By: Libby Lassiter, EVP of leasing and development at Bayer Properties
There’s no doubt many once-packed malls have lost their luster, and the convenience of e-commerce has made in-store shopping shed a bit of its appeal and indeed its necessity. But a host of established retailers are proving to be flexible and adept at responding to changing shopping preferences with experiential offerings drawing customers to their stores. These retailers are creating experiences that are only enjoyable in-person and developers are responding by building or re-developing places people want to gather and dwell long before and/or after shopping. This phenomenon is “experiential retail,” and it is rapidly evolving as well as thriving.
Established retailers and newcomers alike are shifting the paradigm and embracing e-commerce that seamlessly combines a smart mix of in-store and on-property activations. These just cannot be replicated online and create not-to-be-missed, picture-perfect experiences fit for the age of social media.
But first, let’s take a quick look in the rearview.
The Emergence of the Shopping Mall
The original indoor mall created by Austrian architect Victor Gruen opened in suburban Minneapolis more than 60 years ago. He brought a unique vision to life, transforming an expansive site into a suburban oasis, activating the space with nature-inspired features like hanging plants, faux trees, and fountains to evoke an indoor town square feel. That first mall, Southdale Center, set the tone for the future of shopping patterns for baby boomers and changed retail for decades to come. The concept was about much more than just shopping; it too was about the experience. The mall was comprised of an ecosystem including big-brand retailers, specialty kiosks, and casual dining that attracted consumers from a variety of demographics, generations, and interests.
At the same time, with the added pressure of suburban sprawl, main streets were losing their sparkle. Malls started to pop up across the country, and people flocked to them in droves. They were fresh, new, clean, air-conditioned, and they delivered almost everything a shopper needed. The local mall quickly became a social and cultural hub offering one place for meeting friends and shopping, to filming television shows, or as a concert venue for an up-and-coming artist.
The Evolving Retail Industry
By 2005, there were 1,500 malls across the U.S., but what seemed unstoppable had already begun to lose its luster. Over time, countless mall owners failed to invest adequately in upkeep and experiences. Numerous malls became outdated just as many specialty retail categories started to be dominated by value-oriented, big box stores. To complicate matters further, open-air centers, many with manufactured main streets and the pleasing aesthetic of an adjacent traditional neighborhood development (TND), were blending more progressive retailers and dining concepts into appealing outdoor settings, a welcome respite from hours trapped inside a mall.
After a tremendous run that spanned six decades, malls, and retail as a whole, were especially disrupted by technology. More specifically, e-commerce. The convenience of the digital click-to-purchase world resulted in an extreme paradigm shift. Outdated malls and many of their retail tenants became challenged, mostly for failing to respond quickly enough to the massive change in click convenience and consumer preferences. Whereas malls once offered the convenience of one stop shopping, now ecommerce offered an even more convenient way to shop almost any retail category available.
Shifting the Paradigm
While you hear so much about how malls and many stand-alone retailers are struggling, and that brick and mortar retail is dead, the next generation of retail is evolving, growing and gravitating towards places that are more enjoyable. The shopping experience today is enhanced by developers offering guests a variety of unique activities geared towards changing tastes and trends all found within one project. Retail environments should be about creating an atmosphere with a sense of community, and one with the right mix of residential, retail, office, dining, and hotels which offer a tremendous opportunity to draw traffic throughout the week whether for work or recreation. In other words, a stay-cation. Retail today should not be the single driver, but instead, one of many experiences that compliment multiple facets of daily life: work, live, eat, stay, play, shop, enjoy.
Bringing Experiential Retail to Life
Developers who understand the importance of extending the consumer experience outside of individual stores and invest accordingly will be the likely survivors of this next generation of retail. Since we developers/operators don’t necessarily have a say in how our retailers perform within their spaces, we must make sure the common areas are drawing people to our properties and enticing them to stay for more than just buying goods.
People are attracted to interactive gathering places that appeal to the senses and emotions – the sound of a fountain splashing, fire pits crackling, kids playing yard games in natural outdoor spaces – and these experiences should be enjoyed leisurely with friends and or family. These are environments that are worthy of our time, are where we can gather with the people most important to us, make memories, and they can become part of our everyday rituals. Hosting activations like street concerts and complimentary yoga classes are now the norm and essential for maintaining an experiential property. Open container policies have also become an extremely popular value-add, especially in mixed-use properties, as this gives consumers the freedom to take their time, roam the streets with a glass of wine or a cocktail, walk the dog, and experience all of the sights, tastes and sounds. With every visit, we must give our guests a reason to return and stay. Entertainment and walkability are key.
The Rise of Technology and Social Media
Additionally, social media also plays a monumental role. It is an invaluable way to engage with our customers (both existing and prospective) and can create brand loyalty. Retail Dive notes that 62 percent of millennials say that if a brand engages with them on social media, they are more likely to become a loyal customer. But an equally important component is to create “Instagrammable moments.” A simple addition to a colorful mural or a unique, whimsical sculpture can be invaluable – especially if a hashtag is supplied to mark the spot. These are simple yet critical investments. They provide a point of connection and the opportunity for people to share their experience with a like-minded audience of friends, family and social gurus. No doubt, many traditional retailers were skeptical of the impact of e-commerce on their businesses early on. But those that engaged and embraced this format built an emotional connection with the customer.
A unique combination of environment, a walkable mix of uses along with exciting retailers, activations and human experiences are proving to be a powerful combination for the next generation of real estate. We think it’s an enduring offering worthy to be called experiential retail, and we believe it will survive and thrive for countless years to come.
Libby Lassiter joined Bayer Properties in 2005, bringing with her more than 20 years of retail leasing and management experience. She currently oversees leasing for the company in addition to development and construction. Before joining the Bayer team, she was associated with General Growth Properties Inc., in Chicago, Illinois, as Senior Vice President for Retail Redevelopment.
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