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On the Level: Enter the engagement space


Is the golden age of shopping centers over in America? Or is the retail real estate industry poised for a transformative renaissance? “The Future of Shopping Centers,” a report from consulting firm A.T. Kearney, concluded that the reality lies somewhere in the middle. However, builders of the new age must be willing to disavow some long-held principles.

“He or she who dies with the most stuff wins” is chief among them. The sudden success of concepts like Uber, Style Lend, and Rent the Runway are clear indicators of an ethic whereby what’s in someone’s closet or garage doesn’t define that individual as much as what he or she is engaged with at the moment.

“Where 20th century malls and shopping centers grew through marketing brand-oriented offerings to a mass market consumer, 21st century retail real estate will prosper by catering to a customer base … less interested in owning things than in having experiences,” the report said.

Newer consumers, the report maintained, prefer personalized brand connections, which often come with a preference for artisan brands that link them to their local communities — think Detroit’s Shinola watch brand or the microbreweries popping up at town centers nationwide. A.T. Kearney predicted that half of spending cash will go to experiences and experiential products in the next 15 years versus little more than a third today.

In its study of 81 of the largest malls in America last year, JLL inadvertently discovered that one of the most common changes being made was abandonment of the “M-word.” Gateway Mall became Shoppes at Gateway; Concord Mall transformed into Concord Towne Center; Hanover Mall resurfaced as Hanover Crossing. Kearney invented a less artful name for the malls of the 21st century — consumer engagement spaces. It breaks them into four categories:

  • Destination centers. Super-regionals and centers with distinct points of difference drawing wide attention.

  • Values centers. “Hyper-curated” sites focused on related goods and services or formats attuned to the tastes of the locals.

  • Innovation centers. Tech-savvy retailers on the cutting edge of customer experience in groundbreaking centers.

  • Residential opportunities. Long live live-work-play.

Above all, the report’s authors counsel, retailers must become more flexible.

“Retailers need to create tiered networks of flagships, full-service, and express stores to efficiently meet consumers’ needs,” said Michael Brown, who advises several national chains as a partner at A.T. Kearney. “They also have to invest in digital capabilities because it’s too expensive to operate physical legacy networks.”

One-third of purchases will be made online by 2030, the report said, so the consumer engagement space will serve as a complement to digital options in accomplishing Walmart’s age-old mission — getting people the right product in the right place at the right time.

“The transition that has to take place among retailers is to scale the network to what it needs to be to drive customers to the channel that’s right,” Brown said. “It’s all about controlling the customer journey.”

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