Reinvention of malls hastens in COVID-19’s wake

Harmonized retail links e-commerce with brick-and-mortar stores, blurring the line between the two

Reports of a “retail apocalypse” don’t tell the whole story about what’s happening in Canadian shopping malls. The truth is more complex, with wins and losses leading to a revolution in retail.

Malls were already feeling the pressure before the pandemic. Foot traffic among Canada’s top shopping complexes was down 22 per cent in 2019 compared with 2018, according to Deloitte’s report, The Future of the Mall.

Developers and owners were already aware that changes were necessary as more Canadians bought goods online. The pandemic has highlighted the urgency for change, and carefully laidout five-year plans have turned into planning strategies for the here and now.

“The retail apocalypse is a myth, as were predictions about the death of the mall,” says Michael LeBlanc, senior retail advisor at the Retail Council of Canada and producer/host of The Voice of Retail podcast.

“But there’s no question that there’s tremendous transformation happening.”

While e-commerce has been a catalyst for change, it hasn’t meant the end of retail stores.

Customers are using malls for curbside pickups and inspirational window shopping to get ideas about what they want to buy online. And more online retailers could be opening return centres in retail complexes to make it more convenient for customers to send back merchandise.

“What we are seeing now is harmonized retail ,” Mr. Le Blanc notes. “The connection between e-commerce and physical stores is a very intimate one.”

This hybrid model with a blurring of the line between online and in-store experiences is being adopted by what Mr. LeBlanc calls “digitally native vertical brands,” which had previously been living only on the web.

Examples include Warby Parker, a retailer of prescription glasses and contact lenses that now has more than 160 physical stores across Canada and the United States, and Allbirds, a maker of sustainable shoes and clothing.

He says some of those players are doing IPOs to raise capital so they can create brick-and-mortar retail locations.

PRODUCT TESTS AT POP- UP STORES

For some retailers, having a store gives them visibility and prestige as brands seek to be where the action is, with throngs of shoppers buying, browsing and dining in a trendy environment – such as Toronto’s Yorkdale Shopping Centre, one of North America’s most successful malls. It’s not uncommon for the mall’s parking lot to be jammed to the max (prompting a valet parking service) and for customers to be lined up outside of high-profile retailers such as Chanel.

Pop-up stores have become more popular in malls as retailers test out concepts before rolling them out on a large scale.

In September, 2021, Zellers, which largely disappeared from the retail landscape in 2013, returned for a limited time inside a Hudson’s Bay in the GTA’s Burlington Centre.

The company hinted more pop-up shops could be opened in the future. At Square One Shopping Centre in Mississauga, a special three-day pop-up market stocked with everything needed for Ramadan shows that mall owners are willing to be more flexible about leasing and offer shorter-term rentals.

Then there’s the Swedish furniture and homewares retail giant IKEA, which has always had its own sprawling, stand-alone stores. The company recently turned a British shopping complex with a 25-per-cent vacancy rate into its new Livat concept. Located in the former King’s Mall in Hammer smith, West London, Livat( which means“lively happening” in Swedish) features a smalle r-format IKEA store( about onequarter of the size of its usual footprint) that has 1,800 items available for purchase and another 4,000 on display to be ordered instore for delivery or bought later online.

Next, IKEA has set its sights on downtown Toronto and San Francisco as it expands this concept into other markets.

Some car companies have opted to open showrooms in malls to take advantage of the foot traffic. Up until recently, Tesla had “galleries” in a number of Canadian shopping centres meant for browsing and ogling. And last year, Toyota opened a full-service dealership in the West Edmonton Mall, occupying the space left vacant by Sears.

MIXED- USE PROPERTIES

Necessity is the mother of reinvention in the mall world. “They were just too big,” Mr. LeBlanc says. “Very few retailers can take on that kind of physical footprint any more. Those large spaces are being divided up into smaller stores, or food destinations, or repurposed into condominiums.”

As more people adopt a hybrid work model, the live-work-play lifestyle trend is taking off as they seek easy access to shopping, services and entertainment close by. Malls are benefiting when they create living spaces for the same customers that will support retailers on the premises.

The concept of “de-malling” has been catching on: taking boxed-in retail complexes and reinventing the rules. That has meant adding green spaces, putting stores outdoors, making them pedestrian-friendly, creating mini streetscapes and generally throwing out the rule book about what constitutes a mall.

David Ian Gray, a retail consultant, strategist and principal of DIG360 Consulting Ltd., based in Vancouver, says the trend around 2010 was for retailers to be in large-scale power centres.

“Shoppers liked that they were one-stop shops, but they didn’t really enjoy the experience of these cavernous places,” he explains. “They tolerated them, but it was the accountants that caused the trend to wane. Those big-box formats required a large inventory of stock, a significant number of staff and the space was expensive to lease. There came the realization that physical retail as we knew it just wasn’t working and things had to change.”

Malls are increasingly becoming mixed-use spaces.

Mr. Gray points to Brentwood Town Centre (rebranded as The Amazing Brentwood) in Burnaby, B.C., as one that has made the transition well. Once a typical cookie-cutter mall, it began a major renovation in 2014 to become a curated “master-planned neighbourhood,” with retail space, offices, a fitness centre, movie theatre, medical centre and three residential high-rise towers, plus a food court focused on local West Coast cuisine. “What we’re headed to is a very hybridized integrated world,” he says.

One thing is clear. Malls aren’t disappearing from the retail landscape any time soon. They will just look and feel different.

“Shopping malls matter, but how they function and bring people in just got harder,” Mr. LeBlanc says. “It will be very interesting days ahead. Mall owners are smart, innovative people, so I’m excited to see what happens next .”

Large spaces are being divided up into smaller stores, or food destinations, or repurposed into condominiums.

MICHAEL LEBLANC SENIOR RETAIL ADVISOR, RETAIL COUNCIL OF CANADA