A lot of the action in the latest season of Netflix’s Stranger Things takes place in a period-correct shopping center called The Starcourt Mall. The set showcases the hottest shopping experiences that were available in 1985. There’s an indoor food court where characters Steve and Robin work at the Scoop’s Ahoy ice cream shop. And on the top floor, there’s a Gap, where Eleven and Max go on their totally 80s shopping spree.
The set was built in a real mall in Duluth, Georgia. Though it was full of shoppers when it first opened 34 years ago, the opening of newer stores nearby and the explosion of online shopping has caused business to steadily drop over the last few years. It’s becoming a bit of a tourist attraction thanks to the popularity of the show, but it’s still experiencing the same kind of decline shopping centers are suffering all over America.
The call of the mall is quiet for some, but not all
According to Fortune, mall vacancies were at an eight-year high of 9% in 2018. Things have steadied a bit in the last few quarters, but with former mall giants like Banana Republic, Ann Taylor, and yes, even the Gap closing hundreds of stores, many are starting to write the obituaries for these once essential shopping destinations. It’s part of the larger story of the so-called “retail apocalypse.”
However, not all malls are in trouble. The top class of malls that feature special attractions and non-traditional businesses like bowling alleys, upscale restaurants and cool nightclubs are holding steady. The most profitable malls tend to be located in affluent, population-dense markets and offer premium shopping options from companies that offer interesting experiences, like Lululemon’s in-store yoga classes.
The death of retail has been greatly exaggerated
It’s not hard to find articles bemoaning the death of retail. But even with the rise of behemoths like Amazon, over 90% of purchases still happen offline. So what’s driving this perception? It’s a combination of several factors.
First, the media loves to report on tragedies and the story of venerable retailers like Sears succumbing to the fickle demands of business killing millennials. Even with these closings, overall retail is expected to rise about 4% this year.
Second, online businesses are growing at about 4x the speed of offline businesses. Even though the vast majority of shopping is still happening in stores, marketing dollars are rapidly shifting to digital. In fact, 40% of the world’s ad spending took place online in 2018. This contributes to the perception that digital is killing physical. It makes for sexy headlines, but it’s just not the full story.
How to bring malls back from the Upside Down
Technology, special experiences and improved customer services can all help aging malls thrive. If stores want to get their customers to come in, they need to embrace technology and provide interesting in-store features.
- Create fun with technology. Have you decorated your house online to see how a couch might look in your living room? If you’ve been to IKEA lately you might have. The Swedish furniture store developed an app called IKEA Place. It allows customers to place items in a virtual augmented reality environment.
They can choose different sizes and colors of products and “see” them in real life settings. “Augmented reality and virtual reality will be a total game changer for retail in the same way as the internet. Only this time, much faster,” says Michael Valdsgaard, Leader Digital Transformation at Inter IKEA Systems
- Mixed-use facilities. Teenagers practically live in the mall. But what if you actually lived in the mall. Converting malls into multi-service communities is one radical option for using unoccupied real estate. It’s not as strange as it seems.
Newer developments are being built in major cities that have residential condos attached. SB Architects is currently building quite a few of these centers in the Bay Area. Their Senior Vice President Bruce Wright said. “It’s not just a sense of lifestyle and dining and entertainment,“It’s housing. It’s community gathering places where you’re really building a sense of like-mindedness.”
- Create non-traditional experiences. Innovative malls are developing elements that recast the mall as the new city center. They include concert venues, museums and arts centers, health spas, farmer’s markets, yoga studios, and pop-ups for smaller, hotter brands.
Xanadu, a mall just outside of Madrid, features an indoor ski slope, go kart racing, balloon rides, bowling and billiards. The Mall of America has a theme park, a dinosaur museum, and an enormous aquarium. They are both hugely successful. These services provide a chance to be with friends and entertainment that just can’t be replicated online.
- Location-based marketing. This type of marketing, also referred to as geomarketing or geolocation marketing, uses data about location and visit behavior to better understand customers, and present them with relevant messages and offers. It’s usually enabled by connecting with the customer’s mobile device.
Malls can send communications based on a shopper’s location to their favorite stores (using customer loyalty apps). They can also send them offers about events, sales or even daily specials in the food court. Mobile apps can also help visitors locate specific stores and services in the mall
Malls that don’t adapt and innovate are going to fall behind. But those that stay ahead of changing customer expectations are going to do well. New shoppers are looking for more than just a place to buy things. They want to have fun and be with people. They want to experience new things. And if you can deliver that, they will keep coming back for more. Though, you might not want to build any experimental military facilities, if you know what I mean.