Why shopping malls in the US are struggling to survive

Do you know that in the US a growing number of malls are either dead or on life support? Hundreds have closed over the past decade, and Coresight Research estimated last year that a quarter of the roughly 1,000 remaining will close in the next three to five years.

Unibail-Rodamco-Westfield, Europe’s largest mall operator, is planning to exit the US market and sell its portfolio of US mall properties by the end of 2023.

How many times have you imagined how it would look like to have the same technologies and the digital convenience that the ecommerce provides applied to your mall experience? Whatever this would mean for searching, shopping and selling.

Digital convenience creates so much frustration in the physical retail of the shopping malls that it changed how people shop and how investors value the malls in the US. It’s no surprise there is a huge pressure on the mall to reinvent itself by the end of this decade. In order to do that, it needs to understand the key factors driving the current situation.

The Buzz Effect

don’t innovate for the sake of PR, innovate for the consumer

Although retailers are heavy investors in innovation, these are usually deployed as brand activation, rather than operational improvements. Decision-makers spend money on advertising-generating innovation rather than investing in a customer-centric one. They miss the goal, although they play the game.

The Disbelief

trusting the gut feeling, instead of data

There are still top retail people that believe their know-how stems from their own experience and observations. On the other side, performing eCommerce employees believe in science and in backing-up decision making with data. An attitude which helps them win at least 30% in sales away from their physical retail competitors. This is like Dark Ages overlapping with the Industrial Revolution. The Clash is visible: some rely on natural effects (waiting for God to send the rain) while others are already ahead on sustainable growth planning (using intensive agriculture technologies).

Faking the Competition

including the similar physical retail competitors in the competitive matrix

This has a very long tradition in the day-to-day activity of all top managers in physical retail retail business at large. As long as they look away from their online competition, and only keep an eye on their traditional competitors, none of them see the real threats and the need to change. Of course, the selfish side of this aspect is being able to show positive business results on a smaller market valuation.

The Divergent Players

when the parents fight, the customer loses

The current relationship between mall operators and their tenants is complicated and contradictory. Tenants want sales and high-value potential traffic. And they want control through their own marketing assets and value propositions, by building a direct channel with their customers and prospects. In the other corner, shopping malls are looking to own the complete real estate: the complete physical area plus all the channels that open up to customers and visitors. Their best accomplishment is when the customers build relationship with the mall directly, rather than through their tenants. Sadly, this battle misses its most important stakeholder: the customers and their interests.

The Cost of an Opportunity

it takes a lot of bricks and a lot of mortar for traditional retailers to open up a store

It also comes with some other traditional high costs. Like traditional advertising and operational overheads. With location-based mobile advertising, sales automation & pop-up store concepts, an online retailer can start selling to the same market at a fraction of the costs. The expertise in performance marketing shapes the operational of an eCommerce business model to become agile in any situation. While a traditional retailer has to rely on their strict deployment models that usually need large browsing physical area, with lots of staff and expensive décor.

The Cushion

it can save you some headaches, but you also miss all the fun

Some investors relying on traditional retail businesses to increase their wealth are mostly away from the day to day operations. They only look over the quarterly performance reports and the profits. In comparison, tech industry investors show passion and embrace their entrepreneurial skills. Most of them are so attracted by their investments that they want to be involved in the day-to-day decision making process. The funny paradox is that sometimes the uninvolved retail investors also invest in tech and become heavily involved. This aspect is crucial for the focus and the propensity to grow of these new business models.

Cost versus Price

not all the price customers pay comes from their wallet

The word “convenience” has become that one concept to show the difference between price (how much money I pay for an item) and cost (how much *something* I pay for an item: time, energy, cash, fees, POS terminal payment errors, the weird conversations and explanations with the staff, the ugly shopping bag I have to carry around etc.). Traditional retailers believe that opening a costly store closer to their customers’ homes solves the problem. eCommerce retailers know they can deliver the weirdest sex toy in the world conveniently at your work and write “knitting supplies” on the parcel, while naming their company “Granny’s Shop Inc.” instead of “Weirdest Sex Toys Inc”. This is convenience!

Sales Staff v2.0

all the in-store sales assistance are eCommerce customers themselves

All of your young sales staff love technology and innovation. They do their shopping online, and they spend time on messaging apps while servicing the in-store customers. In the same time, they might find time to complain about how poorly built is their employer’s new website or app. They find no joy in selling with no technology at their disposal. And their lack of involvement affects the customer experience.

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