In the 1980s, more than half of US retail sales took place in malls. Over the years, malls have become a symbol of consumerism and go-to shopping hubs.
But times are changing.
More consumers shop online than ever before, and foot traffic to malls has decreased in recent years. The coronavirus outbreak has only sped up this trend, as health and safety concerns keep shoppers at home.
We’re now witnessing daily news of malls filing for bankruptcy or shutting doors. According to Coresight Research, 25% of US malls are projected to close within the next five years. Mandatory restrictions on in-store capacity limits only compound the issue.
"25% of US malls are projected to close within the next five years."
So what does this mean for the future of malls?
Malls that want to stay relevant over the next decade will have to reinvent themselves. Retail store owners have to meet customers where they are and offer a unified omnichannel experience, with inventory both online and in-store.
The reality is: malls might look quite different in the not-so-far-off future.
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The pandemic's role in the decline of malls
With the pandemic top of mind this year, customers have diverged from traditional shopping habits and opted out of in-person shopping—especially at malls.
A tracker from Placer.ai showed that shopping center traffic in the last week of November 2020 was down 42% year over year, while other reports indicate traffic at stores on Black Friday fell by 52.1% compared to the previous year.
"Shopping center traffic in the last week of November 2020 was down 42% year over year."
Instead of shopping at malls, there’s been a major shift to shopping online this holiday season.
In fact, from November 27 through November 30, Shopify merchants’ total online sales grew by 76%, to more than $5.1 billion—up from the more than $2.9 billion reported over Black Friday Cyber Monday weekend in 2019.
What does this mean for the future of malls?
2020 may be the turning point for shopping malls.
The pandemic put a spotlight on the inefficiencies of this retail format, and now it’s up to malls and retail store owners there to reinvent the shopping experience.
Some retail experts predict malls will transform and have different spatial and functional distributions in the upcoming years:
“Of the 1,100 or so enclosed malls that exist, perhaps half will still be standing as they were originally designed in ten years. … eCommerce will never completely replace malls, but there will be far fewer…and the economics will have to change.” — Web Smith, Founder of 2PM
The gap between the best and the rest shopping malls keeps getting bigger, too. According to Macy’s CEO Jeff Gennette, this year we’ve witnessed a bifurcation of malls, and lower-tier malls continue to decline rapidly.
CNBC reports there are roughly 380 C- and D-rated malls, which are considered the most at risk, as they don’t generate sufficient sales to maintain their property and have higher vacancy rates.
"There are roughly 380 C- and D-rated malls, which are considered the most at risk, as they don’t generate sufficient sales to maintain their property."
One of the frequently discussed topics is what the future of vacant malls may be. Predictions range from fulfillment centers and apartment buildings, with a small percentage of retail stores, homeless shelters, and health clinics.
The Wall Street Journal reported that Amazon is looking to buy up vacant mall space, which added to speculation that some malls may become distribution centers going forward.
What could the future of malls look like?
COVID has only accelerated the two parallel processes: the ecommerce boom and the fall of the mall.
As a result, mall owners and their tenants are scrambling to figure out how they can revive mall foot traffic and sales.
Omnichannel retail will likely be a big part of this equation, as well as other elements that could bring shoppers back to malls once again.
Prioritization of safety and convenience
Safety was a top priority throughout 2020. Brick-and-mortar stores applied safety protocols to keep shoppers and employees safe, and some of these initiatives may turn out to be tactics that stick around for the long haul.
Let’s look at a few.
The concept of shopping by appointment isn’t new. However, offering appointment-based shopping helps deliver personalized shopping experiences, which is on the top of the list when it comes to customer expectations for the future of retail.
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Neiman Marcus is one example of an in-mall retail store that has launched a digital hub during the pandemic.
With Your Neiman, shoppers can schedule one-on-one appointments in-store, select items for curbside pickup, or hop on a video chat with an expert Style Advisor. This allows customers to enjoy personal, engaging services (much like they’d expect in a traditional mall setting) that are safe and convenient.
Allowing customers to pick up their orders curbside has helped many retail stores within malls drive online sales.
"Online shoppers who chose local pickup at checkout were 13% more likely to complete their online purchase and they spent at least 23% more.
Brookfield Properties, one of the largest retail real estate managers in the US, launched a Curbside Pickup Program to address its mall tenants’ needs to create a safe and comfortable shopping experience for customers.
Customers have been slow to adopt contactless payments, but yet again, the pandemic has been a catalyst to mass behavioral change.
As reported by PYMNTS, during the first two months of the pandemic, 30% of consumers made mobile wallet transactions for the first time.
What started as a safety protocol soon became a preference. Why? Because contactless payments are faster and carry less risk.
According to Mastercard’s Contactless Consumer Polling, 51% of Americans are now using some form of contactless payment. This includes contactless payment cards, tap to pay, and mobile wallets like Shop, PayPal, Google Pay, Apple Wallet, and Samsung Pay.
Redefined store formats
As retail continues to evolve, stores within malls have to reinvent themselves to stay relevant and make the most of their (costly) retail store space.
Both big retail players and small direct-to-consumer brands are now testing the waters with smaller stores focused on experience-driven shopping. Pop-up shops and micro-retailing have become increasingly popular. Aside from being less costly, they also encourage retailers to think outside the box.
Many of these smaller-scale shops and boutique storefronts rely on experiential shopping. This approach helps them capture the look and feel of local mom-and-pop shops paired with technology that helps them drive sales. As a result, customers get to experience nostalgia for the old retail store concept and the ease of tech-equipped shopping.
Lingerie business LIVELY, for example, started as a digitally native brand. However, soon it incorporated brick-and-mortar retail stores as a vital part of its growth strategy.
According to its data, the brand’s average order value (AOV) is between 60%–80% higher among customers who book fitting sessions online versus those who just walk into one of its stores.
The combination of bricks and clicks has helped LIVELY create an engaging business model with meaningful experiences at every touchpoint.
Greater use of technology to engage customers
Today’s customers compare shopping with you to the best shopping experience they’ve ever had, which, in turn, constantly raises the benchmark when it comes to customer expectations.
Luckily, the use of technology helps retailers keep up with customers’ preferences and deliver engaging experiences online and in-store.
Customers still look for a human interaction that instills confidence and brings them closer to the Add to Cart button. Customers can now shop virtually via chat and video and get a closer look at the product they want to buy.
Beauty and skincare brand Credo Beauty has seen up to a 21x increase in online conversions when virtual shopping is deployed, compared to those who shop unassisted.
Personalized virtual consultation has a positive impact on the AOV as well: customers who get a virtual consultation routinely spend up to 70% more, while one in three customers will visit in-store after interacting with a sales associate online.
"Customers who get a virtual consultation routinely spend up to 70% more."
Having a limited physical footprint makes it impossible to showcase a wide assortment of products. That’s where an endless aisle comes in handy.
An endless aisle helps retailers merge online offerings with their brick-and-mortar locations to bring the best shopping experience to their customers.
Suppose the future of malls is micro retailing and experience-based shopping. In that case, in-store kiosks will empower retailers to display their complete online assortment in-store and allow customers to order products that are out of stock or not sold in-store (and have them shipped to their homes).
COVID has accelerated the adoption of advanced visualization technologies. Due to the pandemic, many retailers prohibit customers from physically testing products.
The solution? Retailers are turning to augmented reality (AR) and virtual reality (VR) to let customers digitally test out thousands of products. Not only does it make shopping easier, but customers also love using immersive technologies.
According to Google, 66% of people say they are interested in using AR for help when shopping.
"66% of people say they are interested in using AR for help when shopping."
One example of this at work: award-winning makeup and skincare brand Charlotte Tilbury uses a virtual Magic Mirror to help customers overcome choice paralysis by enabling a try-before-buy experience free from hygiene concerns.
Unification of in-store and online merchandise
Retail went through different stages and phases to reach a present where one thing is sure: the future of retail is omnichannel.
In recent years we’ve seen retail giants invest heavily in ecommerce, but also tech-savvy digitally native brands open up physical locations within malls.
Customers expect an engaging, seamless, and channel-agnostic experience. That’s why customer-centric brands focus on creating unified end-to-end shopping experiences.
One of the biggest hurdles for mall stores is how to turn visitors or one-time buyers into loyal customers. The key: one system to manage all inventory. Retailers need a single streamlined system that automatically syncs their data and makes it easy to manage their business from anywhere.
The path to purchase is everything but linear.
You’ll see customers browse online, purchase in-store or the other way around. Today, retailers offer customers the opportunity to buy online, pick up in-store (BOPIS), but also buy online, return in-store (BORIS).
Aware of the importance of last-mile delivery, shopping center owners General Growth Properties, Westfield, Macerich, and Simon have invested $4.5 million collectively in delivery service Deliv and rolled it out to various malls.
As reported by the International Council of Shopping Centers, Deliv uses crowdsourced personnel to provide shoppers with same-day delivery of online or in-store purchases from mall tenants at prices equal to or less than standard shipping fees.
The secret to retail success is bringing your in-store and online sales together. Incorporating the right POS technology makes a number of things possible, including personalized shopping experiences, email reminders for in-store favorites, integrated loyalty programs, and frictionless returns, and unified reporting.
Personalized shopping experiences
Consumers are in the driver’s seat—they know what they want and they have enough information to make data-driven decisions.
On top of that, they’re looking for a personalized approach that answers their questions and gives them peace of mind so they can rest assured they’re making the right choice.
As a result, in-store mall sales associates should act as personal shopping assistants and support customers throughout their buyer journey.
The good news: gathering data is easier than ever. Not just on an individual or store level but on a higher shopping center level. Malls can collect valuable information by simply offering free WiFi.
“By agreeing to the terms and conditions when they connect to it, many shoppers are also agreeing to having their data tracked and used by the property owner,” says Melina Cordero, CBRE Head of Retail Research in the Americas.
"By agreeing to the terms and conditions when they connect to it [WiFi], many shoppers are also agreeing to having their data tracked and used by the property owner.”
Unlike in the past, when malls had limited customer insights, today, thanks to big data, they can rely on different systems such as CRM, car parking, WiFi, and apps to gather invaluable information that helps retail stores deliver a more personalized experience.
Stores can also use geofencing and send targeted messaging to consumers’ phones once they enter a certain parameter within the mall (such as being 50 feet from the storefront).
One of the well-known brands that relies on this technique is Starbucks. The coffee company uses geofencing for advertising drinks and offering discounts to customers near their locations.
The future of malls: What’s next?
Moving forward, it’s clear that malls will still have a place in the retail ecosystem. However, they’ll likely have a different look and feel.
As the physical retail landscape evolves, shopping malls will be all about experience per square foot.
Customers don’t think in terms of channels—they expect an outstanding shopping experience from URL to IRL. To meet growing customer expectations, retail store owners within malls need to focus on an omnichannel approach with a unified online-offline experience.
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