Small is beautiful in the modern mall
Specialized shops seek to counteract the ‘paradox of choice’ for shoppers
Shopping malls’ importance to the economy are often underestimated during the current period of flux in the retail industry, the president and chief executive office of the International Council of Shopping Centres said Tuesday.
“One out of 10 jobs in Canada relates to the shopping centre industry and 19 per cent of Canadian GDP relates to the shopping centre industry,” Tom McGee told an industry audience in Toronto. “It’s an enormous industry, a huge source of tax revenue” that supports infrastructure and public services, he said. But with large mall anchor tenants such as Target going out of business in Canada and department store Macy’s planning to close 100 of its 728 stores in the U.S., shopping malls are battling a slowdown in customer foot traffic amid the rise of online shopping.
According to recent research from Newport Beach, Calif.-based real estate research firm Green Street Advisors, occupancy at U.S. malls is declining for the first time since the recession and the growth rate for retail rents is slowing down. In January, the firm forecast same-tenant sales would grow just 1.2 per cent between 2016 and 2019, pulling back from its 2015 forecast which had predicted a 2.6 per cent same-tenant sales increase for the same period of time.
It’s also a sizable drop from last year’s four per cent gain in sametenant sales at shopping malls. Green Street lowered its forecast for mall rent growth to 1.5 per cent for the period between 2016 and 2019 from an earlier prediction of 2.5 per cent growth.
“Malls, whether they are situated in the U.S. or Canada, are all evolving towards this concept of experience,” McGee said after his speech to retail and real estate professionals. “Consumers expect a high level of differentiation (within malls) and varied experiences. That is why you see more food and beverage options, more movie theatres and lots of new and different types of retailers coming in to the mall experience.”
One new trend hitting malls, which for decades featured a very static assortment of retailers, is the rise of small “pop-up” retail boutiques that occupy a space only for a few weeks or months. Joining them are small independents who sell a highly specific “curated” assortment of goods. Call it the anti big-box movement, they embrace the notion that a select, unique retail selection trumps a vast one, and eliminates the so-called “paradox of choice” facing many consumers when they shop at large stores and online.
“There are more choices out there in the realm of retail than there ever were before,” said Craig Patterson, director of applied research at the University of Alberta’s School of Retailing. That is particularly true in Canada, which has only seen a big influx of international retailers into malls in the last 10 to 15 years.
Large department stores are curating too, Patterson said, noting that Nordstrom’s new store in Toronto features a dedicated space for a pop-up boutique that changes its selection every month.
Being able to sell goods in a nontraditional mall setting is a potential boon for small businesses and brands, said Jennifer Lee Koss, owner of Brika, a community of more than 400 designers and artisans that has done a number of pop-up stores to showcase their wares in partnership with mall developer Oxford Properties. Brika did a 300-square foot pop-up store inside the Hudson’s Bay flagship store in Toronto as early as 2013.