Malls Bank on Experiences for a Successful Holiday Season

The holiday shopping season is in full swing! Where are consumers expecting to spend most of their shopping time? Not at a mall, according to the Synchrony Financial “2017 Pre-Holiday Study.”

The holiday shopping season is in full swing! Where are consumers expecting to spend most of their shopping time? Not at a mall, according to the Synchrony Financial “2017 Pre-Holiday Study.” The study shows that about 50 percent of consumers expect to do their holiday spending in a store, but out of that, only 38 percent of in-store shoppers plan to do that shopping in a mall.

Synchrony Holiday Shopper Insights In-Store PurchasesWhere will shoppers go instead of the mall? The majority of consumers (66 percent) say they will spend some time going to mass merchandiser retailers (e.g., Walmart, Target, etc.) and half of store shoppers say they will visit a stand-alone specialty apparel store.

The benefits of going into these stores are the one-stop shopping element. Mass merchandisers have a wide variety of items available at a relatively low price. So, you can buy a sweater for grandma and a toy for little Johnny without a lot of walking around. Stand-alone specialty apparel stores have the benefit of available parking and more personalized service.

Synchrony Holiday Shopper Insights Via GenerationsIf you do venture into the mall, the people you are most likely to see are Gen Z and Millennials. Those aged 18- to 25-years old are the ones who intend to spend the most time at the mall this year, with over 40 percent of them saying they will shop at a mall. The Gen X and Baby Boomer populations (aged 36 to 65) are the ones who say they will stay away. Only 33 percent of this population say they will be mall shopping.

Retailers have been putting an increased focus on strategies to get consumers to walk through their doors. Many retailers now give shoppers the ability to order online and pick-up in-store. This not only saves time for the consumer, but also gives the store the opportunity to up-sell or cross sell other items. Other retailers have been putting interactive experiences and restaurants in their stores to increase the “fun” factor. The last time I walked into a Williams Sonoma store, they were cooking an entire turkey dinner!

The future of the mall depends on maximizing these experiences. There are malls that have added restaurants, art installations and even amusement parks as part of the effort to draw more foot traffic. Many retail experts feel that the survival of the mall lies on its ability to attract shoppers with innovative services and entertainment, in addition to stores and products.

* Note: The views expressed in this blog are those of the blogger and not necessarily of Synchrony Financial. All references to consumers and population refer to the survey respondents from the Synchrony Financial 2017 Pre-Holiday Study unless otherwise noted.

What the Hell Is Happening to Retail?

Retail is having a moment right now. Since the calendar flipped to 2017, we’ve seen more bankruptcies than all of last year. What’s going on?

Retail is having a moment right now.

Since the calendar flipped to 2017, we’ve seen more bankruptcies than all of last year, including some consumer electronics chains like RadioShack (again), hhgregg and Sears. Just recently, hhgregg announced it was going a step further, closing all of its remaining stores and liquidating all products.

The doom-and-gloom news has, of course, extended well beyond the CE industry. Some major stores — JCPenney, Macy’s, Payless, Lululemon, Urban Outfitters and more — have all announced either store closures or seen their stocks tumble to new lows. Ralph Lauren even announced that it was closing its flagship Polo store on Fifth Avenue in New York.

Mind you, all of this is happening at a time when the economy is very much out of the recession phase, consumer spending and confidence are up and the economic outlook has been nothing short of rosy.

So What Gives?

So what the hell is going on? Is this the end of retail? Is the apocalypse upon us?

The answer to any of those questions, as you’d expect, isn’t so straightforward.

Yes, this is a very dark time for retail. A lot of things are up in the air. Brick-and-mortar stores are facing some incredibly difficult times. But that doesn’t mean the entire industry is about to go kaput.

The Atlantic recently published a deep dive into the current state of the retail industry, and its explanation couldn’t have been more accurate — it’s probably the closest thing to a complete answer we’ll be able to find. The analysis points to three main causes for the “Retail Meltdown of 2017”:

  • The rise of online shopping,
  • the existence of faaaaar too many malls,
  • and a major shift in how consumers are spending money.

All of those make perfect sense. No industry understands the impact of online shopping better than the consumer electronics space, which has seen billions of dollars in business go to Amazon. Since 2010, the e-commerce giant’s sales in North America have quadrupled from around $16 billion to more than $80 billion last year. And in 2016, Amazon’s growth alone accounted for more than half of all online sales growth.

There’s also the mobile wallet affect. Since 2010, The Atlantic pointed out, mobile shopping has grown from less than 2 percent of digital spending to 20 percent last year.

As for the declining footprint of malls, there are roughly 1,100 in existence today. That’s down from the peak of about 1,500 (all of which were built between 1956 and 2005). So nearly a third have closed in the last decade. Further, while all of those malls have closed, not a single new one has been built.

Whereas malls used to serve as the cornerstone of local communities, the era of expansion resulted in an oversaturation of malls. When you take into account the number of malls and outdoor shopping centers throughout the U.S. — which brings the total up to more than 7,500 — and break it down by “gross leasable area,” as one research firm did, the U.S. far outpaces the rest of the world.

shopping center study

Lastly, The Atlantic hit on consumer spending trends. Here, it notes that Americans have shifted from a materialistic mindset to one where we’d rather spend money on going out with friends for food and drinks. A fair point.

A Shifting Retail Paradigm

The message in all of this is really geared toward the larger national retail chains. The downturn in physical retail square footage goes to show that, in the era of omnichannel retail, there’s no need to expand your brick-and-mortar footprint in order to boost sales. Rather than needing more locations, companies need a stronger e-commerce strategy. Easier typed out by a blogger than implemented by a retailer.

But what about the smaller stores?

If anything, all of the mall closures are positive for the specialty guys out there. With less competition in those local markets, consumers who still prefer to shop in-person are more likely to turn to you.

But that doesn’t mean you can continue to operate as you always have. Just like we wrote about in our analysis of Staples’ new strategy to drive foot traffic, local shops need to continue to drive home in consumers’ minds why their stores matter. You have to find that personal touch, something that separates you from the national chain, and can entice consumers to come walk through your showroom. It doesn’t have to be a co-working space. Maybe it’s free delivery if they live within so many miles, or same-day installation for orders over a certain price threshold. Heck, maybe it’s even just outstanding personal service from your salesfloor team.

Retail isn’t going anywhere. There’s always going to be a need for a physical place where people can come in and experience a product. The only difference today is that consumers need a little more enticing to get out from behind their computers. The onus is on the retailer to prove its worth in its communities. If you can do that, the “Retail Meltdown of 2017” will mean absolutely nothing to you.