If landlords and retail center owners want to remain in business for the long haul, they will need to start bringing in unconventional businesses, different designs and adding experiential tenants.
The big-box mall of the past is dead.
Owners need to design their shopping centers and malls like a chameleon — one that has the flexibility to adapt to the needs of a new type of consumer, said Danaria Farris McCoy, NewMark Merrill Mountain States’ division operations director, during a presentation on how experiential retail is revolutionizing center formats, tenant mixes and leasing structures at ICSC RECon in Las Vegas. “The physical store and shopping center now is about the distribution of experiences [rather] than the products,” McCoy said.
The presentation was among several educational seminars that kicked off the first day of ICSC RECon, the largest convention for retail professionals in the world. More than 30,000 people are expected to be at the annual four-day conference from Sunday to Wednesday at the Las Vegas Convention Center. The convention comes as the retail industry is adapting to a changing consumer base. Though statistics differ on brick-and-mortar performance, there is an obvious sentiment that traditional brick-and-mortar retailers are facing a growing threat from e-commerce.
More people prefer to shop online in the comfort of their own homes than go to a store. “Traditional retail clearly is undergoing a profound change. The ability to purchase online has changed how consumers behave,” said Area15 CEO Winston Fisher, who will speak on a panel Tuesday about his latest project. Area15 is a mall-inspired entertainment and retail complex set to be unveiled next year.
Experiential retail could be the equalizer that keeps people coming back and shopping. Experiential retail is seen as the future of the retail industry, Fisher said. “What you’re seeing from retailers that are successful is that they are selling the experience of their products as much as the physical product,” he said. “We’re focused on the shift from the consumption economy to the experience economy and that includes consumption, but from experience.” There is no single authoritative definition of experiential retail, McCoy said.
One thing is certain — experiential retail has to have and involve some type of positive experience. This experience is what will keep people coming back, McCoy said. Studying the current retail landscape, McCoy created a hierarchy system that describes the characteristics of a successful experiential retail tenant. The hierarchy describes everything from the basics such as friendly and knowledgeable customer service, efficiency and convenience to creating unique experiences, such as hands-on shops and one-of-a-kind stores.
McCoy points at the success of discount shoe retailer chain DSW. Since DSW piloted a program with in-store nail salons, the company has generated $600K in revenue in those stores. McCoy said while many focus on millennials, retailers need to pay attention to Generation Z, those people born from the mid-1990s to the early 2000s. Unlike their millennial predecessors, the Gen Z crowd has a strong preference to shop at physical places, McCoy said. However, she said surveys suggest even one bad experience could lead them to stop interacting with a brand. “The businesses that don’t create an experience are either susceptible to other competition coming in or their sales going down,” McCoy said.
Fisher, the CEO of Area15, is hoping to capitalize on the consumer base’s growing demand for experiential retail. The 170K SF Area15, just off the strip in Vegas, will feature a mixture of experiential retail, entertainment, food and beverage options, events, music, food festival and drone racing.
“It’s retail, entertainment, art, technology all blended together to create this incredible experience,” Fisher said. “You can say it’s mall-inspired.” Santa Fe, New Mexico-based Meow Wolf has already signed up as one of the anchor tenants, Fisher said. Meow Wolf is a popular art and music venue in New Mexico that is expanding to Las Vegas and Denver. Area15’s events, art installations and performances will be specially curated and constantly change throughout the year.
Fisher said Area15’s interactive exhibits, performances, art and technology will separate it from other venues. OTL Director of Creative Design Chris Roy said old-style malls are dying and many have to transition into becoming “lifestyle centers” that not only have people shopping but coming together to gather. OTL is a design-build company that creates water features for shopping centers and malls.
The water features can be designed and sync with music for a water and light show. Shopping centers where OTL has built water features have become shopping and community destinations, co-founder and CEO J. Wickham Zimmerman said. Roy said the days of landlords and owners putting in a store and hoping for people to come and shop at their centers are over. “Malls were becoming mundane,” Roy said. “You had all these big malls and they were pretty duplicate across the country with the same stores in every one … shopping has to be a destination now. “We have to create experiences that make people want to keep coming back,” Roy said.
Author – Joseph Pimentel, Bisnow Los Angeles