Winter 2006 MegaMalls
Big Draw, Big Deal, Big Business
You won’t find “megamall” or “mega-mall” in the dictionary or even in the International Council of Shopping Centers’ list of shopping center definitions. You’ll find it in an online encyclopedia—defined as “a very large shopping mall,” but that doesn’t begin to describe these giant edifices of retail, entertainment and other pursuits of happiness. Maybe that online definition can be expanded: “Extreme shopping mall; monolithic tribute to consumerism, a magic mix of stores, eateries, entertainment and attractions, with the ability to draw crowds; tourist destination.” That’s more like it.
And right next to that definition, you could put a picture of Mall of America in Bloomington, MN, and one of West Edmonton Mall in Alberta, Canada, both owned by Triple Five Group (Edmonton, AB). Even so, that won’t show you just how enormous these malls are, or everything they house—the retailers, the restaurants, and the many sometimes completely unexpected or unique tenants, entertainment venues and amenities. Nor will it show how many shopper-tourists visit, or how much they spend, or the myriad other things large and small that make these megamalls amazing.
Mall of America: How big is it? 4.2 million-s/f big. Pull into one of 12,550 parking spaces and go inside to find four anchors (Bloomingdale’s, Macy’s, Nordstrom and Sears), more than 520 stores, 14 movie screens, 50 eateries—and then the real fun starts.
Opened in August 1992 minutes from downtown Minneapolis, Mall of America, or MOA, is also a family entertainment/vacation venue that draws 35-40 million visitors a year—more than Disney World and Disneyland combined, according to an AP story. And it has plenty to do. MOA is home to the Timberland Twister roller coaster and Camp Snoopy, the nation’s largest indoor family theme park with more than 30 rides and attractions covering seven acres. MOA is also where you’ll find Underwater Adventures, the world’s largest underground aquarium with more than 4,500 sea creatures, a Lego Imagination Center, the NASCAR Silicon Motor Speedway, a wedding chapel, even a university. The list goes on. Family-friendly, there’s something for everyone—and that’s apart from the “shop till you drop” mentality. And shop they do. According to the Minneapolis-St. Paul Star Tribune, Mall of America shoppers spend more than $860 million a year.
[IMGCAP(1)] West Edmonton Mall: That other well-known shopping behemoth, West Edmonton Mall, covers 5.3 million s/f—the equivalent of 48 city blocks. Alberta’s number-one tourist attraction, this center has more than 12 anchors, 800 stores and services, 110 eating establishments, a 21-screen movie theater, and eight world-class attractions including World Waterpark, a five-acre indoor park with miles of waterslides; Deep Sea Derby, an indoor lake with bumper boats; Galaxyland, the world’s largest indoor amusement park; the Palace Casino, and much more. Plus three hotels.
In one day, a visitor can shop the mall’s Europa Boulevard, Bourbon Street or Chinatown; visit Sea Lions’ Rock to watch Pablo, Clara and Kelpie perform; and, if the visitor’s in luck, catch the Edmonton Oilers practicing on the NHL-regulation rink.
“The formula for success here is that we own and operate the three components—retail, attraction/entertainment, and hotels,” says Gary Hanson, West Edmonton’s GM. “At a slow period, we use the attractions. You can’t do that if you don’t own all three. I don’t know of any others like that in the world,” he says.
Moths to a flame
Ask a megamall retailer the difference between a regional mall and a megamall, and you’ll hear one word over and over: traffic. “It’s pretty much year-round. It’s bonkers [on] weekends and holidays. With other malls, you can’t count on that consistency,” says MaryAnne London, owner of Glitz!, a special-occasion and junior sportswear store in Mall of America.
Megamalls generate traffic by means of mega-events. “The marketing efforts at Mall of America are one of the major differences [between a megamall and a regional mall],” says London. “The events are such high caliber… It’s an entertainment mall—they have to give people a reason to come.” And they do, with more than 300 yearly events. At West Edmonton, the goal is to create a unique experience each time a customer visits, and give them more of the same: bands, book signings, a visit from The World’s Strongest Man—there’s always something happening.
“We have the entertainment factor,” says Maureen Bausch, VP of business development for MOA. “We’re thought of and defined as an attraction, not as a mall.” And as an attraction, MOA markets on a much broader scope: its reach is international. “We market to the traveler as well as the shopper,” says Baush. “Thirty-five percent of our customer base is from beyond 150 miles.” International travelers pour into MOA from all over the world, but particularly from Canada, England, Japan, Germany, Denmark, Norway and Sweden. Tourists make up a large part of West Edmonton Mall’s traffic, as well. “We have direct flights from every major city,” says Hanson. And tourists tend to stay longer—as in days, not hours—and spend more.
Dave Garbe of Oppicks, a sunglasses retailer in Mall of America, says tourists there are “buyers, not browsers.” MOA’s research supports his view: tourists spend an average of $129 per visit. “The closer you live to a mall, the less time and money you are likely to spend there,” says writer Stephen Metcalf on msnbc.com (“Destination: Megamall,
A new type of tourist attraction”). “Conversely, the farther you travel to get to a mall, the more [money] you’re likely to [spend there] to justify the trip. Not surprisingly, malls love travelers.” It’s much the same thing at West Edmonton. “We sell more items to one customer [than we do at our other malls],” says Linda Johansen, EVP and COO for American Kiosk Management, which owns, operates and manages 319 kiosks representing Proactiv Solution acne-treatment products. “People who shop at the mall live far away from the mall, so when they come, they stock up until their next visit.”
And, of course, the sheer number of stores has its own magnetism. While a regional mall might have 100 specialty stores or fewer, megamalls offer more than a shopper can dream of. “We have wonderful category coverage,” says Bausch. MOA has 39 stores in the Men’s & Women’s Fashions category, which makes it a perfect destination for a customer who wants to see what the fashion world has to offer to please a variety of shopper tastes and styles.
“People don’t want to come out to look at one bridal shop,” says London, or one of any type store, for that matter. “Category coverage” also means competition, not only in merchandise but pricing, which makes shoppers happy. For example, Hanson points out that West Edmonton Mall has 50 shoe stores. “They compete with each other, so [the shopper] gets great value,” he says. And those retailers are happy with the sales volume.
Specialty retail, mega style
With so much going on at these megamalls, you might think a specialty retailer could get lost in the crowd. Not so. At West Edmonton, specialty retailers are an integral part of the project. “We promote ourselves as the Greatest Indoor Show on Earth, [and] customers are looking for that unique experience,” says Hanson. “Kiosks contribute to the uniqueness of retail, and they also contribute to the uniqueness of the show, like [a hair-accessories retailer] putting beads in someone’s hair.” It’s ideal for product demonstration by cart and kiosk retailers. “You see action when it comes to the kiosks,” he says. The mall likes it, and so do the shoppers.
And it’s not just experienced retailers in these malls’ specialty retail programs: small, independent mom-and-pops are, too. “The independents give us our flavor,” says Daniel Person, VP of specialty leasing for West Edmonton Mall, with 52 carts and 20 kiosks in its program. Approximately 90 percent of these specialty retailers are owner-operators, not nationals, he says.
In addition to traffic (the buzzword), the advantages for the cart or kiosk retailer are many. MOA’s program has more than 75 cart locations. “Retailers have the opportunity to relocate” within the mall, says MOA specialty leasing representative Lisa Taylor, who has 130 specialty retailers in her program that includes carts, kiosks, in-line stores, and vending. “More importantly, a lot of my tenants have two locations [here]—they might even have three or four carts with different products. It gives the retailer a business under one roof that they can keep an eye on,” she says.
“It’s hard to imagine when you’re in specialty retail how big a market really is,” says Garbe. “Mall of America has three different cart locations for sunglasses. They probably have 100 stores selling them, too… but once you figure out the market is large, it’s easy to consider expanding [in the same mall] than to open in another mall,” he says.
“I have numerous tenants with more than one cart,” says Person. In fact, one owner-operator has ten! “We have a strong relationship with our tenants: we focus more on the operator than we do on the product. By having successful entrepreneurs, we have a low turnover rate.”
“Successful” is the keyword. A retailer’s business skills need to be even more refined in a mega-center for that retailer to succeed. “You have to be a sharper merchant, be more aware of the trends,” says Mike Finn, owner of Rag Stock, a junior clothing and army surplus store at MOA. “You have to show the difference between you and the rest of the competition.” Finn does this by tapping into the trends, creating effective displays, and walking the mall frequently. “The mall is always changing. H&M is coming. Urban Outfitters came last year. You have to visit your competition.”
Another challenge: servicing customers that come from all over. Because there are so many international tourists, megamall retailers often have different issues than regional mall retailers typically face. “It’s a completely different customer,” says Person. Thus, retailers at West Edmonton “deal on more of an international level. It’s not uncommon for them to know currencies.” As for language barriers, “we have a list of people who speak different languages at Guest Services, and we can call them.”
The mega of all malls
Neither Mall of America nor West Edmonton casts the largest shadow, though. The world’s largest malls are in China, a mark of the country’s vigorous new consumer economy. Four of China’s malls are larger than Mall of America, writes David Barboza in The New York Times (“China, New Land of Shoppers, Builds Malls on Gigantic Scale,” 5/25/05). And then there’s the mega of all malls: at six million s/f, Golden Resource Mall in Beijing wins the prize for World’s Largest. And it’s not likely to stop there: China is expected to be home to at least seven of the world’s ten largest shopping malls by 2010.
Is this something North American specialty retailers should look into? Will China’s economy support that growth? On the one hand, “only a certain number can afford to buy,” says Jim Okamura, senior partner with J.C. Williams Group, a retail consulting firm in Chicago. But according to the trade publication Retail Traffic, now is the time to “cash in on the growing middle class in China, which is currently 300 million people strong.” And many US-based developers are doing just that. According to Barboza in The New York Times (“US Firms Join China Mall Surge,” 7/27/05), Simon Property Group “formed a partnership with Morgan Stanley and a state-owned Chinese company to develop as many as a dozen retail shopping centers in China.” Les Morris, PR spokesperson, says the company is “replicating our international experience in Europe.” Similarly, The Taubman Company is looking at building as many as 12 centers in China, Japan and South Korea. And Triple Five Group has plans for two projects—Mall of China, and the Triple Five Wenzhou Mall—each slated at 10 million s/f.
More megamalls will be built on US soil, too. In the works is The Mills Corporation’s Meadowlands Xanadu in New Jersey (just west of New York City), a 4.8 million s/f project that includes nearly 600,000 s/f of retail space. Deborah Georgetti-Piro, Group VP of Mainstreet/The Mills Corporation, says plans include 75 carts and eight kiosks.
And some megamalls on the horizon will be even bigger. On 5.7 million s/f of land, MOA’s “Phase 2,” expected to be completed by late 2008, will house an Ikea, a fitness and spa facility, office space, and hotels, as well as a host of stores and attractions.
But megamalls don’t sprout at the drop of a hardhat. There’s the cost factor, for starters: MOA (Phase 1) cost $650 million. And then there’s the matter of location. As Debra Hazel says of MOA in Shopping Centers Today (“10 Years After: How One Megamall Changed the Industry,” 5/02), “Try finding nearly 80 vacant acres less than five minutes from an international airport and on a major highway. At the time, Minneapolis-St. Paul was ‘under-retailed’ for a metro area of more than two million people, and with its fierce Minnesota winters, conditions were ripe for an indoor environment offering a variety of services.”
What was once dubbed a mega-mistake and built against constant criticism is today a glowing success. Sure, things change at both MOA and West Edmonton, as they do in any mall. That’s what helps keep them vibrant. Stores come and stores go, attractions are added or updated, monthly events calendars showcase cooking demos, autograph sessions, fashion shows, costume contests and so much more to attract and engage visitors. Says Person of West Edmonton: “We’re an experience, not just a building.” Indeed: the megamall in motion. It evolves, reinvents, expands. “Mall of America changes every day,” says Bausch. “That’s the beauty of it.”
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