Six Pixels of Separation - The Blog
January 31, 2013 9:48 PM

Do Shopping Centers Have A Future?

Retail, consumerism and how we buy has changed in the past few years, like never before.

If you speak to a brand that has retail as one of their primary transactional channels, they are nervous. How we buy has so fundamentally changed, that it's not uncommon for me to be asked the question: "do shopping centers have a future?" It's important to understand the new retail landscape. When e-commerce first kicked in, it was clunky (some would argue that it's still a little clunky). E-commerce isn't clean either. Dynamic merchandising is a challenge online. Consumers are mostly looking at products in a thumbnail-like photo and the process lacks a brand experience where serendipity meets exploration. Online, we tend to shop for the things we've indentified, while retail outlets can suck consumers in by surrounding the products we went to the store for with other opportunities. Shipping, returning and dealing with that process is still a hurdle for some (this is exasperated when it comes to products that have specific sizes and fits). Yes, the e-commerce world has countless stories of brands who have both optimized and perfected the experience (think Amazon, Zappos, Fab, etc...) while retail has continued to evolve their physical experiences in an attempt to make them more engaging to the consumer (think Apple LEGO, Lululemon, etc...).

More disruption is also more integration.

Here's the thing: we don't just shop online at home (or at the office) anymore. We can shop online while we're still in the physical retail space. It's no surprise that mobile changes everything. These smartphones are powerful, connected, social and transactional. As retailers once dealt with the free shipping model that was initiated by e-commerce plays to encourage consumers to buy online instead of at stores, we're now entering a similar phase where retailers are matching the online channels prices in an attempt to curb the activity of showrooming (when consumers go the physical store, but use their smartphones to price check and purchase online without buying anything from the physical location - turning the retail environment into one, big showroom). The bigger deal here isn't how retailers combat this constant, persistent and mobile barrage of consumers being able to buy when, how and where they want. Make no mistake about it, as same-day shipping becomes more prevalent (and it will), there will be a tipping point that will force retailers to simply sell. "Simply sell" means that the e-commerce department is not a department unto itself, it's a horizontal activity that sits embedded within all of the selling activity - as one. It's a cogent thought if you consider that consumers can shop the brand on their mobile devices while they're physically experiencing the brand at the retail level. So, why shop online when you're in a store? It's a different layer of convenience. The shop may not have the size you need, the right style or the quantities you were looking for. Perhaps it comes packaged in a way that you would prefer shipped, instead of schlepping it along with you on your day. Maybe it simply doesn't fit in your car.

So, do shopping centers have a future?

They do. If you look at the evolution of these physical locations, you will note how the more successful ones have evolved to meet the changing urban environment. Shopping malls used to be very linear in their construction and they were anchored by the big department stores. That dynamic has changed for a myriad of reasons that include issues of urban sprawl, technology and the evolution of consumer habits. What we're currently seeing are more shopping malls that have a more circular construction to them. They almost look like giant spiders whose arms might have a department store or two, but entertainment activities trump the mega-stores. Movie theaters, cafes, restaurants, comedy clubs, mini-putt and more have turned shopping centers into entertainment centers. The stores that are performing the best are becoming hyper-focused on providing much more than something to buy. Apple has the Genius Bar and Lululemon gives yoga classes. The stores have a smaller footprint, offer more services layered to the products and have an almost pop-up feel to them. A sense that they are not permanently there. Shopping centers continue to evolve into our town square. A gathering place for our community that transcends the former single-function of buying stuff.

...And this is just the beginning.

Walk into a modern shopping mall. What do you see? Bigger spaces with massive skylights (some real and some fake), sidewalk-like walking paths that give off the feeling of walking through an actual city center. This is all by design. This is all done to create a city within a city. Commerce plays an important, but not exclusive, role in this city. Brands and retailers are going to adapt to this. Big department stores will start to feel like a place that features many different brand boutiques. You will notice how stores will host a variety of engagements that include the traditional shopping along with virtual goods and services. Smartphones (or whatever mobile looks like) will be woven into the experience and will not be adjunct to it. People like to gather, to wander, to experience and to be with one another. It is one of the primary reasons that cities exist. They are places for us - as individuals - to be a community. True, not all shopping centers will survive, but the ones that can create a communal experience that transcends the transaction will thrive...

...And so too, will the brands that can be adaptive to this new consumer... this new environment. What are you thoughts?

By Mitch Joel


Comments Comments Feed
  • Posted by Tiffany Brown
    Mitch Joel

    The biggest trend in retail right now that I'm aware of is that big box retailers are shutting their doors across American and smaller "mom and pop" niche uses are moving up into shopping centers and areas of town that they could have otherwise never afforded before due to availability of space and Landlord desire to lease up space. In my local market alone, we've seen Circuit City, Super Kmart, Borders Books, etc. all close within the past few years due to simply being too big and having too much space to support their actual sales not to mention large grocery stores like Safeway and large retailers like Old Navy.

    I work for a global commercial real estate company (these are my own observations and not opinions of the company), and research just put out this quarter notes that sectors expected to see growth in 2013 will be smaller niche grocery concepts, fast-food/fast-casual restaurants, fitness services, dollar stores/thrift stores, automotive, wireless and financial services. Shrinking sectors will be traditional large grocery stores, video stores, book stores, office supply and traditional sit-down restaurants. As you can see, these trends are simply mirroring the needs of the economy. Much like your shopping center example above, businesses will have to adapt to both the market itself and the needs of its consumers while also taking into consideration their competition, just as before.

    But what's interesting about shopping centers, is that they didn't really pop up on the landscape until the 1950s when people were leaving the cities for suburbs and realized that they needed a centralized place to shop. According to this article, shopping centers provided “the needed place and opportunity for participation in modern community life that … American town squares provided in the past.” (http://retailtrafficmag.com/development/trends/retail_victor_gruen_say/)

    Because of this, the need for "shopping centers" will never completely go away, just evolve and morph into something slightly different. From town squares, to shopping centers, to malls, to mixed use projects, entertainment districts, and lifestyle centers, I think we'll continue to see a blurring of traditional retail in the future ... I've even recently seen suggested the rapid growth of the concept of "medretail," or mixed retail and office medical developments which will purportedly increase in growth to support the aging baby boomer generation.

    What I think we'll (hopefully) see go away over time are the carbon copy shopping centers across America that have the same 5-10 tenants in every development ... which I think are a reflection of the mass produced, industrial era way of thinking and does not sufficiently reflect the needs of modern society today. There are so many facets to this discussion that make it interesting (not to mention the changing trends in workplace structure and needs for office space) combined with the fact that the housing market is not as strong of an investment as it once was, and that multi-family developments right now are so hot across the country. I've even seen fully breathable office building concepts with residential and retail space embedded popping up ... check out CoExist for these types of stories. Fun stuff.

    Reply
  • Posted by Kirk Cheyfitz
    Mitch Joel

    Great post, Mitch. One of our London clients, Westfield, has built two incredible malls on the east and west side of London, both of which exemplify the future of retail as you describe it. More importantly, I think, is that you are absolutely right about all commerce becoming e-commerce as mobile and social take on increasing importance in every purchase, no matter where or how it's made. In the "great minds think alike" department :) I've just posted a piece on PandoDaily about the convergence of all retail commerce, looking particularly (as one example) at Walmart's efforts to recapture share in the $3.7 trillion US retail market. Would love to hear what you think about the "blurring line between physical and digital retail: http://pandodaily.com/2013/01/31/showrooming-and-the-blurring-line-between-physical-and-digital-retail/

    Reply
Add a Comment

Please complete all the fields below, including the spam filter (to prove you're not a robot).

  1. Fill in your email address to have your Gravatar photo included with your comment.
  2. Please type the word pixels here:
TrackBacks

TrackBack URL: http://www.twistimage.com/movabletype/mt-tb.cgi/3153