As American malls lose traditional department store flagships and other retailers, the path forward is likely in reimagining malls as "consumer engagement spaces" that cater to consumers "less interested in owning things than in having experiences and accessing functionalities," according to a new report from global management consulting firm A.T. Kearney.
The U.S. is "dramatically overstored," especially compared to other countries, where urban planning and the evolution of technology have spurred a much different retail evolution, according to the report. There's some 24 square feet of commercial retail space for every American, compared to a fraction of that elsewhere in the world, the authors say.
Technology and demographics are also driving change, much more so than during retail's heyday in the 20th century, the authors said.
"The Future of Shopping Centers" report is a clarion call that rejects the notion of a retail collapse, but nevertheless exhorts fundamental change in retail centers.
"It's important to remember that while the pace has slowed a bit, retailers are still opening new stores every year," Michael Brown, a partner in A.T. Kearney's consumer products and retail practice and an author of the report, said in a statement. "The future of retail real estate is as robust as the industry's imagination. That said, for operators of these new centers, future success depends to a large degree on being able to 'unlearn' the lessons of the past."
Authors Brown and A.T. Kearney Business Development Manager Matt Lubelczyk envision four basic approaches to such spaces:
- Destination centers, centered around a large attraction with a compelling social element
- Innovation centers, sort of large-scale pop-ups that test retail concepts
- Value centers, drawing their identity — and tenants — from shared values anchored by an idea, like animal rights, or an ethnic or community identity
- "Retaildential" spaces, targeting specific demographics like young urban hipsters, single 40-somethings or retirees, with a mix of goods and services aimed at their needs and desires
It's incumbent upon landlords and tenants to work together to catch up to the more successful retail configurations found abroad, which evolved in a much different environment than in the U.S. Domestically, big box retailers and department stores have anchored malls in outlying areas, without regard to demographics or technology, often based on adjacency to highways or main roads, according to the report.
By contrast, in Europe there is more mixed-use development and retail that is located close to transportation hubs. In Asia, meanwhile, mobile and internet shopping has expanded quickly, so that legacy retailers early on embraced e-commerce, which protected them when digital pure-play e-retailers emerged. Asian department stores, in Japan in the 1990s for example, long ago morphed into destination malls.
And culture and lifestyle have greatly shaped commercial development in Asia, where sports facilities and eateries have long been associated with shopping centers.
"In the future, retail-based real estate will be environments where people gather to engage with friends, connect with like-minded shoppers, seek out unique experiences, reaffirm values and interactively relate to brands on a personal level," Brown said.