By Stephen Choi
With the announcement of the Amazon-Whole Foods deal, many grocers and retailers that have entered the grocery market saw their stocks tank, losing $11 billion in market valuation. It’s no secret that Amazon is using its dominance in eCommerce world to transition into the brick and mortar stores. Is this the beginning of the end? Will the Amazon Effect destroy an entire industry?
The answer: it depends.
With any disrupted industry, malls have done some serious pivoting to stay relevant. One of the main competitive advantages malls have over the likes of Amazon is physicality (it will be interesting to see what Amazon does with Whole Foods). Instead of physical “materialistic” goods, many consumers, especially Millennials, want the unique “experience” (shareable, of course, through Instagram and Snap Chat videos/pictures). The successful malls are those that are able to integrate the whole shopping experience into a streamlined “work, live, and play” community instead of a standalone, isolated, behemoth.
A great example of this “experiential” shopping is The Grove (owned by Caruso) in Los Angeles. Completed in 2002, the Grove’s sales average per square foot is $2,200. Situated right next to the affluent Beverly Hills, the mall provides an oasis from the urban concrete jungle of Los Angeles. Capitalizing on Southern California’s gorgeous year-round weather, the mall provides a Disneyland-like version of historic Los Angeles, quaint, garden-like, classical art-deco buildings. In addition, the mall has carefully chosen tenants that fit the “chic” living style of Angelenos. Many retail shops embrace the fickle nature of the modern consumers with store designs that are less cluttered and minimalist. Food vendors and restaurants cater towards the organic, fresh produce trend of many health-conscious consumers. More importantly, the mall understands its consumers, those who want to escape the concrete jungle into a garden-like private villa. The mall has done an amazing job masking the traditional mall shopping into an experience.
Another example of an integrated community mall is the Bellevue Collection in Bellevue, Washington, a satellite-city of Seattle. Owned and operated by the Kemper Development Company, the Collection consists of three sections all built next to each other: Bellevue Square, Lincoln Park, and Bellevue Place. Bellevue Square, for a suburban mall, has attracted 16 million visitors annually with roughly $1,000 sales per square foot. Back in 2013, a $1.2 billion expansion was started to update Lincoln Park, bringing Class A office space, retail and dining space, hotels, and multi-family units. Catering towards the instant gratification mind-set of the tech-driven population, the Collection provides a one-stop destination for consumers to “live work play” in a chic and hip way. Instead of relying on traditional large department stores to drive foot traffic, the Mall is relying on smaller specialty stores. There is more emphasis on entertainment and “experience” with more upscale restaurants and luxury movie theaters. Located in Lincoln Square, Din Tai Fung, a Taiwanese restaurant that specializes in dumplings, often has an hour long wait during lunch and dinner. Imagine a mall full of quality tenants such as Din Tai Fung. Once an experience mimics the consumer’s lifestyle (or wanted lifestyle), the consumer will become loyal.
Although traditional malls are a dying breed, many malls have bucked the trend and reinvented themselves such as The Grove and Bellevue Collection. Experience is something that cannot be recreated through a click of a button. You must be there physically to feel it. This mode of competitive advantage must be creatively exploited by malls in order to survive the Amazon of Things.