per capita, almost 5 times that of the nearest developed nation. We’re busting at the seams with sellers, many of them in overlapping categories, and the mall is the easiest place to witness that.
With department stores losing relevance and specialty (especially apparel) in a funk, the idea of a lifestyle center, with mixed use is a much more appealing ideal for the consumer–to say nothing of the internet. The nearest/best example I can think of is City Center in Columbus Ohio. A mere twenty years ago, this was the newest, most vibrant place to shop in the city and the region for that matter. Now, it lays empty, with only a few ma and pa stores to show for all its glittering escalators and three stories of stacked-box retail. A white/glass ghost town.
It’s time for the best planners and developers in the country to get together and re-formulate the future of modern retail and to determine the fate of the millions of square feet now laying near dormant across the country. Who will create the new “big idea” out of this mess? Who will be first to market?
Can they be retro-fitted into lifestyle centers? Should they just be made into parks and green space? What about better communities or recreational centers? What’s the solution?
There is no quick & easy, sound-bite answer but with every challenge, there comes opportunity…and the opportunities to create something better out of our aging fleet of regional centers is endless. It’s going to be an interesting decade for retail coming up.
Regional Malls need to focus on becoming more like a town center to the local market they serve. Increase the number of events. Plug in local schools, churches and organizations. Increase customer loyalty through community involvement. Play to strengths like focusing the benefit of not being impacted by weather. Redevelopments should look for ways to add more residential components.
I agree that malls as a general class are not dead–sure there are plenty of them that are; but there are more that aren’t. The recent race to store closures and bankruptcies is having an effect on mall occupancy, and it will still get a little worse, but on a whole across the country, mall occupancy is still stronger than most other shopping center classes.
Just as retailers constantly need to find ways to keep their inventory and brand fresh, mall landlords have to do the same–and have been making such moves–which include adding lifestyle center wings, renovation, adding non-traditional anchor tenants (such as Target, Costco and AMC Theatres), improving dining and entertainment options, etc. The extreme is completely de-malling (Taking the roof off) to turn it into a lifestyle center.
There are still plenty of second and third-tier markets, like where I live, where the enclosed regional mall remains the primary dominant retail venue. Pyramid Management runs our mall here, which a couple years ago added a Target and Dick’s Sporting Goods and in the last six months has been receipt to a new Victoria’s Secret/Pink, Justice for Girls, a Steve & Barry’s that is staying open, and a national brand maternity store–and the company is working on a separate out parcel where it will add two additional casual dining restaurants, a Barnes & Noble/Borders, Best Buy, and Bed, Bath & Beyond; as well as an expansion to the Regal Cinema. These are all major moves that will keep traffic going to this mall and hopefully keep it fresh.
Major regional shopping malls have lost share because other forms of shopping destinations are easier to construct. A power center or lifestyle center or strip center takes less land, and the zoning is often easier. So very few new enclosed malls are being built. The ones that remain are likely to remain strong because they auction their space to the highest bidders, and the highest bidders are often among the hottest concepts. Not every hot concept needs or wants to be in a regional mall, but no mall needs everybody, since no mall has unlimited space.
And maybe someday the mall developers will build office buildings, condo’s and schools on top of the malls, further enhancing their traffic.
The point about how Malls need to establish themselves as a destination is absolutely correct. But how? With so many brand messages throughout the mall it seems impossible on the surface. However, malls need to look at what Forrester calls “Experience Based Differentiation” for answers.
Malls meant something to all of us when we were kids. Interesting that it still seems to resonate with the younger generations today–what is that experience for the younger generations? Maybe on second thought don’t answer that.
Anyway the answer lies in understanding all the elements of what it takes to shop at a mall and discover the opportunities for true differentiation in each element.
One thing I know for certain is that shoppers tend to look for one stop shopping or quick in and out opportunities. Maybe if malls did a better job of micro-zoning the different retailer product offerings they could address the quick in and out opportunity.
Speaking as a consumer, I certainly like the parking lots at malls a lot more than the Power Centers. I am amazed that there are not more accidents.
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There are a number of factors that have lead to the downturn of regional malls. One factor which is overlooked is that locally owned anchors have been acquired and re-named under national banners, which have less appeal. Another factor is that these malls are cluttered with repetition of the same types of businesses. Regional malls have lost character.
The malls are muddled with cellular phone service hawkers, blighted food courts, and atmospheres that attract hordes of teens hanging around and causing everyday shoppers to be uncomfortable.
Regional Malls, and for that matter department stores, are on a slow path to their demise. Their days are limited, and will be replaced by Superstores, which truly have better positioning, as well as offering a clearer shopping experience for their consumers. The major retailers spend much time and money, as well as focus an incredible amount of resources on getting the correct product, pricing and environmental mix together to maximize their appeal to their consumers.
Walmart, Target, Meijer, Costco, etc, have all designed their shopping experiences to maximize their customer experience while in the store, and minimize any issues which would take them away from the store. This includes store within the store QSRs, Banks, Dry Cleaning, Barbers, Opticians, Pharmacies and even basic medical care. Why go anywhere else?
We saw Target go from 600 stores over the next five years down to 500 and now it’s 350. One reason they site is the withdrawal of financing (tenants and shoppers for that matter) for regional shopping centers. Record gas prices, the credit crunch and the onslaught of “exurbs” make traveling less attractive as well.
Our grandparents cash and carry mentality is making a comeback as credit limits shrink and real estate geniuses go back to being school teachers. The focus on price at any cost has put our food and children at risk and Americans are taking a flight to quality. The law of large numbers makes these mega-retailers completely unattractive since they have no chance of doubling revenue at these levels in an economic slowdown (until 2010 when it becomes a meltdown).
Speaking of growth, whatever happened to Tesco’s Fresh and Easy and Walmart’s Marketside?
Overbuilding is the real killer here. Next in line is the demise of the regional department store. Repetition is boring. I really don’t need five Macy’s and five Dillard’s in one city. What I need is one location that is centrally located with a full variety of products, services and atmosphere. I have just described the downtown stores of 30+ years ago. My, how retailers have let accountants and MBAs ruin their trade.
In the long run, profit is a good thing but it certainly isn’t the only thing. Will regional malls have a place in America? Yes–but in a far smaller number than today.
Acres of increasingly-cheap empty space surrounded by lots of parking…someone is going to figure out what to put in that space to make it work again! Maybe it’s just Walmart (in some communities, it probably is). Maybe it’s something completely new and different (something more “lifestyle” oriented, I’d think). But someone will figure it out, and they will get very rich doing it.
Regional malls have to position themselves as destinations–not a cluster of stores.
Malls and other retail center concepts evolved from the peddler’s wagon but some arrived on the scene in more timely fashion than others. Today, with so many forces in play that affect how the ever-diversifying consumer spends a buck, shouldn’t we expect convenient “retail places” that offer the biggest value, most contemporary excitement together with the “best” prices to win this current round in retailing?
I was in Steubenville, Ohio a while back and a Walmart Supercenter anchored the regional mall. I can see this repeating itself in other places as well.
I think there is a future for the regional malls. The tired old anchors like Sears will be replaced with newer concepts. Sure, in old declining neighborhoods the mall is doomed but in the nicer areas, I think we will continue to see the malls evolve with new concepts. I’d like to see concepts like the newer 200,000 square foot grocers like Woodman’s supermarket anchoring more malls. Where else can they open and still have a regional location with abundant parking?
Regional malls expect to draw consumers from a larger area than the neighborhood stores. As such, they have to be destinations but destinations for what? Discretionary items? To see and touch products? To attend special events? For entertainment? The regional malls need to carve out a reason for consumers to spend the money on gasoline.
For instance, having a movie theater and interesting eating places might make the mall a destination for entertainment and then live performances could be added at times. Then while there, consumers may also visit stores for discretionary items.
Another approach might be doing what was mentioned earlier–having a Walmart or Target as one of the anchor stores so the destination really offers everything and a consumer only has to go to one location to buy everything on their list. Having a collection of nationwide chains connected by a roof with no other draw is not likely to be very effective in the immediate future.
It is far too soon to declare the regional mall dead. Like many retail formats they are going through a period of transition that will eliminate some malls and allow others to reinvent themselves. Yes, some, but not all of the several thousand regional malls across the country are no longer needed; others are thriving even in this economy.
If you think regional malls are dead, next Saturday I would like to invite you to visit Woodfield Mall in Illinois, Cherry Hills Mall in New Jersey, Aventura Mall in Florida or Fashion Valley Mall in San Diego. If traffic is like a usual Saturday in these malls, you may very well have a difficult time finding a place to park.
Clearly, the party is over for the Regional Center. The U.S. is more than over-stored with 25,000 square feet of retail per capita, almost 5 times that of the nearest developed nation. We’re busting at the seams with sellers, many of them in overlapping categories, and the mall is the easiest place to witness that.
With department stores losing relevance and specialty (especially apparel) in a funk, the idea of a lifestyle center, with mixed use is a much more appealing ideal for the consumer–to say nothing of the internet. The nearest/best example I can think of is City Center in Columbus Ohio. A mere twenty years ago, this was the newest, most vibrant place to shop in the city and the region for that matter. Now, it lays empty, with only a few ma and pa stores to show for all its glittering escalators and three stories of stacked-box retail. A white/glass ghost town.
It’s time for the best planners and developers in the country to get together and re-formulate the future of modern retail and to determine the fate of the millions of square feet now laying near dormant across the country. Who will create the new “big idea” out of this mess? Who will be first to market?
Can they be retro-fitted into lifestyle centers? Should they just be made into parks and green space? What about better communities or recreational centers? What’s the solution?
There is no quick & easy, sound-bite answer but with every challenge, there comes opportunity…and the opportunities to create something better out of our aging fleet of regional centers is endless. It’s going to be an interesting decade for retail coming up.
Regional Malls need to focus on becoming more like a town center to the local market they serve. Increase the number of events. Plug in local schools, churches and organizations. Increase customer loyalty through community involvement. Play to strengths like focusing the benefit of not being impacted by weather. Redevelopments should look for ways to add more residential components.
I agree that malls as a general class are not dead–sure there are plenty of them that are; but there are more that aren’t. The recent race to store closures and bankruptcies is having an effect on mall occupancy, and it will still get a little worse, but on a whole across the country, mall occupancy is still stronger than most other shopping center classes.
Just as retailers constantly need to find ways to keep their inventory and brand fresh, mall landlords have to do the same–and have been making such moves–which include adding lifestyle center wings, renovation, adding non-traditional anchor tenants (such as Target, Costco and AMC Theatres), improving dining and entertainment options, etc. The extreme is completely de-malling (Taking the roof off) to turn it into a lifestyle center.
There are still plenty of second and third-tier markets, like where I live, where the enclosed regional mall remains the primary dominant retail venue. Pyramid Management runs our mall here, which a couple years ago added a Target and Dick’s Sporting Goods and in the last six months has been receipt to a new Victoria’s Secret/Pink, Justice for Girls, a Steve & Barry’s that is staying open, and a national brand maternity store–and the company is working on a separate out parcel where it will add two additional casual dining restaurants, a Barnes & Noble/Borders, Best Buy, and Bed, Bath & Beyond; as well as an expansion to the Regal Cinema. These are all major moves that will keep traffic going to this mall and hopefully keep it fresh.
Major regional shopping malls have lost share because other forms of shopping destinations are easier to construct. A power center or lifestyle center or strip center takes less land, and the zoning is often easier. So very few new enclosed malls are being built. The ones that remain are likely to remain strong because they auction their space to the highest bidders, and the highest bidders are often among the hottest concepts. Not every hot concept needs or wants to be in a regional mall, but no mall needs everybody, since no mall has unlimited space.
And maybe someday the mall developers will build office buildings, condo’s and schools on top of the malls, further enhancing their traffic.
The point about how Malls need to establish themselves as a destination is absolutely correct. But how? With so many brand messages throughout the mall it seems impossible on the surface. However, malls need to look at what Forrester calls “Experience Based Differentiation” for answers.
Malls meant something to all of us when we were kids. Interesting that it still seems to resonate with the younger generations today–what is that experience for the younger generations? Maybe on second thought don’t answer that.
Anyway the answer lies in understanding all the elements of what it takes to shop at a mall and discover the opportunities for true differentiation in each element.
One thing I know for certain is that shoppers tend to look for one stop shopping or quick in and out opportunities. Maybe if malls did a better job of micro-zoning the different retailer product offerings they could address the quick in and out opportunity.
Speaking as a consumer, I certainly like the parking lots at malls a lot more than the Power Centers. I am amazed that there are not more accidents.