The shopping center, that quintessentially American invention, is being redefined for the digital age.
This story first appeared in the November 11, 2015 issue of WWD. Subscribe Today.
It’s been due for a reboot. While the model has undergone numerous changes since 1958 when the first one, Southdale Center in Edina, Minn., was unveiled, seismic shifts in consumer behavior and buying patterns have forced malls to become more relevant.
Westfield Corp. is testing in London a new suite of digital services that was two years in the making and is destined for Westfield World Trade Center, which opens next year. The technology will enable direct digital feeds from retailers and “wayfinding” at a superior level, the company said. There will be food ordering and delivery of products. If a customer wants to shop for a black dress, she’ll be able to shop black dresses across all of the property’s brands because Westfield will integrate retailers’ inventories into its app.
“We’re a conduit for retailers in digital and physical,” said Bill Hecht, chief operating officer of Westfield U.S.
Simon is spending $1 billion a year on enhancing its properties, according to David Contis, president of Simon Malls, including expansions, renovations and investments in technology such as installing fiber optics in malls for Wi-Fi, downloadable directories at simonmall.com, simonsaid.com, a Web site for fashion lovers, and #ifounditatsimon, for Millennials to share looks.
“We’re adding beacons, which allow retailers to communicate with customers,” Contis said. “Interactive digital directories show you what’s on sale or offer downloadable coupons.”
The company is testing technology in California that lets customers know where parking spaces are available in a lot and a new loyalty program is in beta testing.
“The mall is very Darwinian,” Contis said. “That’s why we’re spending $1 billion. You can’t react to change, you have to be part of the change.”
Multichannel shoppers generally spend more than their single-source counterparts. The key for malls and their tenants is figuring out how much technology customers want from a brick-and-mortar experience. Do they want everything technology has to offer, such as beacons, touch screens and push or pull advertising? Or do they simply want some old-fashioned quality time with the merch, holding a handbag and feeling the leather or caressing a silk sleeve?
“Shoppers want what they’ve always wanted, which is service,” said Webber Hudson, executive vice president of Related Urban. “Technology has enabled a whole new level of service.”
Related, which is developing the ambitious and potentially transformative Hudson Yards, anchored by Neiman Marcus, on the far west side of Manhattan, is helping Neiman’s take service “to a whole new level,” Hudson said. “We’re working with them on how to convert an ordinary pickup or return to an incremental transaction. We’re using technology to perfect the transaction and make the experience better by eliminating the frustration of repetitive data-process entry.”
Todd Caruso, head of CBRE’s retail landlord practice, said the technology being deployed by shopping centers “is the price of entry today,” but he doesn’t view it with the same conviction as others. “It’s the classic ‘new thing.’ But it’s not the case that we’re glued to our phones. When we look back on this five years from now, we’ll say it was silly to do that.”
Large operators like Westfield and Simon are making centers more dense where possible, adding residential, office space and/or hotels to existing properties and creating new sources of foot traffic from captive audiences.
“When you look at our portfolio, we continue to [develop] the business and our existing centers,” said David Ruddick, director of leasing of Westfield U.S. “Given the opportunity, we want to create town centers. It gives [shopping] centers a new sense of life.”
“People want to live near the mall,” said Contis. “We’ve added residential at or near properties.”
“At Copley Place [in Boston,] we’re talking about doing a 52-story luxury residential and condominium tower right above Neiman Marcus.”
“Malls have to figure out how to get the traffic back,” said Karen Bellantoni, vice chairman of Robert K. Futterman & Associates. “They have too much invested not to figure it out. One way is to tear down department stores. Simon is taking department store pads and breaking them up into smaller shops.”
Locations downsized by Sears proved to be a boon to shopping centers, where mall owners broke up the space to accommodate specialty stores. There are more Sears and Kmart units held by Seritage, a publicly traded REIT, in which Sears Holdings is a major investor. Otherwise, many retailers have “right-sized” their portfolios.
Shopping centers are trying to capitalize on the personalization trend in retail by adding tenants that appeal to local tastes. Westfield Topanga in Canoga Park, Calif., is introducing gyms and spin studios for fitness-crazed shoppers.
Ruddick said Bespoke, a digital innovation hub at Westfield San Francisco Center with 35,000 square feet of co-working and demonstration space, finds pop-up shops that appeal to locals who want to try out new products before they’re released.
Chris Conlon, chief operating officer and executive vice president of Acadia Realty Trust, described City Point, a 1.8 million-square-foot mixed-use residential, retail, entertainment and office project, as being “By Brooklyn, for Brooklyn.”
The lower level of the shopping center will house DeKalb Market Hall. Century 21, CityTarget and Alamo Drafthouse Cinema are the anchors. “There’s a clear demographic preference for living at or near 24/7 environments,” Conlon said. “People are moving to Brooklyn in droves.”
Thor Equities shares Acadia’s preference for urban retail. Chairman and ceo Joseph Sitt said Thor owns 39 properties in SoHo that it will curate “to dramatically improve the offering and bring more luxury,” Sitt said. “I leased a space on Greene Street to Brunello Cucinelli and it’s one of their best stores. A lot of leases are starting to turn over in SoHo. We’re 40 percent there.”
“The shopping center is more than just retail these days,” Hudson said. “We think of the retail center as a continuum of the great emporiums. What we’ve set out to do is curate one of these emporiums, like the old Macy’s or Marshall Fields. Our story is Neiman Marcus and a great collection of food and beverage.”
He said the company will mix jewelry, couture, fast-fashion, contemporary and bridge “to craft a democratic assortment with a foothold in luxury, but also great high-street retailers.”