How to save shopping malls by making them the chosen third place?

After my post on the retail apocalypse, I received emails on perspectives to “save” the shopping mall. So here’s my take. Position it as the chosen Third Place.

Let me paint you a scenario. On an unseasonably warm day in April, a swarm of tourists gathered at the entrance to the Westfield World Trade Center, Manhattan’s newest mall, marvelling at the sunlight pouring through the soaring white cathedral of the Oculus. Many posed for selfies, while others asked passers-by to snap photos of them and their families.

Others were passing through on their way to work; the mall sits on top of the city’s biggest transit hub. A group of twenty-somethings were en route to Hudson Eats, the food court boasting New York-only food vendors at the nearby Brookfield Place mall, which can be reached by an underground corridor. The crowds, on a beautiful day in a city renowned for shopping, demonstrate a certain paradox; at a time when many are proclaiming the mall “dead,” shopping centres like Westfield World Trade Center — which houses luxury tenants like Smythson and Dior Beauty and is set to attract over 100 million visitors a year — are thriving.

Thankfully the scenario above is real.

Shopping malls have always sought out to be the third place. But this has waned with different choices such as coffee shops, community centers etc. Toss the changing landscape and demographics. Could malls do better to first stay relevant.

Convenience was central to the conception of malls. They were first designed as one-stop shops for consumers to buy everything in a single place. It wasn’t a new concept; shoppers in urban areas had been flocking to large department stores for over a century. But the growth of suburbs in the mid-20th century created new needs. In many cases, suburbanites also needed places to hang out, and emerging shopping malls, from the very beginning, functioned as both retail destinations and town centres.

Convenience is still king among consumers — but malls can’t compete with the internet. This may be one of the more insidious effects of online shopping on the mall landscape. While the needs around shopping are lessened, consumers’ need for a ‘third place’ is still very real.

Malls are being forced to redouble their efforts to offer more than an opportunity to shop. While in the past, a movie theatre or speciality food store might have cut it, today consumers expect a good deal more.

The ‘third place’ is a not explored by sociologist Ray Oldenberg in his book The Great Good Place; if home is the ‘first place,’ and work is the ‘second place,’ the ‘third place’ is an informal gathering space where people can mingle outside the realms of the first two environments. Besides being good for the community, third places can be cash cows; it’s why Starbucks worked the concept into its mission statement. And pioneering mall owners are following suit, creating mixed-use spaces that provide reasons for consumers to visit regularly, and whenever possible, linger. Hey, it was convincing enough for Starbucks to take it on as part of their strategy.

In today’s hyper-connected, hyper-mobile age, consumers get bored easily. A mall with the same brand names as everywhere else has no draw. It’s a fact that Iguatemi, which owns some of the leading upmarket malls in Brazil, is well aware of. The company strives for a democratic and diverse mix that includes brands that are distinct to the location: “Part of Iguatemi’s DNA is to mix local Brazilian designers with international brands,” says Jereissati. At the São Paulo location, affordable Brazilian brands like Ellus and Iodice mingle with the likes of Chanel, Gucci and Prada.

Malls’ usually unforgiving lease agreements make pop-up shops — a key trend in street retail — difficult to pull off, so property managers must take extra care to select the right tenants. As a result, the property has a number of flagships and unique retailers; most recently, it added Miami boutique The Webster to the mix. The strategy has paid off:

But while retail mix is a vital component. Having that correct balance to attract foot traffic. And trust me, foot traffic to retailers within malls is like oxygen. Cut it off and everything dies. It is also akin to online traffic. So let’s see the components of the mix.

Food and Beverage

The fastest way to get people to hang around is to feed them. So it’s no surprise that the food court has become an important battleground for malls. And with so-called foodie culture going mainstream, once-typical fast food offerings no longer cut it.

Food is at the centre of the Howard Hughes Corporation’s redevelopment plans for New York’s South Street Seaport, the 170,000 square foot building where Milan boutique 10 Corso Como will be opening an outpost. The company has confirmed that Jean-Georges Vongerichten and David Chang will have locations there, as well as a 40,000 square foot Eataly-style market in the historic Tin Building. The tricky part is that everyone only has one stomach, so you better make the food offering worth filling that stomach and also offer other options to visit, which brings me to the next point.

Environment

Malls are also experimenting with other ways to keep shoppers entertained. At the base level of that initiative is creating a space that shoppers actually want to be in. “What makes malls difficult is that they’re controlled environments, which is inherently inauthentic,” says Schley.

At South Coast Plaza, it’s as simple as having fresh flowers. And to make the mall Instagrammable.  South Coast Plaza pays a lot of attention to detail on how they build and plan the interiors of our malls, with the key intent to have beautiful environments filled with flowers, art, great design and architecture.”

The Dubai Mall (TDM) is a good example of how important it is to have a social media-friendly environment. TDM in particular is clever at blending digital with real life — social media penetration is very high here and the mall and its surrounding area offers plenty of content creation opportunities.

Entertainment

Special events and cultural initiatives also generate foot traffic. In August 2016, Westfield acquired the production company of Tony-winning Broadway producer Scott Sanders, installing Sanders as the company’s creative head of global entertainment. Cultural and art events will also be a big initiative for South Street Seaport, which is expected to soon unveil the name of the artist who will be creating a “sculptural element” on the roof, which Weinrib hopes will “become an icon for the city and an attraction in itself.”

Meanwhile, South Coast Plaza has enjoyed the benefits of being next door to the world-class Segerstrom Center for the Arts. The two properties are owned by the same family and regularly partner for events to great effect. The mall’s lunar New Year festival, for instance, helped drive sales in January, a typically slow time.

In 2016, when Iguatemi celebrated its 50th anniversary, it marked the occasion with the re-opening of its beloved Mini Plaza, the heart of the company’s original flagship, Iguatemi Sao Paolo. Along with the unveiling of Saint Laurent and Cartier boutiques, the centre played host to an installation by Argentine contemporary artist Leandro Erlich.

Kid Friendly

Today’s consumers want their children to have a good time too, an expectation not lost on developers of TDM and Mall of the Emirates (MoE) in the Middle East. Both malls have top-line attractions — the aquarium and fountains in TDM and Ski Dubai in MoE — in addition to mini theme parks with scaled-down rollercoasters. Two companies capitalising on this demand are Cinepolis — which has added jungle gyms and a playtime intermission to its kid-focused cinemas — and Kidzania, which features a child-size replica of a city in which children can role-play at bottling Coca-Cola and pulling teeth in a Crest-themed dental office. Putting aside criticism that the latter is an early form of consumerist indoctrination, both have proven successful additions to luxury malls, particularly in the Middle East.

Mixed Use

Once shoppers have been enticed, the trick is to keep them coming back, ideally with tenants that invite habitual visits. While Westfield has always been keen to incorporate grocery stores and gyms, which invite repeat visits, they’d meet with resistance from department stores and anchor tenants, who complained that such businesses would only consume parking, not drive sales. Now, the thinking has changed.

A key area of growth for Westfield has been the health and wellness sector, particularly “micro-fitness,” meaning boutique concepts like Barry’s Bootcamp and SoulCycle. In September 2015, Westfield opened The Village Topanga in California, a complement to Westfield Topanga across the street, with a focus on health and wellness tenants.

The Village boasts two gyms, athleisure brands including Kate Hudson’s Fabletics, Yoga Works, Burke-Williams Day Spa, and a UCLA Health Clinic, which offers high quality medical care in an atmosphere that Hecht describes as more Equinox than doctor’s office. The Village added an additional 7.5 million annual customer visits to Westfield Topanga’s; as of February 2017, Topanga’s overall traffic was up 3.6 percent on a moving annual basis, with over 21 million shoppers visiting the centre every year.

Hecht also sees an opportunity in the “dayworking” space. The company has already dipped its toes into the arena with its Bespoke concept, a combined co-working, event and tech demo space designed to foster a retail and tech community, at its Westfield San Francisco Centre. With the same goal in mind, the Middle East’s TDM and MoE are both anchored by hotels and a supermarket.

Residential

Westfield has been developing mall-adjacent residential properties, a no-brainer because doing so will not only create a revenue stream from rent, but will also increase foot traffic to stores. The lines are blurring between where you work and where you play and where you live, the trend is more residences and office spaces attached to malls.

The changing shape of the mall looks set to continue. The future of driverless cars, for instance, is already on Hecht’s mind. And no wonder, mall operators, typically devote 30 to 40 percent of property to parking. Indeed, the mall as we know it is being reshaped by a wide range of technological forces, from the e-commerce boom of the past decade, to the ride-sharing movement of today, and the self-driving cars of the near future.

While each of these developments presents its own set of challenges, for savvy property owners there’s plenty of opportunity not just to survive — but to thrive. continue to innovate and be relevant.

Check out my related posts:

Is there a retail apocalypse coming?

How can bookstores reinvent themselves?


Interesting reads:

http://ucr.com/news-trends/2015/05/third-place-retail-meets-community/

https://www.washingtonpost.com/news/digger/wp/2016/05/12/macys-woes-could-doom-a-third-of-americas-malls-analyst-says/?utm_term=.0ba83ba46c91

http://articles.baltimoresun.com/1996-03-18/news/1996078026_1_victor-gruen-crossroads-mall-convivial

https://opinionator.blogs.nytimes.com/2009/06/01/rethinking-the-mall/

http://www.indiaretailing.com/2013/06/12/shopping-centre/will-the-vanishing-third-places-add-first-life-to-the-shopping-malls/

http://montgomeryplanning.org/blog-design/2012/07/a-new-generation-of-malls-track-downtown-again/

https://www.businessoffashion.com/articles/intelligence/a-new-model-for-shopping-malls

https://ixtenso.com/en/story/31935-from-shopping-center-to-third-place.html

http://www.zerohedge.com/news/2017-03-07/third-all-shopping-malls-are-projected-close-space-available-signs-go-all-over-ameri

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