Does the American Shopping Mall Have a Second Life? Retailers have to customize the experience

Changes to how shopping center’s function in the future is coming to a mall near you. Aivars Lode Avantce

Here's how to have a good time at the local shopping mall," a reviewer called Bunny E. posted on Yelp this past February. "Load the 'Dawn of the Dead’ soundtrack on your MP3 player and go to the mall between 7-8 a.m. (before they even turn on all the lights). Hit play and immerse yourself in a post-apocalyptic nightmare world. And get some great exercise to boot!"

The shopping center Bunny E. reviewed is the massive, 1.5 million-square-foot, nearly empty Cincinnati Mall, in the northern suburbs of Ohio's third largest city. It is one of hundreds of dead or dying indoor malls that dot the American landscape. Moms and dads who fondly remember teen years spent flirting at the mall now bring their kids to watch bulldozers flatten the dated buildings. Ironically, some of these zombie shopping malls have more nostalgic followers on Facebook and blogs like Deadmalls.com than they have actual shoppers.

Blame the recession, Amazon and unimaginative retailers. Offline stores are scrambling for "progressively smaller pieces of the retail pie as e-commerce relentlessly gains share in many categories," says Jeff Jordan, general partner at venture capital firm Andreessen Horowitz. Circuit City, Borders, CompUSA, Tower Records and Blockbuster all folded their tents, and many others are showing signs of serious economic distress, he points out. "The mall and shopping center stalwarts are closing stores by the thousands, and there are few large physical chains opening stores to take their place."

Some malls, however, are fighting back, using social media and inventive combinations of retail and community outlets. Doctors' offices, clinics, churches, indoor sports fields, grassy parks and even schools are filling up big chunks of retail space and attracting potential shoppers. What’s more, just when you thought it was a goner, the traditional shopping mall format is surfacing in some unexpected places (think airport security). The trend reflects consumers’ growing interest in blending recreation, education and other activities with the brick-and-mortar shopping experience, say experts.

Shoppers clearly still care about the fate of these spaces. When the 45-year-old, 32-acre Miracle City Mall in Titusville, Fla., closed in February, a local organization with deep Facebook connections wooed developers with a rally in its sprawling parking lot. The Greater Titusville Renaissance committee was hoping for several hundred supporters-cum-shoppers—about 3,000 showed up, along with high school marching bands and food trucks. Some supporters carried signs that read, "If you come, we will shop." Tentative plans for a new Miracle City Towne Center include five large stores (the old mall had two anchor stores), smaller shops and offices facing a small park and a tiled outdoor walkway. The new mall might also include doctors' offices, an urgent-care clinic and restaurants, says Robin Fisher, Brevard County commissioner and point person on the redevelopment.

Social media has been crucial in driving the project forward. "Looking at our demographics doesn't tell the whole story. We needed the developer to understand the community’s [hunger] for a nearby place to shop," explains Fisher, adding that Facebook helped get residents connected to the developers. By April, a development partnership based in Columbus, Ohio, was attempting to buy the old mall and line up tenants for the new open-air center. Demolition has been set to begin by the end of this year.

In the past, shopping malls were always set up more for developers than retailers, says David Ginsburg, CEO of Downtown Cincinnati Inc., a business development nonprofit. His organization is helping push redevelopment plans for another dead Cincinnati mall, Tower Place, which shuttered in February. The city bought the property in foreclosure and is negotiating with a developer to turn it into a parking structure with stores at the street level. The old mall parking garage would be replaced with a 30-story residential tower, more parking and a supermarket, says Jeff McElravy, senior development officer at City of Cincinnati.

"We need to learn the lesson from the empty malls and make our new shopping centers adaptable for what residents will need in the future," Ginsburg says. For now, brick-and-mortar stores will probably become a small part of community mixed-use malls, he adds.

Not everyone agrees. Mixed-use shopping hubs are a pipe dream, argues Don Wood, CEO of Federal Realty Investment Trust, which owns more than 80 shopping centers around the country. He says the towns around failed malls are not dense or high-income enough to support mixed-use projects. In addition, the projects are costly to build and require that developers have a wide range of experience in retail, office and residential, which is rare.

Not Dead Yet
From a brand and marketing perspective, the mall situation seems far more hopeful. The reinvented mall is merely in need of its own brand identity, featuring activities like ice skating and bowling plus retail stores carrying unique private label products, says Raj Kumar, partner in the retail practice of consultancy A.T. Kearney. "We know cookie-cutter, middle-of-the road shopping environments don't cut it anymore," he says.

Stores making a home in these hubs will also have to change their way of doing business. "Customers need to feel at home in the retail space such as they do at outfitter REI, which offers products, staff, décor and advice tied to outdoor activities," explains Kumar. "Retailers also have to customize the buying experience to make you feel special—such as Lowe's, which keeps a database of your purchases to help you shop." The winners in the space will be specialty stores with robust websites that can respond quickly to a very specific target audience, Kumar predicts.

The National Retail Federation's 2012 Shopper Experience study supports that. Four out of five purchases are still made in physical stores, according to the study, but shoppers are more demanding.

"Armed with tools to access data at any moment, they are poised to buy and expect retailers to be ready for them," the study points out. To keep customers coming back, it advises, retailers must recast stores as places for discovery and interaction with products, where employees assist in the decision-making process and shoppers enjoy instant gratification.

Also encouraging is research from Piper Jaffray which shows that teens prefer to shop in-store, especially for clothing. A study released in April indicates that about three-quarters of teens would rather shop in-store than online. Paradoxically, it also shows that a majority of teens are doing much of their shopping online. The upshot: There's a ripe opportunity for savvy mall retailers to snag those texting teens.

But they still have a ways to go.

"No one is ready to abandon the mall concept entirely," says Peter Breen, managing director at the Path to Purchase Institute. "But the big national chains haven't devoted much capital to any major real estate transformations. The emphasis for most of these dinosaurs has been on opening digital channels, with the logic that if you can’t coax the shoppers out to the mall anymore, then go find them at home."

Mall mainstay JCPenney has become a veritable poster child for the shopping center's struggle to adapt. The company last month replaced CEO Ron Johnson with his predecessor, Mike Ullman, after Johnson’s ambitious turnaround efforts—no coupons, stores within a store—harpooned sales. Survival, rather than innovation, seems to be the chain’s current strategy.

In the meantime, the hulking, 25-year-old Cincinnati Mall is holding on by its fingernails, with three-quarters of the space sitting empty. The owner hopes to sell about 15 percent of the retail space for a youth sports complex, but government red tape is slowing down the deal.

Meanwhile, the facility was rebranded in late February as the Forest Fair Village. Kohl's, Burlington Coat Factory and Bass Pro Shop Outdoor World have kept their doors open, with Bass continuing to offer in-store classes and outdoor-themed activities along with hunting and fishing gear. "We don’t call ourselves a mall anymore," says Karla Ellsworth, general manager of Forest Fair. "We are transforming into an indoor family activity and shopping center. It will be a place where parents can browse for clothes or shoes while their children are taking hockey or gymnastics classes."

Shop the Friendly Skies
Traditional malls may be dying in suburbia, but the mall concept is booming in the nation's largest airports, where an audience trapped behind security gates is looking for diversions. Air travelers are increasingly enticed by malls jammed with high-end retailers selling perfume, cosmetics, clothes, technology, wine and books.

Examples abound. This year, Los Angeles International Airport's new Bradley West International Terminal will add more than 60 food and luxury retail stores, including Michael Kors and Fred Segal. Dallas-Fort Worth International Airport recently increased space for retailers and concessions in Terminal A by 50 percent, with new upscale offerings including Geppetto’s toy store and wine bar Vino Volo. Over the next three years, Denver International Airport will completely overhaul its food, beverage and retail space, adding stores and updating existing ones.

Stacy Moore, a food retail strategist, says airport malls have become so popular that travelers have been known to go to the airport early so they'll have time to explore the shopping promenade before a flight. Those retailers with the most success, she says, sell clothing, gifts, food or beverages that are unique, fun and tied to the local area. Wine shops with tasting counters are also big, as are Best Buy electronics kiosks and Life is Good gift shops.

Impressed with the sales trends, Moore opened her own shop that sells specialty food inside a new shopping mall at Boston's Logan International Airport. Since Terminal C has become more populated with retailers, Moore reports a 30 percent sales bump for items like gluten-free sandwiches and packs of local chocolates and roasted nuts.

What, if anything, can zombie malls learn from these buzzing airport shopping hubs? Echoing the findings of the NRF, Moore says they demonstrate that consumers will still go to a physical shopping space but only if it lets them gain some specialized knowledge and have new experiences.

"Even in an airport, shoppers will walk right by a chain store with products and displays they can see anywhere," says Moore. "If you are a mall, your only hope is in targeting the right customer behavior."