Reuters Insider - For struggling malls, it's time to reinvent: Consultant
29/08/2014 22:22
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Description: Kevin Mullaney, President of retail consulting
firm The Grayson Company, says a glut of retail
square footage has challenged the American mall
and offers turnaround strategies.
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Transcript (May be auto-generated)
We're talking back-to-school shopping with Kevin Mullaney, who's the President
of The Grayson Company. Kevin, thank you so much for being here. Thank you for
having me. So let's start by talking about what malls are doing this
back-to-school season to keep the shoppers coming through? The idea of having a
mall and what a mall can do to keep customers interested and engaged, it's
harder for a mall to get a customer to respond immediately because customers are
coming for the content of the mall, be it the stores that are in it, or the
activities that are in it. So what you see is a lot of stores doing tie-ins with
outside events. Staples is doing something for example with Katy Perry. They're
trying to do things to make themselves more interesting to get people to come to
the stores. So really, trying to make themselves a destination - people going
out of their way to come and see this.
Exactly. And that's- it's somewhat new territory. I don't know if a Staples-Katy
Perry partnership makes much sense but the challenge malls have are that they-
it takes them longer. They're not as good in the short term of bringing people
in. So back-to-school is a high traffic time. Stores can do things quickly to
try to bring people in through promotions, new products. But a mall needs to
have good content. So a mall that has an Apple store, for example, will be a
much more desirable mall than a mall that doesn't have an Apple store. And
that's hard to change for a back-to-school period for example. Well, Katy Perry
and Staples certainly make an interesting pairing. Do these tie-ins seem to be
working?
I think it's because there's no direct correlation to sales. It's more how
people measure social media. People know they have to be interacting with their
customers in a different way but on a scale of how you can measure it. Social
media is harder to measure. A coupon that you send out and get someone to redeem
you can measure very specifically. So I think it's hard for them to measure
that. Where do you see malls fitting into today's retail ecosystem? So malls
have been a very, very important part in the past of the shopping experience.
They're diminishing a little bit in terms of the importance for a couple of big
reasons. Number one is we have too many- we have too much retail space. I think
in the US we have something like 46 square feet of retail space for every
person. In the UK, by contrast, they have 9 square feet. So we have too many to
begin with. The good malls and the good centers are better than they've ever
been. If you take Aventura and Florida, it's an amazing center that gets better
and better. So the top centers are really good. The B centers are maybe holding
on, and the C and Ds are really on the struggle bus. I mean, they're going to
have trouble making it. And so what are people- what are malls on the A list
that you just mentioned doing right, and what can the C and the D list learn
from them? So if you're hot, everybody wants to be in your mall. So in fairness,
what they're doing right is they've got the right mix of tenants and they're in
good locations, and they happened to be in affluent locations. So as the wealthy
tend to get wealthier, those stores do well. And as the less economic- the
economically-challenged don't do as well, those centers suffer significantly. So
what can they do? They have to reinvent. This won't be an evolution. This will
have to be a complete remake of those smaller malls into potentially lifestyle
centers. I mean, one of the reasons people are leaving malls is for the urban-
they're migrating back to the urban centers. The millennials don't want to own,
they want to rent. They like shopping locally. Etsy is a great example of sort
of local even though it's global, but it's all handcrafted and local. They like
shopping like that. So they're moving back into more of an urban environment,
and that's leaving those malls. So they're going to have to reinvent themselves,
maybe as- one idea would be that they could turn themselves into mini urban
centers - put in housing, small specialty - stores only, but it really has to be
changed dramatically. And you mentioned the Etsy, how big of a threat is
ecommerce in general to the mall as we know it? So ecommerce- I think it's the
bigger question is omnichannel. Today's customer is- we are all carrying enough
devices that we can shop, we can- we can do anything. We can make plane
reservations. So I think what's happening with omnichannel is people have many
more options. But remember, roughly 90% of all retail is still done in a
physical store. And if you add- 5% of that is by retailers that have 5% of the
online are retailers that have a physical store. So 95% of the retail that's
done is done either in-store or through a retailer that has an in-store
presence. So it's important because it didn't exist to the level that it did.
And it's becoming more and more important. But it's not the biggest threat.
Okay, and let's talk about specific retailers. Of the retailers that we tend to
see in malls, which one are role models in terms of doing this right, adapting,
keeping up with change? Probably the most impressive one I've seen is Urban
Outfitters. Urban Outfitters has a new concept out of mall, and it's- you don't
know necessarily that it's an Urban Outfitters. It's called Space Ninety 8, and
it's in Brooklyn. And it's a mix of Urban Outfitters merchandise with small
specialty store- craft merchandise mixed through. And it's all interchangeable.
It's also has a restaurant, it has a bar, it's a great concept and it's really
resonating. It looks like it's resonating with customers. They've also developed
something call "terrain". There is one up in Connecticut. There one I think on
Pennsylvania. So they're really changing it up, and I think they're bringing
some of those concepts into their retail stores. So I would look to them. They
look like a leader in resonating with millennials and getting them into the
store. But they know to get into the- to get the customer, they've got to go out
of the malls as well. Very interesting insights. Kevin, thank you so much. Thank
you very much. My guest is Kevin Mullaney. He is the President of The Grayson
Company. I'm Lily Jamali. This is Reuters