For most operating within retail, the challenges that are being faced today are simply a stark reality of doing business. Rising costs and a general sense of financial uncertainty have cast quite a pall over the industry of late. It’s also resulting in sharp turns in consumer behaviour and an uptick in their digital habits, requiring many retailers to quickly adapt their offering and service to meet these changes in taste and preference. For shopping centres, their landlords and retail tenants, the impact of these changes can often be more acute, demanding from them constant innovation and a consistent rethink of the value they’re providing visitors.
With these current challenges in mind, we sit down with Tom McGee, President & CEO of ICSC (Innovating Commerce Serving Communities, formerly International Council of Shopping Centers) to discuss the current state of the North American shopping centre, the continued evolution that’s needed in order to remain relevant as a shopping venue, and what the mall shopping experience might look like going forward.
Retail Insider the magazine: In your estimation, considering the challenges that most retailers operating within the industry face today, what is the current state of the North American shopping centre?
Tom McGee (TM): Marketplaces and shopping centres have continued to show their resilience and stability, despite ongoing economic challenges like inflation and an increased price sensitivity amongst consumers. Vacancy rates remain historically low, reflecting robust demand for retail space. But higher interest rates have slowed the building and development of new space, making it challenging for some retailers to find suitable locations.
However, this strong demand for store space signals a healthy marketplace and underscores the importance of physical retail in today’s shopping landscape – and that both retailers and consumers see it as an asset. In fact, retailers can see a benefit beyond just in-store sales, as our recent Halo Effect III report showed a direct correlation between a new physical store and an increase in online sales in that area.
Our marketplaces have evolved over the past few years to meet changing consumer preferences. Today’s shopping centres are more than just places to shop—they’re vibrant hubs that blend retail with entertainment, dining, and services, creating a dynamic, multifaceted experience for visitors.
RITM: From your perspective, what about retail marketplaces and spaces have changed most significantly over the course of the past 5 to 10 years?
TM: Over the past 5 to 10 years, retail marketplaces and spaces have undergone significant transformations driven by evolving consumer expectations and technological advancements.
There’s been a notable emphasis on creating spaces that serve as community hubs—places where people not only shop but also socialize, dine, run errands, and seek entertainment. We’ve seen a shift towards more diverse tenant mixes that cater to the modern consumer’s desire for convenience and unique experiences. This focus on experiential retail is key to the industry’s resilience, as it continues to adapt to economic pressures and changing consumer behaviours. The marketplaces of today are not just about transactions; they’re about creating connections and fostering community.
Retailers are also exploring innovative formats like small-format locations, pop-ups, and storein-store concepts, which offer flexibility and allow brands to quickly adapt to changing consumer preferences and demand. Additionally, the rise of omnichannel retail strategies, including curbside pickup and BOPIS has redefined convenience, making it easier for consumers to blend online and in-store shopping experiences seamlessly. In fact, the ability to use stores effectively as “distribution centres” to support omnichannel commerce is a significant change in the past several years, and one that retailers are taking advantage of to meet consumer needs.
RITM: What challenges do you think are posing the greatest impediment concerning the continued growth and evolution of North American retail marketplaces and spaces?
TM: The continued growth and evolution of North American retail marketplaces is facing space constraints, a byproduct of a lack of new development. High costs associated with construction and land acquisition, partly a result of high interest rates, have resulted in less new retail space being built. Developers and retailers alike are hopeful that interest rate cuts will make it less expensive to finance new projects, thus removing a significant barrier for expanding retail footprints and modernizing existing spaces.
And, the demand for brick-and-mortar retail is very much there; in our recent survey of retail leaders, 78 per cent of executives said foot traffic to brick-and-mortar establishments rose over the past year, and more than two-thirds said their organization is currently looking to grow and expand the number of stores. As consumers look for dynamic and experience-driven retail spaces, our industry’s ability to innovate remains strong, and space constraints have been partially and temporarily remedied by small-format stores, pop-ups, store-in-store options, and other innovative formats.
RITM: What in your estimation are some of the more successful retailer initiatives today with respect to consumer attraction?
TM: During the pandemic, retailers embraced omnichannel strategies as consumer shopping behaviours shifted. Today, click-and-collect options and other convenient services are essential for today’s omnichannel consumers.
We’re also seeing an increase in mixed use developments focused on creating centres where people can shop, work, dine, and play in the same area. As a result, these developments can help transform marketplaces into vibrant communities and create new economic opportunities.
Additionally, experiential retail is a key component to attracting consumers, as brands look to create memorable in-store experiences through initiatives like interactive displays, in-store events, product demonstrations, and immersive environments that engage customers beyond just shopping. Entertainment concepts, like escape rooms and mini golf, continue to rapidly expand, as consumers increasingly desire opportunities to socialize and share experiences together.
RITM: Going forward, looking ahead over the course of the next one to three years, how do you believe North American marketplaces and spaces will be described?
TM: Over the next one to three years, we can expect North American marketplaces to continue evolving based on consumer demands and appetite for physical retail – characterized by a fusion of innovation and personalization.
Physical retail will increasingly shift towards creating immersive, experiential environments that go beyond the traditional transactions and turn stores into destinations that engage and captivate consumers. The growing trends of omnichannel strategies will also become more seamless, integrating online and offline experiences to offer customers a personalized journey from digital touchpoints to in-store interactions.
As with other industries, technology will continue to play a growing and pivotal role throughout retail and the marketplaces industry, with innovations like augmented reality supporting offerings like virtual try-ons and AI-powered recommendations to further enhance the shopping experience both online and in-store. As a result of adopting these initiatives, the retail landscape will become more dynamic, personalized, and interconnected, setting new standards for how brands connect with and serve their customers.
*This article originally appeared in Retail Insider the magazine. Read the newest issue here.
