Shopping malls are rapidly losing ground to online shopping and off-mall locations. To get shoppers back, malls are investing in traditional tactics -- luring customers to food courts and restaurants -- and newer strategies like adding skating rinks, amusement parks and museums. Here is a look at the secrets shopping malls won't tell you.
1. "We're a dying breed."
Not long ago, Zan Jones, 43, took a trip to a mall in her hometown, Plano, Tex., and came home slightly depressed. The mainstays were still there Dillard's, Sears, and a diner she's known since her teenage years but in between the familiar landmarks, she found empty storefronts, "For Rent" signs and sloppy temporary shops. "I felt kind of nostalgic," says the marketing professional and mother of two. "It just used to be so great."
It's a common feeling. Shopping malls, once a hub of suburban commercial life, are swiftly losing ground. And it shows: vacancies at regional and super-regional malls topped 9% in the first quarter of 2011, up from 5.6% four years ago, according to market researcher Reis, Inc. "We've seen malls at the highest vacancy rates since we've been tracking them for the last 10 years," says Ryan Severino, a senior economist for the firm. And more may be on the way, because of clauses in many leases that allow retailers to opt out if a mall can't retain a major department store.
The empty store fronts make malls less appealing for consumers, and create a ripple effect, says Philip Martin, a real estate investment trust strategist for Morningstar. That's only enhanced the power of online retailers: Online sales grew 12.6% last year to $176.2 billion and are expected to increase at a compound annual rate of 10% through 2015, according to Forrester Research. In contrast sales at all brick-and-mortar stores in and out of malls rose 3.7% in 2010 and are expected to grow 4% this year, according to the National Retail Federation. But that modest growth won't save the mall, says Michael Niemira, vice president of research and chief economist for the International Council of Shopping Centers. Many large retailers are downsizing to smaller locations, now that they don't need such large display floors or inventory space, he says: "Now 'big box' is a smaller box."
2. "Thank goodness you're hungry."
More malls are investing in a tried-and-true tactic to get shoppers to stick around: feed them. The theory is simple, says Niemira. If people aren't rushing home for lunch or can get a snack for a screaming child and stay in the mall, they'll stick around longer. "And obviously the longer people stay the more likely they will spend money," he says. In the interest of keeping shoppers in the building, some malls are renovating their food courts to bring in more local eateries, while others are opening new wings dedicated to high-end restaurants. Department stores are also dedicating more square footage to food by adding and expanding restaurants. Not long ago, the Filene's Basement at the Stamford Town Center in Stamford, Conn. was torn down and replaced with seven restaurants, including a P.F. Chang's China Bistro, California Pizza Kitchen and The Capital Grille, says Bill Taubman, chief operating officer of Taubman Centers, which owns the mall. "We absolutely think that it's helped the shopping center both in terms of the number shoppers as well as the quality," says Taubman. Arun Sharma, a marketing professor for the University of Miami School of Business Administration says the strategy is being duplicated at other malls.
There's another reason malls are devoting more space and money to their food courts. Shoppers spend almost 20% more at a mall with a "good food court," according to a 2007 survey cited by Sharma. And good, medium or otherwise, shoppers overall are spending more money on food at the mall, according to the International Council of Shopping Center. Food courts brought in $792 per square foot in 2010, up 5% from the year before; restaurants brought in $459 per square foot, up 4% from 2009.
3. "Mall? More like an amusement park."
Tweens eager to catch a glimpse of Disney star Selena Gomez can shell out up to $120 for concert tickets or they can save their cash and head to the mall. As malls turn to celebrity appearances, on-site health screenings, fashion shows and more, the Simon Property Group, the biggest mall developer in the U.S., has added the 18-year-old Gomez to its roster for a series of question-and-answer sessions. The result: an audience of 3,000 to 6,000 people per event, says Simon spokesman Les Morris, some of whom undoubtedly stick around to buy clothes, accessories and hot pretzels. The effect, consumer psychologist Kit Yarrow says, "is kind of like Santa on steroids."
With consumers finding easier ways to get their stuff, shopping malls have become less about shopping and more about entertainment. Malls are adding skating rinks, amusement parks, movie theaters and museums to draw people in. The Mall of America is the classic example, but in 2010, a group of car enthusiasts added an auto museum to the Pavillions at Talking Stick shopping center in Scottsdale, Ariz., and a 26,000-square foot aquarium opened in another Arizona mall. "Most shopping mall operators have realized they can't sit back and just be landlords," says Paco Underhill, author of "Call of the Mall." "They have to be place makers." The extra activities can translate into extra revenue, at least according to a survey by the National University of Singapore. There, people who went to a movie theater in a shopping center spent between $99 and $130 a month at the mall, 10% to 45% more than those who skipped the flicks.
4. "Our gift cards also take."
Mall-wide gift cards seem so appealing. Why tell a recipient where he or she should shop? Instead, with one card, he could choose a kitchen gadget at one store or a golf shirt at another or both! But in spite of new federal rules designed to rein in various fees and limits, mall-wide gift cards often come with strings and conditions that aren't present in cards issued by individual stores, says Daniel Horne, a marketing professor for Providence College who tracks the gift card industry. Monthly inactivity fees may kick in for cards issued by major mall chains --which typically carry a Visa or a MasterCard logo -- if they haven't been used for a year, says Horne. And cards issued by local malls may come with additional restrictions on where those cards can be used, says Kwame Kuadey, chief executive of Giftcarderscue.com, a website where people buy and sell gift cards. Sometimes, the cards cannot be used at particular stores. Visa said in a statement that its gift cards are issued by various financial institutions that are free to assess fees and that it offers additional protections against card theft and fraud. MasterCard did not respond to requests for comment.
Shoppers should also be skeptical of promotional gift cards given to them by shopping malls as part of promotion because they aren't subject to the new rules, says Kuadey. Those promotional gift cards can come with tight expiration dates, unlike traditional cards purchased by consumers, which cannot expire for at least five years. Malls are offering more of these gift cards to consumers who spend a certain amount as a way to encourage shopping but they may not apply to certain products, says Horne. The cards can come in handy for planned purchases, but don't let the deadlines lead to impulse buys, he warns.
5. "We're following your every move."
With apps and technology to serve up deals to customers the minute they step through the doors, malls are firmly embracing the smart phone crowd. Shoppers can download an app like Shopkick, which offers gift cards and certificates to consumers who "check in" at different stores. But the location-based program (and others like it) may feel a little creepy, says Ryan Goff, social media director for MGH Inc., a full-service marketing agency based in Baltimore. In order for the program to communicate with a shopper's cell phone, the mall has to install tiny transmitters at entrances and participating stores, so the program knows when a customer enters the mall or walks into a particular store, according to Shopkick. Still other malls are using Bluetooth technology to send alerts to consumers' smartphones as soon as they enter the mall and while they move throughout the mall, informing them about special events or sales at stores they're approaching, Goff says.
And while some shoppers are happy with the deals, others aren't comfortable with sharing their every move, says Goff. Shopkick tracks the number of shoppers who use the app, where they go, and what they do, according to a company spokeswoman, then reports the aggregate data to the mall and the stores. She also says the firm does not give out data on individual users, and that consumers must have their app open for data to be collected.