A case for shopping mall operators during the COVID-19 crisis

Written by: Ranise Teo

One can argue that the fall of the physical retail mall has arrived. According to Statista, over one-third of United States consumers reported that they were much less likely to go to a shopping mall because of the COVID-19 pandemic and this phenomenon isn’t unique. With shoppers globally thin on the ground, it becomes a known fact that shopping centres around the world need to reinvent themselves to tide through declining sales. Inaction will translate to severe consequences, with CNBC predicting that the United States will close 1 in 4 of its shopping malls, in other words, 300 of 1200 retail malls across the country, where in France, 1 in 5 large stores are predicted to close. As mall owners slowly face the grim picture in front of them, this article distils several beneficial tips that allow them to adapt to the “new normal”, attracting new visitors and preventing existing ones from leaving.

Frank Conversations between Retailers and Landlords

Just outside of London, Lakeside shopping centre is a mecca for consumerism. However, the dawn of the crisis meant that the mall had been open for only essential purchases. Its owner, Intu Properties Plc, had collected just 29% of rental fees from its tenants there and around the United Kingdom. This was a meagre sum compared to 77% of the amount they received last year. On the other end of the spectrum, United States mall owner Taubman Centers Inc is fighting back the backlash it has been receiving, based on a memo dictating tenants that it is still compulsory for them to pay rent despite the plight they are in.

Tenants themselves are also taking action, for example, Associated British Foods Plc’s Primark and Swedish fashion retailer Hennes & Mauritz AB are withholding rental payments or seeking for better terms. Similar sentiments are echoed in North America, with the Cheesecake Factory Inc applying for a filing which reveals the company’s inability to pay its April rent and was in discussions with its landlords. 

To weather through this storm, malls need not undergo drastic infrastructural overhaul and expansion in order to compete in this market. Developing a stand-off between stores and shopping centre owners will not help either. Instead, even-handed negotiations are the best way to help both parties recover. Alterations for retailers could include moving to monthly rent payments in cases where retailers are still expected to pay quarterly instalments in advance. Making it easier for tenants to break leases would also avoid time-consuming and costly processes to exit agreements. In a new normal which will polarize vibrant malls and secondary locations, mall owners will benefit from these measures in the long run when retailers recall how they were treated during struggling times. Consequently, mall operators are able to offer a strong retail mix, consisting of fresh brands attracted to settle in the location and the strongest stores who emerge loyal to them after the crisis.

Experiential-based Shopping 

There is a shift in societal expectations in the retailing landscape. Consumers no longer focus on price but covet experiences more. Additionally, a study by Harris Group found that most consumers in the United States, from an 18-year-old to a 68-year-old, now value your experiences more than products and services. eCommerce is riding on this wave, allowing shoppers to connect the physical shopping experience and convenience. QuantumMetric has revealed that online conversion rates in the United States have increased by 8.8%, reflecting a level of shopping urgency typically seen during Cyber Mondays. Additionally, there has been a 129% year-over-year growth in US and Canadian eCommerce orders, and a 146% growth in all online retail orders.

How can shopping mall owners build on customer experience to increase retention, satisfaction and revenue? While it is up to retailers to sell their products and pivot to promote them - as we can see from the increasing virtual try-on dressing rooms, smart mirrors, high-tech customized product offerings - mall operators can complement these stores by building an amazing experience that makes consumers feel excited and motivated. Tapping on the psychology of consumers can increase sales, given that 90% or more of purchasing decisions are made subconsciously. In Spain, X-Madrid is a case in point. In this area, there is a zone for beach volleyball, another for climbing and a diving centre. On the other side of the world, Singapore has its rain vortex at Jewel Changi Airport, coupled with the Skywalk, to keep families bringing their kids back to these attractions and youths looking for their next Instagram shot. In a similar fashion, Chengdu’s New Century Global Centre has rebranded itself as an integrated lifestyle resort and shopping nexus, with an indoor beach, water park and multiple hotels.

In short, the trial of the great diversity of shopping-centre formats is beginning to take off and operators should ride on this momentum that empowers them to position themselves as a place for people to spend their weekends, going beyond just a functional shopping mall. 

Embrace Digital

With the rise of online marketplaces accelerated by digitization providing both consumers and sellers with the inherent ability to engage in collective buying and selling, mall operators should not place their hopes on ‘revenge shopping’ after the lockdown to bring back sales. They should also not shy away from embracing eCommerce and wait out to see if physical businesses will bounce back to ‘business as usual’. This could potentially translate to resources wasted on a futile litmus test due to industrial inertia. Instead, shopping mall owners should analyze the retail industry opportunities and market, responding to changing shopping patterns with omnichannel retailing. Omnichannel retailing as a solution grants consumers the speed of gratification and tackles their worries of safe distancing.

To consumers, Amazon is a lifestyle now. However, that should not mean that brick-and-mortar should be abandoned. The ability to touch or try on an item before a purchase is a top reason consumers shop at physical stores across all generations. Based on the same report, almost 70% of Millennials shop online, most are still split 50/50 on whether they prefer online shopping vs in-store shopping. Customers still want to see and feel a product in-store and then return home to make the actual purchase online - a strategy Apple has capitalized on. 

Hence, those who deliver true multi-channel experiences that offer consumers a personalized product discovery will be able to differentiate themselves against competitors. Physical shopping malls have to subsequently offer strong eCommerce service and justify their physical location by offering added value. Several malls are considering converting vacant anchor store space to delivery centres where shoppers can buy online from one or more mall tenants and pick it up in one place. Others are reconfiguring parking lots to include a drive-thru lane for parcel pick up, serving as a common delivery point for customers. In Alabama, Birmingham’s Crawford Square Real Estate Advisors is rolling out the “On the Go” initiative as a permanent “click-and-collect” enhancement at The Shoppes of EastChase in Montgomery and Mountain Brook’s Lane Parke.

All in all, the Pandemic definitely has an impact on the valuation and sales price on the mall. Nevertheless, there will always be a place for physical shopping malls given that it is in our human nature to crave the buzz of interactions, and we cannot be constantly isolated. While retailers and landlords can aim to reach a compromise, it is more pertinent that they ensure seamless integration between their in-store and online experiences to form a better customer experience. The end-to-end experience matters for buyers - from convenience, selection, shipping times, return policies - and mall operators have to ensure that they are offering the full package in order to reclaim their footfall. Being able to crystalise and articulate their value-add to consumers and relevant stakeholders will also serve to facilitate them better in the long run.

About The Author:

Ranise Teo

Arcadier's Business Development & Marketing Team

Ranise currently supports the Marketing team in the management of the creation and production of online content, and the Business Development team on new expert partner leads.

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