Canadian Malls Need to be Revolutionized Post-Pandemic: Report

The Canadian retail sector is set to be revolutionized as shoppers redefine the role of the store and embrace technology while retailers and mall owners grapple with the repercussions of the COVID-19 pandemic.

REVOLUTIONIZING MALLS IS THE WAY FORWARD

According to the report The future of the mall: Building a new kind of destination for the post-pandemic world, by Deloitte, there are five critical changes that mall landlords, retailers, and the entire industry must embrace to protect the sector and keep Canadians coming back into stores.

They are: Focus on safety and convenience; Rethink the role of the store; Make way for the food revolution; Embrace technology; Become a new destination.

“Now more than ever, landlords and retailers need to work hand in hand in an effort to get ahead of the evolving trends and create a reason for Canadian consumers to return to in-store shopping post-pandemic and have a smooth, stress-free experience,” said Marty Weintraub, partner and national Retail leader at Deloitte Canada. “The mall of the future will be a destination that feeds the functional requirements of our lives as well as our need to be social. It will be a thriving community where people will live, work, play, and eat. It will not be your parents’ mall—so much so that we may no longer call it a ‘mall’ at all.

“One thing is certain: a revolution is coming to our retail experience. It’s clear that the pandemic has changed how people feel about interacting with the world around them. These changes could last long into the future, which means retailers and landlords alike have both a great opportunity and obligation to reimagine the entire customer journey and create a totally new kind of destination that will keep visitors coming back for years to come.”

Michael Kehoe, Lead Ambassador in Canada for the New-York based International Council of Shopping Centers, said the most prominent takeaway from the Deloitte opinion on the future of the mall is that consumer real estate landlords need to create “a new destination” to be competitive.

“Retail real estate and shopping centres are always changing and evolving. Bricks and mortar retail will always change and adapt to market conditions and consumer demand and the pace of that process is being accelerated,” said Kehoe, a veteran of more than 40 years in the industry and broker/owner of Fairfield Commercial Real Estate in Calgary. “Shopping centres as we know them now will reconfigure, redevelop, de-mall, add density to become more community oriented with a more localized leasing focus to better serve their customers, and the trade areas where they are situated to be relevant destinations.

“The shopping centre has had 10 years of disruption in the past five months and it is clear that the Darwinian struggle that is retailing is no longer the survival of the fittest. It will be the survival of the creative.”

COVID-19 HAS ACCELERATED RETAIL CHANGES THAT WERE ALREADY IN THE WORKS

Weintraub said the COVID-19 pandemic has served to accelerate changes that were already underway and accelerate innovation among mall owners and retailers alike. Canadian consumers were already starting to change how they shopped, and now they are looking for a significantly better experience that connects the online world to an elevated in-person experience for the long term. The unknowns coming out of the pandemic have added even more variables into this evolution that need to be navigated, such as how long social distancing measures will be maintained as well as the accelerated shift in consumer behaviours, he said.

“A lot of these shifts were happening before COVID. We’re seeing a very strong movement of consumers to put their wallet with retailers and businesses that have navigated the crisis really well and have led with purpose really. So showing care of community, care of people,” he said.

“That’s a good example of a trend and a mindset shift that’s here to stay. We’ve seen a massive adoption of ecommerce and digital. One because there was no choice but again that’s one we’re already seeing some ratcheting down in terms of preference to shopping online but it’s not going to go down to where it was pre-COVID and it’s not going to be as high as we saw early in the pandemic either.”

He said one of the newer trends is the focus on safety. While post-pandemic some changes may take place where certain of today’s practices will no longer be around, he said some aspects of hygiene are now burned into people.

With all the store closures taking place these days and into the near future, Weintraub said the mall can no longer be just about shopping. With fewer traditional stores, there will be a move to convert spaces to more community-oriented uses and experiences.

One other trend into the future, Weintraub said, will be more residential use at malls. That could include either building on top of the mall or building condos on parking lot land for example beside the mall.

FIVE KEY CHANGES MALLS SHOULD INVEST IN POST-COVID

According to Deloitte, here’s a closer look at the five key changes mall owners and retailers need to invest in order to survive and thrive in the post-pandemic world and get Canadians coming back in store:

1. Focus on safety and convenience: “The new mall will need to carefully balance consumers’ desire for social interaction with their need for a safe, easy shopping experience. Retailers and landlords need to address customers’ concerns by finding innovative ways to adjust how they organize their stores, interact with customers, collect payment, and deliver products. The key to getting people back into malls will be for owners and retailers to work together to invest in customer safety, and to provide tools and applications that make for a smoother, more convenient shopping experience.”

2. Rethink the role of the store: “Given mall foot traffic had fallen by 22 percent in the country’s top 10 malls even before the COVID-19 outbreak (2019 vs. 2018), retailers need to reconsider the size and number of stores that will meet their customers’ needs, eliminating poorer-performing stores and focusing on showroom, pop-up locations, and other innovative formats. The growth of online shopping (with 78 percent of consumers expecting online shopping to increase in popularity post-pandemic) calls into question the need for an extensive network of stores. Consumers will no longer come in just to browse; they will arrive already knowing what they want, and the associate’s role will be to facilitate the purchase through an exceptional customer experience.”

3. Make way for the food revolution: “As less relevant fashion retailers move out of mall locations, their departure will make room for landlords to bring in an exciting new breed of restaurant offerings. This will feed the consumer’s desire for social experience and will likely become the new anchor bringing visitors to the mall. As a social experience, dining out appeals to all customer segments—and it cannot be replicated online. Smart mall owners are viewing food and beverage venues as the new anchor that will enhance their destination appeal. When it comes to the experience of food choices in the mall, a renaissance is coming.”

4. Embrace technology: “Retailers need to take a page from digital-first companies—it’s never been more important to build a seamless and integrated physical and digital brand presence. Customers are increasingly looking for a digitized experience both online and off, enabled by technological innovation at every turn. Malls and retailers need to use digital tools to maximize productivity and efficiency and create a dynamic, engaging experience, such as product testing and simulation using AR and VR technologies, an ‘endless-aisle’ distribution strategy that can deliver in 24 hours or less, pop-up shops to showcase new products both in person and online, as well as online concierge services, digitized browsing, and virtual fitting rooms.”

5. Become a new destination: “Most of all, the mall must become the new meeting place for the community—a multi-purpose destination that offers extensive leisure activities as well as other functions, like office, residential, and cultural amenities. Shops should be mixed in with other complementary uses, giving visitors an interactive experience in which the entire environment comes into play. Owners may need to rethink their rental models to allow for different types of retail experiences, such as short-term pop-ups or exhibitions. There is a great opportunity here to be innovative.”