The Mall of America Takes on the Great Recession
Mar 2, 2010 2:07 PM
It might come as a shock to many mall owners who spent 2009 struggling to reconcile their budgets, but it turned out to be a pretty good year for the Mall of America.
The 4.2-million-square-foot Bloomington, Minn.-based behemoth, which boasts 2.5 million square feet of retail space, reported a 3.5 percent increase in shopper traffic last year, to 42 million annual visitors. Sales rose too, by 1.5 percent.
This wasn’t because the mall has proved immune to the worst recession in 80 years, says Maureen Bausch, executive vice president of business development with the property. Shoppers there have spent less and like every other retail property in the country, the Mall of America received a number of rent concession requests from struggling retailers.
But while many property owners have walked a fine line by trying to maintain a quality of service while cutting back on cleaning, security and marketing, the management at the Mall of America made a strategic decision not to institute any cost-cutting measures that might adversely affect the property, says Bausch. In fact, last year, management did not reduce its maintenance schedule and held about 400 events on its premises, including celebrity appearances, cooking demonstrations, book signings and even a cheerleading competition.
“The key is to keep people coming in your door—we had record traffic last year and sales were up and that was marketing,” Bausch says. “If you have a customer, everything else falls into place, so we did lots of promotions, lots of discounts, lots of events; things we knew would draw traffic.”
To be sure, the Mall of America has several advantages over your standard regional mall. It is an internationally known property and a tourist destination in its own right. The complex also includes a seven-acre amusement park, an aquarium, a speedway and a golf course, among other attractions. The mall’s iconic status also helps draw celebrities who realize that an appearance at the property means easy exposure to a wide audience, Bausch notes. All of that keeps people coming even in the worst of times.
“What they are doing is they are taking advantage of what makes them distinctive and desirable to a consumer,” says George Whalin, founder of Retail Management Consultants, based in Carlsbad, Calif. “The Mall of America, because of its sheer size, is unique. Between its restaurants, and its movie theaters, and its other amenities, it’s a unique destination for people. I don’t know that the average retail mall could do that.”
In 2008, for example, the mall added six new rides to its Nickelodeon theme park, including the SpongeBob Square Pants Rock Bottom Plunge roller coaster and the Avatar Airbender, which features spinning seats on a giant swinging surfboard. The improvements cost somewhere in the neighborhood of $25 million. But Bausch says the price was worth it. She estimates that about 30 percent of the mall’s annual visitors come specifically to visit the park, not to shop. But after they go on a couple of rides they might grab a bite to eat at one of the property’s restaurants or catch a movie at the on-site movie theater or make an impulse purchase after passing a store window.
Even if they don’t spend on that trip, the theme park is a great branding opportunity as it keeps the mall at the top of customers’ minds when they do think about going shopping. (Admission to the park is free, but the cost of a one-day unlimited access pass to rides has gone up $5 since the new rides were added, to $29.95 for those taller than 3’11. The cost of an annual pass has gone up to $250.00 from $99.00.)
Lessons for others
While owners of smaller centers might not have the money to offer non-retail amenities on quite the same scale as the Mall of America, there are lessons that can be applied, including that they might want to consider investing in non-retail uses.
To succeed in the future, most retail properties will have to follow the Mall of America’s lead and become public spaces first, sales centers second, according to Paco Underhill, founder of Envirosell Inc., a New York City-based research and consulting firm and author of What We Buy: The Science of Shopping and Call of the Mall: The Geography of Shopping. As part of that effort, they will have to provide a range of different activities and create draws for children, who often decide where families spend their free time.
“Developers all across the world are focusing on the ‘all,’ rather than the ‘mall,’” says Underhill. “They are recognizing that malls often have the potential of becoming edge cities.”
Adding entertainment amenities to attract more traffic is the first part of the solution. The second is to make sure the mall offers a wide variety of public events that tie into those amenities and to promote the property as much as possible through a variety of channels.
Overall, Bausch estimates that the mall generates about $400 million in publicity every year.
“Keep your mall top of mind,” she advises property owners. “You want them...
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