Deloitte: Malls will have to become mixed-use destinations post-pandemic

Retailers and mall owners will have to change what malls look like in a challenging post-Covid environment, pivoting to a technology-enhanced, multi-purpose destination, according to a recent report from Deloitte Canada.

Traditional shopping malls, born of suburban development in the postwar-period, were already dying before the pandemic. Covid-19 will likely provide an accelerated coup-de-grace to malls as consumers more deeply embrace e-commerce and avoid indoor shopping facilities in an ongoing pandemic context.

Foot traffic declined 22% in Canada’s top 10 malls between 2018 and 2019, while foot traffic in February 2020 was down 42% year-over-year. Deloitte also notes that 78% of consumers expect online shopping to become more popular post-Covid, while 58% of consumers expect enclosed-mall shopping to become less popular in the post-pandemic era.

Approximately 12% of consumers said they expect to shop in enclosed malls once a week after the pandemic, compared to the 22% who shopped in malls once a week prior to the Covid-19 outbreak.

According to the Deloitte report, Canadian consumers now have a customer journey and brand experience across multiple channels, and often arrive at stores knowing exactly what they want (if they haven’t already bought it online).

Landlords and retailers will, as such, have to change what the mall experience is in order attract consumers post-pandemic. “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," said Marty Weintraub, partner and national retail leader at Deloitte Canada.

Malls will have to invest in five key areas: safety and convenience, rethought store roles, more restaurant space, more technology, and a focus on being a “destination.”

Enticing back shoppers will require a safe, easy shopping experience. This means that malls and retailers will have to rethink how they organize their stores, interact with customers, collect payment, and deliver products. Curbside pickup, for example, is an option that consumers will continue to demand well into the future, according to the report.

With declining foot traffic, retailers will have to cut poor-performing stores and focus on showroom and pop-up locations. Few retailers will require an extensive network of stores, and the remaining showrooms will need associates to create an exceptional customer experience for mostly-informed consumers.

As fashion retailers diminish, malls will have to shift to restaurants as anchors in the post-pandemic period. Since dining out cannot be replicated online, forward-thinking mall operators will view food and beverage venues as the new anchor stores. Food and beverage floor space has increased from 5% in the 1990s to 15-20% today, and one developer told Deloitte that it could rise to as much as 50% in the future.

Retailers will also have to embrace technology to satisfy consumers who want a digitized experience, online and off. This will entail an effective e-commerce presence, digital tools to maximize productivity, and an engaging digital experience in-store – including AR and VR enhancement, digital browsing, and virtual fitting rooms.

Lastly, malls will have to shift into a multi-purpose destination, with a mix of office, residential, and cultural amenities. They will have to provide a broader and more dynamic experience that consumers can’t find elsewhere – as single-purpose retail malls will expectedly wither as more shopping continues to shift online.

The Dubai Mall in the UAE, for example, offers a popular multi-purpose, experience-driven destination. The facility is a top entertainment destination for locals and tourists, with luxury brand stores, free events and attractions, a large aquarium, and world-class food and beverage offerings.

"It's clear that the pandemic has changed how people feel about interacting with the world around them,” Weintraub added. “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."