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How Shopping Malls Are Adapting In An Online World

Nov 27, 2013
Originally published on November 27, 2013 11:49 am

Traditional shopping malls took a big hit after the economic collapse. Problems at big retailers Sears and J.C. Penney — two of the biggest mall tenants — could signal even more troubles.

But malls are trying to adapt. As online shopping grows, things are getting more and more competitive out in the real world of brick-and-mortar retail.

The South Coast Plaza in Costa Mesa, Calif., shows just how competitive the mall business can be. The Orange County shopping center is one of the most successful high-end malls in the U.S., and it offers all kinds of amenities to lure customers: There's a VIP lounge for frequent shoppers, translators for 60 different languages and a meditation room.

There's even a "gentleman's room," with a TV showing sports all the time, says Debra Gunn Downing, executive director of marketing at the mall. Men can sit there and have a glass of wine or a beer.

"I can't walk through here without a million things on my mind about what could be done better, what we need to do next," she says. "I hope they dusted the top of the ornaments, because that's something that has to be done. The poinsettias, if there's one leaf wilting or one flower wilting, it has to be pulled out and replaced."

Howard Davidowitz, a retail analyst and consultant, says these kinds of high-end malls — with stores like Nordstrom and Bloomingdales — are winning.

"The other malls — which typically are two anchors, lower-end malls, smaller stores — they're doing terrible because those customers are shopping at Family Dollar, Dollar General, Dollar Tree," he says.

Davidowitz says there's no denying that retailers in malls are hurting in part because of a move to online shopping. Increasingly, spaces left by struggling retail stores are being filled by health clubs, doctor's offices and restaurants — "because that can't be affected by online shopping," he says.

But even with online sales growing every year, malls are still at 90-plus percent capacity. Jesse Tron, with the International Council of Shopping Centers, says people have been predicting the death of the mall since its inception.

"Catalog shopping was going to kill traditional brick-and-mortar sales," Tron says. "There's still absolutely going to be need for brick-and-mortar presence for the most successful retailers. What that might mean is that it's a little bit less in terms of the amount of space that they need, but they'll still need space."

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Traditional shopping malls took a big hit after the financial crisis. And now, problems at major retailers Sears and J.C. Penney - two of the biggest mall tenants - could signal even more trouble.

As the holiday shopping season gets its official start this week, malls are adapting and fighting back. NPR's Sonari Glinton reports.

SONARI GLINTON, BYLINE: As people get more and more comfortable with online shopping, things get more and more competitive out here in the real world of brick and mortar retail.

I've come to the South Coast Plaza Mall in Costa Mesa, Calif. - think "Real Housewives of Orange County" - where I wanted to see how really competitive things can be.

DEBRA GUNN DOWNING: I can't walk through here without a million things on my mind about what could be done better; what we need to do next.

GLINTON: Debra Gunn Downing is the executive director of marketing at South Coast Plaza, in Costa Mesa.

DOWNING: I can't walk through here without thinking, I hope they dusted the tops of the ornaments - because that's something that has to be done. The poinsettias, if there's one leaf wrong, one leaf wilting or one flower wilting, it has to be pulled out and replaced.

GLINTON: South Coast Plaza is one of the most successful malls in the U.S. About a third of malls are just like this one. Gunn Downing says even high-end malls, like hers, have to work hard to be competitive because, well, no has to come. This mall offers all kinds of amenities - from translating 60 different languages, to a VIP lounge.

DOWNING: This is offered as amenity to our best customers. So they can come in here. We have this gentlemen's room. The TV is on sports all the time. He can sit in here and have a glass of wine or a beer and some snacks, and put his feet up or take a nap. We have a mediation room over here. So if someone wants...

GLINTON: A meditation room - this is California.

(LAUGHTER)

DOWNING: So if someone wants a quiet place to sit and relax, they can sit there and meditate.

HOWARD DAVIDOWITZ: I would say, those are the kind of malls that are winning.

GLINTON: Howard Davidowitz is a retail analyst and consultant. He says the competition is tough for high-end malls to compete with each other.

DAVIDOWITZ: Now, the other malls - which typically are two anchors, lower-end malls, smaller stores - they're doing terrible because those customers are shopping at Family Dollar, Dollar General, Dollar Tree. There's more bifurcation in malls than there's ever been. In addition, there's online.

GLINTON: Davidowitz says there's no denying that retailers in malls are hurting, in part because of a move to online shopping. Increasingly, in addition to amenities, health clubs, doctor's offices, discount stores and restaurants are taking up spaces left by struggling retailers.

DAVIDOWITZ: So malls are changing their tenant mix, to be more responsive to the fact that the middle class is shrinking and are more budget conscious than ever before.

GLINTON: While every year, the percentages of online sales grow, at the same time malls are at over 90 percent capacity. Jesse Tron is with the International Council of Shopping Centers. He says people have been predicting the death of the shopping mall since its inception.

JESSE TRON: Catalogue shopping was going to kill traditional brick and mortar sales, and everything like that. Look, I think that online shopping is not going anywhere. But I think that needing to have a multichannel, multifaceted approach, when it comes to retail, is going to be the key.

GLINTON: Tron says it's not enough to open your doors and wait for people to come to the mall. He says mall owners are going to have to worker harder, and think smaller, for consumer dollars.

TRON: There's still absolutely going to be need for brick and mortar presence for the most successful retailers. What that might mean is that it's a little bit less, in terms of the amount of space that they need; but they'll still need space.

GLINTON: For regular retailers, it's a battle to get consumers inside their doors, and to spend money while they're there. And the battle begins in about 48 hours.

Sonari Glinton, NPR News, Costa Mesa, Calif. Transcript provided by NPR, Copyright NPR.