At a time when the viability of stores is being questioned, mega-malls are thriving. Drapers investigates why
The store is dead, many doomsayers have declared in recent years. However, a visit to Westfield Stratford City or Westfield London, Bluewater, Intu Trafford Centre and their ilk would pour scorn over those claims.
The so-called mega malls are thriving. Retail analyst Globaldata predicts sales at large-scale shopping centres will grow by 7.2% over the next five years, outpacing other bricks-and-mortar retail locations, which have forecast growth of 5%.
At a time when many retailers are closing stores, why are mega-malls still so popular?
“I put it down to a divergence of the good becoming better and the weak becoming weaker,” says Ann Summers property asset manager Graham Seaton. “The experience you get at some of these mega-centres is pretty special.”
In fact, a mere presence in some of these bigger centres can help build brand equity, says Harper Dennis Hobbs head of retail consultancy Jonathan De Mello. This also makes them popular with overseas retailers: “Opening in such locations allows them to market their brands more effectively across the piece. It typically drives a halo effect for online and wholesale.”
De Mello says some big international brands are opting to only open in key cities and mega-malls, while relying on online for a significant portion of their sales, because online is “such a profit maker” once brand equity is achieved.
Size alone does not make these super-malls thriving destinations. Sarah Mander, assistant director, retail leasing at developer Hammerson, says consumers are now looking for experiences when they go to these centres.
This is something Philip Lunn, co-founder of developer Lateral Property Group, is keen to deliver in his new Axiom scheme, which is scheduled to open in Castleford, West Yorkshire, in 2021. The UK’s biggest new out-of-town shopping centre since Bluewater opened in 1999 will house more than 75 retail, restaurant and leisure units. Marks & Spencer, Next and Primark have already signed up at the 600,000 sq ft scheme.
Lunn refers to Axiom as a “shopping resort” and has taken inspiration from the experience-driven retail malls in the Middle East and US.
“Customers want more,” he says. “They want leisure, they want ski slopes, they want experiences. They want a family day out where the kids are going to have fun. You’re not just dragging them around the shops.”
Lunn promises “really cool stuff” at Axiom, which he describes as a shopping centre for the “Instagram generation”. This includes “dancing fountains” and a sizeable events space. The site also benefits from being next door to Xscape Yorkshire, one of the UK’s largest indoor ski slopes.
The Disney touch
Lunn has taken much inspiration from LA’s The Grove mall – a favourite hangout of many a Hollywood star. The Grove has a dancing fountain – similar to that Lunn is planning at Axiom – a double-decker trolleybus offering free rides around the shopping location, lush landscaping and a complimentary five-star concierge. It also connects to the Original Farmers Market, which features 100 gourmet grocers and is a culinary landmark in LA.
The Grove opened in 2002 and is now the second most-productive malls in terms of sales per square foot in the US.
Founder Rick Caruso says: “Traditional indoor malls never interested me. I wanted to create community gathering places … where you can linger with friends over a good meal, spend an afternoon with the family, or simply enjoy a nice stroll with some shopping along the way.
“For The Grove, that meant breaking a cardinal rule of shopping centre developers: ’If it flows or grows, it goes.’ In other words, don’t spend a dime on anything that doesn’t generate a direct return.
“I most enjoyed overhearing a conversation at a shopping centre convention during The Grove’s construction. One mall executive remarked to another, ‘Caruso is going to bankrupt himself with all those bells and Whistles.’ Almost two decades later, our competitors are still playing catch-up.”
Lunn says Caruso adopted similar principles to Disney when developing The Grove: aiming to tell stories via his shopping destination and create a unique experience: “He wanted to deliver an experience and excitement, not just a bog-standard shopping destination.”
Many, Lunn included, are now following Caruso’s lead. New Las Vegas mall Area 15, which is scheduled to open by late 2019, is vying to create an immersive, experiential destination.
Developer Fisher Brothers and creative agency Beneville Studios is dedicating space to experiential tenants. Area 15 also has 40,000 sq ft dedicated to events and will host more than 100 events a year, including live music events, virtual reality experiences and e-sports tournaments. The mall is designed to be the perfect hangout for Generation Z consumers.
Lunn thinks more traditional operators desperately need to re-invent their malls. “The really sterile boring centres that offer no experience are going to have a tough time over the next couple of years,” he predicts.
Shoppers are also seeking experiences from the stores they shop in within these mega-malls, says Omar Aziz, retail operations director at womenswear brand Quiz.
“The experience has got to be different to what they get at a smaller high street store,” he says. The centrepiece of Quiz’s Westfield Stratford City store is a digital “scatter wall”, which features social media content, campaign videos and imagery from Quiz.
“Our products are designed to make women feel glamorous, so we want our store experience to reflect this by making our customers feel special, and to leave them with a lasting impression,” explains Aziz.
Seaton agrees that stores have to be at their best in these super-centres, and has recently refitted Ann Summers’ Manchester Arndale and Birmingham Bullring stores: “We’ve prioritised stores in those centres in terms of refits to get them looking right. High turnover stores get heavily used.”
Many online and wholesale brands are also opening statement stores in these locations. Online retailer Missguided’s first stores launched in the mega-malls of Westfield Stratford City and Bluewater. The units are a visual assault on the senses and feature unicorn-headed mannequins.
Aziz says that retailers need to deliver theatre, while ensuring the store trades profitably: “The days of having stores that are brand statements that don’t contribute are over. The mall rents can be very expensive and every store has to contribute.”
Seaton agrees: “The kind of rents you end up paying means you’ve got to work the space quite hard. We don’t believe stores are there as billboards – they’re there to sell products.”
Fewer, bigger, better is the mantra of many fashion retailers when it comes to stores, which has led to some brands upsizing in mega-malls.
Hammerson director of UK shopping centres Pete Cooper gives the example of River Island, which took a bigger space within its Bullring centre in 2015, in a store he describes as “international flagship status”.
The store, which became the second largest in River Island’s estate, changed the perception of what River Island could offer to Bullring shoppers, says Cooper, and consequently boosted sales. It is now one of the retailer’s top three performing UK stores, he says.
Securing bigger, more high-profile units in these centres is also a priority for JD Sports.
Group acquisitions manager James Air says this enables the sportswear retailer to sell a wider offer. “Shoppers expect to be able to shop the full range. That means we need a store of a certain size,” he says. “We can’t have a situation where Westfield London hasn’t got the right size, it’s just not good enough.”
Aziz agrees: “When a customer walks in, they want it now. They don’t come to these destinations on their lunch break. You have to give them what they want whilst they’re there.”
Quiz has added iPads and kiosks to its stores in super centres to enable shoppers to order products that are not in stock for delivery at home.
However, Air says this is not good enough for JD’s shoppers. “There’s a lot less tolerance from our customers to shop at the kiosk if something’s not in stock. They want it then and there.”
Big malls, big overheads
Taking space in mega-malls comes with downsides and that is “phenomenally expensive” operating costs, says Seaton, which include sizeable service charges.
Seaton says it is difficult, especially for smaller tenants such as Ann Summers, to negotiate these charges.
Does the boost to sales and brand equity that trading in these mega malls brings make it worthwhile?
De Mello says it depends whether your brand thrives in high footfall locations. He uses the example of one beauty brand that achieved the same sales from its Bluewater store as it did in a store in a market town. “If you do better margins in other locations where rent and rates are cheaper then focus on those locations,” he advises.
Despite the associated costs of these stores being “eyewateringly expensive”, Air says they are worth the expense as a good mega mall can deliver the all-important experience that shoppers are looking for.
And it is experience that will entice today’s demanding shoppers, who have the option of buying anything they want with the tap of a smartphone, into stores.
Reinventing retail in Battersea
London is set for a new retail hub with the redevelopment of Battersea Power Station.
The 42 acre site will create homes, shopping spaces, workplaces – Apple has signed for an office there – galleries, markets and restaurants.
The scheme brings 200 retail and food and beverage units, 100 of which will be housed in the former Power Station.
Sam Cotton, retail leasing director at Battersea Power Station, says: “We’ve repositioned Battersea as the fourth retail pillar of London. If you take a map of London, the Westfields anchor east and west, and you have Brent Cross in the north. There’s very little in south London.”
Cotton wants to deliver “something different” and is eager to work with brands to make this a reality.
“We’re giving brands the opportunity to use our platform and do something different, whether that be a new concept or product line or perhaps a shop that doesn’t sell any product at all and is a completely digital experience.”
The first phase of the development, Circus West Village, which mainly features bars and restaurants, is already open. The bulk of the retail space is due to open in 2020.
The scheme will include a 40,000 sq ft food hall, events space and a park, and a Tube station is under construction to make the development easily accessible.