Shopping centres are the Mecca of customer experience. Long before Amazon and Shopify were optimizing landing pages for conversion rates, malls have been testing layouts, lighting and music in order to entice purchases.
Over the past 50 years, they have been upgraded, refined and renewed to create an environment that is attractive for customers and profitable for retailers. The evolution continues as Toronto-area shopping centres usher in new tenants and compete with online retailers.
Now, property managers like Oxford Properties are facing an previously unheard of threat: the appeal of buying almost anything from home. Does Canada’s double-digit e-commerce growth keep them awake at night?
“People are tactile to a certain degree, they have to feel it, they have to touch it, they have to try it on.”
Not really, according to Anthony Casalanguida director of property management at Oxford and former general manager of the Yorkdale Shopping Centre.
“We believe that [shopping centres] provide an opportunity for people to have a little bit of social interaction,” he said “People are tactile to a certain degree, they have to feel it, they have to touch it, they have to try it on.”
Most large malls in the greater Toronto area were built in the 1960s and 70s, including Yorkdale (1964) and the Toronto Eaton Centre (1977), and have undergone continual renewal in retailers and decor to keep visitors’ interest. Most recently, Cadillac-Fairview, owner of the Eaton Centre, announced that it a Saks Fifth Avenue would be added to the mall as part of its purchase of the Hudson’s Bay’s property on Queen Street West.
Casalanguida noted that though high-end malls are going strong, there have been very few new, large indoor malls constructed in since the 1970s. The exception to this is construction firm Remington’s announcement that it would build a large mall in Markham, which is expected to be completed by 2016.
The type of shopping centre and its retailers makes a big difference. Yorkdale and Eaton Centre are among Canada’s leading malls in terms of revenue per square footage, denoting their high-end retail tenants and high-spending customer demographic.
“[Some] retailers are going to find that they can service the needs of their customers by e-tailing.”
Casalanguida sees the biggest impact of e-commerce on shopping centres is in the value-based malls where the experience of buying is less important than it might be to shoppers at Yorkdale. If you can buy a pair of jeans at the Gap, and you already know your size, why wander through a mall to make that purchase?
“I think there’s going to be consolidation,” he said, noting that some value-based retailers may reduce their square-footage or carry less inventory in their stores. “[Some] retailers are going to find that they can service the needs of their customers by e-tailing, [and] that’s fine. But at the same time, they need some kind of display or some sort of flagship location.”
Tellingly, the Sears at Eaton Centre is scheduled to close in 2014, and be replaced by upscale American fashion retailer Nordstrom.
“If you look at every single shopping centre in the GTA, there’s activity,” Casalanguida noted.
“Some of those peripheral shopping centres will begin losing tenancies”
American retailers are crowding the value end of the shopping spectrum as well, though typically not in urban shopping centres. Target bought K-mart’s retail locations and expanded its Canadian presence in 2013 with sights clearly set on Wal-Mart’s market share. Wal-Mart, meanwhile, re-launched its Canadian e-commerce website in 2013. Target has not announced any plans for e-commerce in Canada.
“Some of those peripheral shopping centres will begin losing tenancies one by one because of the fact that they don’t need that distribution channel in order to accommodate the needs of those customers.”
Meanwhile, online platforms like Shopify are experimenting with short-term retail locations and pop-up shops to bring that tactile product experience to new shoppers. While this could be a boon to shopping centres in the future, this trend hasn’t reached high-end locations like Yorkdale yet.
“We haven’t seen [short-term retail] as much at this point,” Casalanguida said, “but I suspect that it’s probably going to be coming to us in the near future.”
Shopping centres haven’t faced such an agile opponent in the past, but as the managers of Yorkdale and Eaton Centre are aware, it’s impossible to replicate the experience of shopping while at home in front of a computer.
“It’s not simply a matter of just the material exchange of money for a product, it’s a social experience,” Casalanguida said. “I love being in [the shopping centre] environment because there’s just a general sense of happiness.”