Across the United States, the business of retail is in for a rude awakening. The decline of shopping malls has been obscured by a turbulent political climate. One in ten Americans is employed in retail, an industry with a murky future due to overbuilding and changing consumer habits. Reports from around the country indicate that the death of retail, and by extension, the collapse of shopping malls is already underway.
Macy’s recently accounted that it plans to cut more than 10,000 jobs. This overlaps Macy’s announcement to close 100 stores to cut costs, and in the next year, Sears and JC Penney plan to close more than 200 stores combined. Layoffs are the new norm— the U.S. has lost 20,000+ retail jobs in the last three months.
The mainstream media has finally caught onto the societal magnitude of this decline. Derek Thompson, a senior editor at The Atlantic says we are witnessing “a great retail apocalypse,” while the New York Times was more sinister in their analysis in an article titled “Department Stores, Once Anchors at Malls, Become Millstones.” Retail developers are lost and desperately searching for solutions — perhaps because there are none.
Although the economic outlook for shopping malls (and the retail stores that grew with them — J Crew, Abercrombie & Fitch, Wet Seal, etc.) may look grim, we are beginning to see clues that may showcase the new shape of the retail landscape. To escape the fire and rise from its ashes, companies must adopt new assumptions about modern consumer purchase behavior. This begs the following questions: will retail shopping malls, which once served as the bastions of suburban life, descend towards irrelevancy? Or can retail shopping malls survive the turbulent winds of technological disruption?
As American boardrooms shift their strategic focus to the behaviors of digital natives, executives must adapt to their desires and part ways with long-held operating assumptions. The shift will likely come with new business models and changing cost structures. As mall developers shift their strategy towards the needs of a younger generation, their strategy should rest upon four pillars.
1. New Assumptions
Retail experiences designed for the digital world require new ways of thinking about the economy and the levers that drive consumer spending. In this new age, the power has shifted to consumers who have more choice and information than ever before. Today’s shopping malls were planned and built with different assumptions about the way the world functions. By bundling stores into a concentrated location, consumers could discover and purchase essential and non-essential goods in a single place. As malls became a destination, the popularity of shopping grew rapidly. Malls excelled due to unmatched convenience and the increased spending that resulted from said convenience, but today, American shopping malls rest on a destabilizing foundation.
Since moving into my Hoboken, New Jersey apartment last summer, I have purchased all essential and non-essential goods on Amazon including my mattress, kitchen utensils, and basic clothing. It takes less than a minute to make a purchase on Amazon, equal to the amount of time it takes to walk downstairs and hop in an Uber. Amazon has disrupted shopping malls with convenience — price, selection, transparency, customer service, and soon, speed. To defeat the turbulent winds of technological change, shopping malls must compete on vectors that technology cannot accommodate — such as fostering human connection, live entertainment, community-building, and other out-of-home experiences.
The rise of digital platforms like Netflix, Facebook, and YouTube has boosted the entertainment factor of the home, a trend that’s been propelled by a 2600% increase in the number of gamers since the PlayStation was released in 1994. The opportunity cost of visiting a mall has never been greater. Malls, which once competed against television and movie theaters, now compete with a plethora of immersive and addictive entertainment services and social networks. Amazon is not the only culprit contributing to the decline of shopping malls.
Malls and the suburbs that enabled them were built around the automobile. To accommodate large swaths of people, and the cars that transported them, shopping malls built large surrounding parking lots, which swallowed up a sizable percentage of their valuable suburban real estate. As self-driving cars and transportation services like Uber shift the way we transport ourselves, malls can convert parking lots into green spaces, restaurants, and entertainment centers. As a result, the land that was once monopolized by cars will be utilized by people in new ways. Malls who navigate these changes wisely will see spaces they already own rise in land and public use value.
The shopping mall experience must reflect the realities of the 21st century, from transportation, to entertainment to culture. The malls of the future can only thrive by confronting these contemporary shifts and building for a technologically advanced world.
2. Entertainment Bundle
Shopping malls transformed the act of shopping for non-essential goods into a form of entertainment. They sold status and amusement to the upper echelons of American society who could afford to spend an afternoon shopping and consume beyond their basic needs.
I distinctly remember the stores at Stonestown Galleria, the local shopping mall nearby where I grew up in San Francisco. I frequently visited the mall in search of Panda Express, See’s Candies samples, GameStop, and the San Francisco Giants Dugout Store. My purchases were infrequent because trips to the mall were more about entertainment than making a purchase. The local mall was a place to escape home, spend time with friends, and enjoy the independence. I wasn’t the only one. For teenagers, the mall was a safe indoor place of freedom; a place to spend their allowance and eat junk food. For decades, malls were successful because they entertained parents with their children in tow. Malls were a sanctuary for parents to explore fashion, escape household mundanities, and conveniently drive to an active, safe destination to shop and dine. An afternoon at the mall offered a sense of accomplishment that benefitted all parties — kids were happy and parents were satisfied with both the diverse retail choices and the convenience of making material purchases, which grew the American economy.
Most of the material things we purchase at shopping malls are non-essential. Entertainment may continue to serve as the primary value proposition for suburban malls, but shopping as a form of entertainment will look dramatically different. Tactile experiences, from shopping, to entertainment, to recreation will draw the most visitors.
Shopping malls should welcome guests with a variety of sensory experiences that cannot be replicated digitally or anywhere else. They should unite communities via outdoor experiences, sports, classes, food, drink, and socializing interactions. Shopping malls are democratized entertainment bundles for all ages and that value proposition does not need to change.
3. The Memory is the Product
Until recently, memories were a personal experience. They lived on through flashbacks and spread through stories. Today, with cameras in our hands and on our bodies at all times, process every experience as a potential social media post, quantifying our activities in terms of how many likes a potential future update would garner. Jean Baudrillard, one of my favorite media theorists calls this the “museumification” of society. Baudrillard looks at this phenomenon with a critical lens, but it represents a major opportunity for mall developers. The value of a modern experience sits in direct relationship to its ability to be photographed, shared, and leveraged as a status symbol.
This phenomenon manifests itself in New York City’s market for “doors off” helicopter tours, which has emerged as a hot fad in the past five years.
Companies such as FlyNYON do not just sell exclusive helicopter tours. Instead, they sell the actual experience, which finds permanence through the inevitable Facebook post and integrated palpable experiences, memory and socialization. FlyNYON is acutely aware of this — they sell a collection of Instagram photos of the entire helicopter ride, with the passenger positioned as the hero. These photo collections sell status in the same way a Louis Vuitton bag once did. Your immediate friends may see the bag, but your entire social network and the world at large can fawn over your Instagram.
We can dig up clues about the future of retail from the diction of FlyNYON’s helicopter tour description: “Experience the surreal nature of floatingabove these magnificent cities while snapping shot after shot from amazing and unthinkable photos. Warning: Our frequent flyers prove that this experience is addicting, the rush is unforgettable and the photosyou’ll get will be breathtaking.”
Status is transitioning from a function of what you own to what you do, from liquid assets to social capital.
The strategy of turning the pursuit of status into an enjoyable experience is robust, but the tactics must shift. Modern high-end brands such as Equinox and ByChloe depend on Instagram to inspire organic growth.
Equinox conveys status via exclusivity and a shareable commitment to fitness. The fitness brand sees itself as a mecca of health and wellness (which members oft demonstrate through Instagrams of their workouts) that empowers its membership to achieve its loftiest goals.
ByChloe, a vegan restaurant in New York City conveys status via global awareness and conscientiousness. ByChloe encourages people to document and share their experience with 1980s style signage, PopArt typography, and clear calls-to-action. One Yelp review reads: “After seeing it on my Instagram for so long, I had to try it.” A trip to ByChloe is incomplete without an Instagram, a reality that is baked into the fabric this restaurant.
To attract young shoppers, malls should create interactive memorable and sensational experiences that are always evolving. New attractions inspire photos, photos inspire Instagrams, and Instagrams boost a destination’s perceived relevance. Like the fashion brands who thrive within them — such as H&M and Zara — shopping malls should embrace a state of constant evolution driven by weeks instead of seasons. Santa’s visit under the Christmas tree should be replicated as consistently as possible. Malls developers should focus on modern status symbols, many of which are driven by smartphones and the cameras that make them so powerful.
4. Community Building
Victor Gruen, the father of the American mall industry, originally set out to mimic the cultural centers of Vienna, Austria — where he was born. He envisioned shopping malls as centers for social interaction and community engagement, both of which could combat suburban isolation. Shopping malls would become majestic indoor-outdoor experiences that combined balconies, food, drink, zoos, sports, and community centers that mimicked traditional European town squares. Gruen’s vision was never fully realized, but his words still carry weight as we look towards tomorrow. In the future, retail experiences will foster friendship between guests and generate loyalty via community.
Modern mobile apps allow communities to emerge spontaneously in physical places. The apps that we use habitually — Facebook, Instagram, Snapchat, etc. — are a modern manifestation of a clock tower’s silent chime, a historical convening mechanism in the traditional European town square.
To illustrate the convergence of retail and community, look no further than the world’s most valuable company: Apple. The company is known for visually stunning retail stores that foster human-to-human connection between passionate customers and ignite their creative spirits. The company recently introduced a new program called Today at Apple to drive regular foot traffic to Apple’s retail stores. Apple encourages its customers to do more of what they love, learn, share, and experience their Apple-related passions — music, photography, videography, art, and coding — together. The initiative is enhanced by photo walks, how-to sessions, camps for kids, and live music performances that transform Apple stores into community centers.
Taking guidance from Apple, shopping malls must become recreational centers, as well as venues for education and entertainment. In turn, mall development initiatives should revolve around community engagement (instead of merely selling objects) with indoor-outdoor experiences that combine food, music, learning centers, and creativity rooms — all of which should be dynamic and easily interchangeable. These entertainment hubs should be safe and enjoyable for guests of all ages and reflect a variety of ages and interests.
The malls, and retail stores within them, that foster friendship, shared experiences, spontaneous encounters, and hold tactual events can thrive in the digital age. Technology may make our lives more convenient, but it cannot augment the essential subtleties of human connection. Our success as a species has always depended on our ability to communicate and interact.
Shopping malls may be able to rescue themselves after all.