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Shopping malls need to adapt or die.

This story first appeared in the October 29, 2014 issue of WWD. Subscribe Today.

That was the message on Tuesday from José de Jesús Legaspi, president of the Legaspi Co., and Rick J. Caruso, founder and chief executive officer of Caruso Affiliated, at the WWD Apparel & Retail CEO Summit’s session “Conversation: Bricks & Mortar — Redefining the Retail Experience.”

If the Internet and the economy haven’t already dented the shopping mall industry, then its own detachment from consumers and disregard for changing demographics will hasten its downfall. Ignore Hispanics at your own peril, said Legaspi, whose properties cater specifically to Hispanics. Caruso, whose open-air shopping centers, The Grove and The Americana at Brand, create a distinctive sense of place for customers, warned against failing to intuit and respond to consumers’ deepest desires.

Both speakers have successful businesses to back up their positions. Legaspi’s properties, which include the Desert Sky Mall in Phoenix and Pacific View Mall in Ventura, Calif., had an annual compound growth rate of 20 percent. The Grove and The Americana at Brand do sales of $2,200 per square foot and $1,700 per square foot, respectively.

“There are 55 million Hispanics with $1.5 trillion in buying power,” Legaspi said. “Hispanics spend 22 percent more than non-Hispancis.” According to Legaspi, the Hispanic consumer is young, around 27 years old on average, and extremely loyal, if her expectations for a high level of service are met. “Hispanics want to be serviced,” Legaspi said. “It’s the Nordstrom customer.”

The Hispanic consumer is getting what she wants. The Hispanic community in the U.S. missed the taste of Hecho En Mexico or Mexican Coca Cola made with sugar cane. Now, Coca Cola in Atlanta is importing Mexican Coke, Legaspi said. What’s more, tortillas have replaced white bread as the leading form of bread in supermarkets.

Legaspi targets Hispanic customers through their values, which include culture, language and respect for the extended family. Legaspi Co. centers commemorate the Virgin of Guadalupe Day, a Catholic holiday and other pageants, which he calls “legacy events.”

“We have lots of benches for great-grandma and great-grandpa,” he said, “because they go shopping with the family.”

Legaspi also helps retailers at his centers learn about Hispanics. He said Victoria’s Secret and Coach are popular with Hispanics. “I told Payless Shoes to move away from self service and to servicing the customer, the mom with kids.”

Legaspi is building bandstands in some locations, because music is such a big part of Hispanic culture. He even started his presentation with the sound Trio Ellas, a girl group made up of third- and fourth-generation Hispanics that plays Mariachi music and is making the musical genre cool.

Caruso is also into music and live performance. “We do 350 events a year at the Grove,” he said. “We have a 92 percent conversion rate versus 50 percent in normal malls.” The reason, Caruso said, is because his centers give consumers more things to do than just shop. For example, The Americana at Brand was inspired by historic Newbury Street in Boston and the 900,000-square-foot, 15.5-acre mixed-use property is laid out as a classic American town square, circled by an historic orange trolley. A large fountain dances to music and lights up in the evening.

Caruso on Tuesday unveiled a unique deal with the Uber car-service app for the holiday season. He said the deal will allow shoppers to book an Uber car through the Uber app, or by calling The Grove or The Americana at Brand Concierge, to take them to and from their homes to one of the company’s properties “and I will pick up the bill.” The service will operate from Black Friday to Christmas, he said. Caruso said the Uber cars are the type of service he believes operators must provide today’s time-pressed consumers to spur them to spend. The decision to offer the service came from discussions within Caruso Affiliated about its increasingly crowded parking lots and how to improve them. “I want to create a better experience and let you know I care about you and I am going to give you back time,” Caruso said, adding he believes shoppers will spend more time at his centers as a result.

Legaspi homes in on his target customers’ interests. “Young girls love Quinceañera,” Legaspi said. “I hear Macy’s may be opening Quinceañera stores.”

“I started out with street retailing,” Legaspi said, adding that when he “began to look at where I could make a place for my families,” he thought about designing centers with the characteristics of downtown retail. “I think all the malls started to look the same,” he said. “Unless you listen to your consumers, you can’t react to them. The enclosed malls — I make them sort of the gathering place. We follow the demographics.”

“I’m not in the shopping mall business,” declared Caruso. “I’m not in the indoor mall or outdoor mall business. What we do is create places. I don’t trust retail. I’m sorry to say that to all of you. The story is not about retail. It’s about experience.”

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Caruso believes that the country’s priorities changed after 9/11. “There was a fundamental shift,” he said. “A sense of community and sense of neighborhood became a priority.” There was a moment in time when indoor malls provided that, but no more. “Unless indoor malls reinvent themselves, the future is bleak.

“The retailer and restaurateur is my customer,” Caruso added. “These properties need to be about protecting your brands. You can’t do that if you can’t control the inside and outside of your store.”

The answer, according to Caruso, is to become less of a retailer and more of a shopkeeper.

Both men agreed that shopping centers are works in progress. “We try to mimic downtown,” Caruso said. “We constantly tweak the mix. I don’t think you’re ever done.”

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