By Mark Seavy 

With the departure of retail staples like Sears, Lord & Taylor, and Kmart, mall operators are taking a “wholistic” approach to blending brick and mortar with digital, Ethan Chernofsky, SVP of Marketing at the research firm Placer.ai, said during a recent Women’s Wear Daily webinar. 

The strategy gives equal weight to both in-person and online shopping. It is part of a broader brand expansion effort as mall operators rebuild a retail sector hit hard by the pandemic, working to attract new tenants to replace those that have departed.  

For malls, the emphasis of this strategy has been to attract luxury retailers and build out experiences or activations like the Nintendo Play Tour, which made a stop at the Aventura Mall in Aventura, FL. It offered interactive experiences, photo opportunities with Nintendo characters, and playable demos of Switch games all designed to bring consumers into the mall.  

Mall operator Simon Property Group, meanwhile, launched the ShopSimon eCommerce site to complement brick-and-mortar offerings and has also committed to spending $1.5 billion annually on mall development. So far this year it has signed rental agreements with 75 luxury stores covering 208,000 square feet across its malls, with another 47 out for signature, CEO David Simon said. The mall operator also signed more than 3,900 leases through the first nine months of this year covering 15 million square feet, deals that are forecast to result in $1 billion in annual revenue, according to Simon. 

“The reason we are seeing demand for retail for a very specific set of properties is because those shopping center owners understand that they have a lot of power in their hands,” Chernofsky said. “In the past, we always looked at a mall as a sum of its parts, such as Macy’s, Nordstrom, or Abercrombie & Fitch. But if we recognize that a mall is a brand in and of itself, that draw can bring power back to the retailers. If the mall is a brand, being in there makes you a luxury brand and there is life you gain by being in that space.” 

Moving forward, retailers need to devise promotions that can run throughout the year rather than just around holidays, Chernofsky said. Starbucks, for example, promotes its pumpkin spice latte during the fall and its tie-dye frappuccino in slower summer months, he said. Eyewear retailer Warby Parker, meanwhile, gave away free eclipse glasses for viewing the total solar eclipse on April 8th. And retailer Krispy Kreme responded with a “Total Solar Eclipse” limited-edition donut ahead of the event.  

“We see these in food service to help create lift, but we don’t see that to the same extent in apparel,” Chernofsky said. “There is an opportunity to think differently about what the consumer is going through during the year and then align deals and promotions around those time periods. Retailers must recognize that the holiday season is not a single act.” 

In addition to deploying new promotional strategies, retailers also need to re-fashion their stores to account for the smaller spaces that are available. Barnes & Noble, Macy’s, and other retailers have deployed smaller store formats, like Macy’s Bloomingdales’ sub-brand Bloomies and Backstage. This strategy of focusing on smaller footprints appears to be succeeding, as Simon had a 96.2% occupancy rate at its malls and outlets in Q3 and its Tulsa Premium Outlets in Jenks, OK—which had been in the works since 2014,—opened in August with 100% occupancy and 79 tenants. 

Movie theaters, a long-time mall anchor, are also repositioning themselves as locations for live events and exclusive products. Cinemark has begun selling film-related merchandise as well as branded cups and popcorn tubs and has expanded sales through its eCommerce store. The ability to sell items beyond the theaters has been a “nice incremental source of growth,” CEO Sean Gamble said. Theater operator AMC Holdings has also expanded outside its cinemas to sell its “Perfectly Popcorn” through 6,000 stores, including Walmart, Kroger, Publix, and Meijer. AMC, which has closed 181 theaters, also plans to spend $1 – $1.5 billion renovating its remaining theaters during the next four to seven years, CFO Sean Goodman said. 

“Streaming doesn’t mean people don’t want to go to the movie theater for certain experiences,” Chernofsky said. “There is a big difference between a segment that needs to evolve and one that is dying. Fewer stores don’t mean they are going away because there is a draw and, the more retailers lean into periods of change, the more positive the outcome.”