Remaking the Mall

WHILE BABY BOOMERS still have higher incomes than their younger Gen X counterparts, they are spending less at retail as their disposable cash gets eaten up by everything from college tuitions to “bracket creep” — and their spending will continue to slow as they head into retirement.

The even younger Gen Y, while numerically big at 70 million, contributes just 5% of consumer spending and thus doesn’t have much economic oomph.

But back to Generation X: Now between ages 27 and 39, this group represents the vanguard of the powerful married-with-kids market (controlling 18% of the GDP); their careers are near peak income; and they are in a position to make retailers and designers wake up to what has been brewing for some time: the death of the traditional shopping mall.

For the first time in decades, shopping centers — where Americans dispose of 49% of the nearly $2.5 trillion they spend on non-automotive retail items every year — are poised for the biggest revolution since the first fully enclosed mall opened outside Minnesota in 1956, amid the Baby Boom.

Now it’s Boomers’ kids who are having their say. Xers, the smartest shoppers on the face of the earth, want to do more than just buy stuff — whether it’s eat a proper sit-down meal (not in a food court), see a movie or work via laptop over a cup of coffee. Indeed, the biggest issue facing builders today is “the migration of the development community from being landlords to creating spaces,” says Paco Underhill, founder and managing director of commercial research firm Envirosell and author of the recently released The Call of the Mall (Simon & Schuster, 2004).

Providing this place-like experience is becoming imperative for retailers and developers, not just because Generation X has money to spend (and they do), but because their attitudes represent a fundamental shift in shopping culture. According to a report by the International Council of Shopping Centers, “25- to 34-year-olds spend the most at mall stores per trip among all age groups. This implies that retailers targeting this segment today are poised to reap benefits tomorrow.”

Easier said than done. “Traditional mall anchors like department stores are not getting younger shoppers,” says Wendy Liebmann, president of New York City-based WSL Strategic Retail, a marketing and retail consultancy. They alienate “people in their teens, 20s and 30s.”

Thus, new shopping venues known as “lifestyle centers” have become a popular option with retailers as well as shoppers, says David Kass, president of the Cincinnati-based Continental Retail Development. These feature clusters of specialty chain retailers, such as Pottery Barn and Crate & Barrel, along with movie theatres and restaurants.

Mall designers are turning to other new concepts, says Mark Costandi, himself a 35-year-old Gen Xer who is also a project architect and designer at retail branding and interior design firm FRCH in Cincinnati. According to Costandi, “they turn the mall inside-out.”

For a developer to capitalize on the Gen X market and create a new sort of mall (or what Liebmann describes as a “multi-format shopping center experience”), location, functionality, variety and experience must combine to create the environment Generation X wants. Successful retailers who target Gen X in these environments sell products that seem less mass-marketed and more retro, while also being affordable.

Canny developers are also adding residential and office space to their shopping centers — ideally, customers could earn and spend just about all of their money in one place. “Retail has to follow housing trends,” adds Underhill. “As the problems of crime and pollution have largely been solved in a lot of cities, we are witnessing the re-population of downtowns.” Developers looking to capture Gen X shoppers must ask: How do I better service the young, the rich and the childless who live downtown?

Whether willingly or simply because they have no other choice, developers and retailers are waking up to the challenges of serving Gen X, the first cohort to be both alienated enough and affluent enough to make a real difference in how the country shops. As Costandi, who designs and shops in the next generation of shopping centers, says, “a successful mall needs to give us a bit of life, the excitement our generation is looking for — we’re not mall walkers!”

James Morrow is a journalist based in Sydney, Australia. This excerpt is from a larger study he wrote for PROMO’s sister publication American Demographics.