The week of August 31, 2003, was a typically slow news week wrapping up the dog days of summer, but it may go down as a watershed moment for the retailers, designers, developers and architects who work in the fast-changing world of shopping malls. In Sunnyvale, Calif., the beginning of that week saw the final curtains drawn on the Sunnyvale Town Center, a traditional box-style shopping center that opened in 1979, which had been slowly drowning in the middle of a vast sea of empty parking spaces before going under following anchor tenant J.C. Penney's decision to weigh anchor.
The headline in a local newspaper: Sunnyvale mall a goner.
A few days later and 2,500 miles east, in Richmond, Va., the local press was very different. In that city's suburb of Henrico County, locals and officials gathered to cut the ribbon on the new Short Pump Town Center, one of a new breed of shopping venues known broadly in the business as lifestyle centers. Late architect Victor Gruen, who popped the notion of America's mall out of his own brain and, in so doing, helped bring to life Baby Boomers' picture of the American Dream, must be turning in his grave. Departing radically from the traditional mall concept, the Short Pump Town Center was the latest entry in a broader retail trend being led by members of Generation X.
While Baby Boomers still have higher incomes than their younger Gen X counterparts, they are spending fewer and fewer dollars on retail purchases as their disposable cash gets eaten up by everything from college tuitions to bracket creep and their spending will continue to decrease as they head into retirement.
The feted Generation Y, while bigger in terms of numbers, only contributes about 5 percent of consumer spending and thus doesn't have the economic oomph to cause planners and developers to, literally, re-landscape urban and suburban America.
That task has fallen to Generation X. Now between ages 27 and 39, this demographic represents the vanguard of the powerful married-with-kids market (controlling 18 percent of the GDP), who are seeing their careers take off toward peak income, and are in a position to make retailers and designers wake up to what has been brewing for some time: the death of the traditional shopping mall.
THE MALL IS DEAD LONG LIVE THE MALL!
But are developers getting the message? Yes and no. On one hand, about 60 lifestyle centers have been built around the country, and 20 more are slated to open over the next two years (in comparison to only five regional malls that are thought to be on the drawing board. A 2001study by PriceWaterhouseCoopers estimates that 400 of these retail behemoths could be obsolete by the end of next year). Further economic motivation: the average lifestyle center turns over about $500 per square foot in sales per year, compared with just $211 for a typical old-style shopping mall.
At the same time, Mall developers are not doing enough to capture Generation X, says Wendy Liebmann, president of New York City-based WSL Strategic Retail, a global marketing and retail consulting firm. I think that one of the huge issues malls are facing is that the people behind them do not understand the way the younger generation of shoppers shop. They're still trying to attract their parents and grandparents.
It is not difficult to determine the importance of middle-aged households to the U.S. economy. Households headed by people between the ages of 35 and 54 make up only 42 percent of households, but account for 54 percent of consumer expenditure.
For the first time in decades, shopping centers where Americans dispose of 49 percent of the nearly $2.5 trillion they spend on non-automotive retail items every year, and whose new construction starts eclipsed $3.15 billion in 2003 are poised for the biggest revolution since the first fully enclosed mall opened outside Minnesota in 1956, amid the Baby Boom.
Now it's Boomers' kids who are having their say, and what these shoppers want is another reason to walk in the doors. Just filling some immediate consumer need may have been enough up to now, but not tomorrow. Xers, the smartest shoppers on the face of the earth, want to do more than just buy stuff whether it be to have a proper sit-down meal (not in a food court), see a movie or get some work done on their laptop while having a cup of coffee. Indeed, the biggest issue facing builders today is the migration of the development community from being landlords to creating spaces, says Paco Underhill, founder and managing director of commercial research firm Envirosell and author of the recently released The Call of the Mall (Simon & Schuster, 2004).
Providing this place-like experience is becoming increasingly imperative for retailers and developers. The International Council of Shopping Centers recently issued a report entitled Tapping the 25- to 34-year-old Consumer, which, while skewed toward the junior end of Gen X, underlined the need to capture this market. This is not just because Generation X has money to spend (and they do), but because their attitudes represent a fundamental shift in shopping culture, one which will be seen for decades to come. As the report's authors put it, As teens of today move into the next age cohort, the 25- to 34-year-old population will accelerate rapidly over the next 10 years. Mall tenants, in particular, could potentially exploit the fact that 25- to 34-year-olds spend the highest at mall stores per trip among the age groups. This implies that retailers targeting this segment today are poised to reap benefits tomorrow.
Easier said than done. Traditional mall anchors like department stores are not getting the younger shoppers, says Liebmann, and alienate people in their teens, 20s and 30s. Because of these giants' inability to draw customers into malls, says David Kass, president of the Cincinnati-based Continental Retail Development, specialty retailers have been looking for venues that are more economical for them, and where they don't have to subsidize anchor tenants with higher rents.
Thus, says Kass, whose company has built several such shopping environments around the country, lifestyle centers have become a popular option with retailers as well as shoppers.
Besides lifestyle centers, which tend to feature clusters of specialty chain retailers such as Pottery Barn and Crate & Barrel along with movie theatres and restaurants, mall designers are turning to other new concepts, says Mark Costandi, himself a 35-year-old Gen Xer who is also a project architect and designer at retail branding and interior design giant FRCH in Cincinnati. But one general rule tends to apply to just about all new developments that successfully capture this Generation X market: according to Costandi, they turn the mall inside-out.
Whether it is the main street concept, lifestyle centers, de-malling, mixed, or multi-use properties, the story is the same, he says. Certainly we're seeing more and more glorified strip centers with nicer tenants for those developers that aren't that daring, but others are going further. Those that own malls are de-malling, which is a jargony way to describe tearing everything down except for anchor stores at either end and then rebuilding from the middle out.
Alternatively, some choose to keep the existing structure and scab exterior pads onto the old anonymous box of the mall, giving the retail outlets and restaurants inside an exterior presence, such as at the Kenwood Mall in Ohio.
MIXING IT UP, OR, THE SUBURBAN JUNGLE
For a developer to capitalize on the Gen X market and create a new sort of mall (or what Liebmann describes as a multi-format shopping center experience), more is needed than to put new signage and doors on an old anonymous box. Location, functionality, variety and experience must all combine to create the environment Generation X wants. Even if the stores seem ubiquitous, the successful retailers who target Gen X in these environments are ones who sell products that seem less mass-marketed and more retro, while also being affordable.
People in Generation X like the trend of being able to walk down a main street under one non-roof, which gives them a cozy traditional feel that is also very big at the moment, says Liebmann. But that's only part of the battle. There is an issue of things being more urban in feel rather than an extension of the 'burbs. A cultural mindset relevant to this audience that doesn't want to be stuck way out there.
One company that has been working to do this is Federal Realty Investment Trust (FRIT). During the 1980s and 1990s, they put together a string of properties across the U.S. in closed-in suburbs of the sort favored by the young professionals and start-up families of Gen X who don't want to live in the outer rings of their parents. Although they say they do not market specifically to the Gen X cohort, we do cater to many of the characteristics of Gen Xers, says Vikki Quinn, FRIT's director of marketing. Since they are more likely to be health-conscious, some of our properties have gyms. We also try to offer things that Gen Xers like. Since a lot of them are young and looking for social outlets, we have outdoor concerts.
Quinn cites two of her company's properties: Bethesda Row just outside of Washington, D.C., and Santana Row, in San Jos, Calif., as prime examples of shopping centers that fit this model. (Being in the Silicon Valley area, Santana Row also offers something that is showing up in more shopping centers around the country: wireless Internet hot spots).
The key to the thinking behind places like these, says Quinn, is that they don't just appeal to shoppers: These are for people on a date, people with families looking to do something outside, a whole range of people, she says. Some of our retailers are staying open later, because people like to wander in to the bookstore or art gallery after dinner to hang out. Retailers are definitely recognizing this and capitalizing on it.
As part of this trend, which might be called the urbanization of the mall, canny developers are adding residential and office space to their shopping centers meaning that, ideally, customers could both earn and spend just about all of their money in one place. (FRIT's Bethesda and San Jos properties both have housing components).
YOU NEVER KNOW YOUR LUCK IN A BIG CITY
Generation X has a real need to establish community, and we tend to be more urban notes Costandi, and says the best of these venues combine these values to create transparent streetscapes that let shoppers (and residents) go where and do what they want, and form their own relationships and habits organically, without being directed by planners. My biggest push as a designer is to capture these residential aspects, and it's great when you can incorporate residential and even office life into these centers so that they don't just sit there in the middle of a sea of parking, he says, echoing Gruen, who originally envisioned his malls surrounded by housing as well.
WHERE X BOTTOMS OUT
Generation X will be between the ages of 44 and 55 in 2020. Along the way, there will be obvious lows in the size of certain age groups, creating what we will call the "X Effect."
But this is only the beginning. Experts say that the next wave of shopping mall urbanization will be more dramatic, mirroring development seen for a decade in other countries. While Americans may have invented the concept of the traditional, shopping mall, it is overseas that architects, designers and developers are working to create the mall of the future. The U.S. market is still very old paradigm, says Liebmann, born and raised in Australia, where she says some very innovative non-anchored shopping centers are being built, especially in traditional downtown areas where developers have feared to tread over the past several decades.
Retail has to follow housing trends, adds Underhill. While the mall and the lifestyle center followed the population to a suburban setting, today, as the problems of crime and pollution have largely been solved in a lot of cities, we are witnessing the re-population of downtowns. The key question for developers looking to capture Gen X shoppers becomes:How do I better service the young, the rich and the childless who are living downtown?
The answer, says Underhill, is in the latest developments like the recently opened Time-Warner Center in Manhattan, where customers are going to arrive both by escalators from street level below and by elevator from their condos above.
Time pressures are also part of this urbanization trend, and Underhill says that malls will have to change their marketing strategies to take advantage of Gen X's preoccupation with getting things done efficiently and conveniently a need that will only get more acute over the next decade. Already, the ICSC has found that shoppers at lifestyle centers tend to be more pop-in, pop-out shoppers than those visiting traditional malls, spending 57 minutes versus 78 minutes on average per trip, according to one survey they conducted of 1,500 shoppers at five such centers around the country. But although their shopping time was shorter, it was also more valuable to retailers, with lifestyle center customers spending $79.80 per visit, or $84 an hour, versus $57.70 per visit, or just about $60 an hour, at malls.
To take advantage of this desire of shoppers to save time, there will be a better union between a store, its catalog and the Web, predicts Underhill. The implications are going to be major in terms of how retailers market themselves. Among the future scenarios he sees are the end of traditional coupons, in-store circulars and newspaper ads for sales, to be replaced by personalized direct mail over the Internet, where what the shopper gets is based on his own relationship to the store.
Furthermore, he says, more and more stores will be an extension of their catalog, whereby they won't necessarily have all their inventory in stock but will be able to provide delivery within a short time. And retailers will be more organized around providing one-stop lifestyle solutions, whether it be a studio apartment store where everything is miniature and bundled, or a grocery store that offers complete meal-in-a-box kits.
Whether willingly or simply because they have no other choice, developers and retailers are waking up to the challenges of serving Gen X, the first cohort to be both alienated enough and affluent enough to make a real difference in how the country shops. As Costandi, who designs and shops in the next generation of shopping centers, says, a successful mall needs to give us a bit of life, the excitement our generation is looking for we're not mall walkers!
James Morrow is a freelance journalist, based in Sydney, Australia, and can be reached at firstname.lastname@example.org