Survival. What person, living thing or mall for that matter does not want to survive? The need to survive is an innate instinct hardwired into each and every one of us and our bodies come complete with fantastic biological responses that help us stay alive. The use of intuition is a good example of a biological response that is a perfectly acceptable survival tool to use when faced with danger. The response of fight-or-flight is another. I mean who among us cannot appreciate a biological reaction that helps us to decide when faced with peril whether to stay and fight or get the hell out? Fighting for life is innate and is nothing if not healthy. However, being in the constant state of “Survival Mode” is not.
“Survival Mode” is different from “Survival Instincts” in that it is a state of being that kicks into gear in response to danger or stress versus a healthy reaction to a stressful situation. Said another way, “Survival Mode” is the reason a person dying from thirst in the desert drinks the sand. As an owner of mall that may be in danger of dying, the last thing you want to enter into is “Survival Mode” and one of the first signs of entering that state is when you begin to make short-term decisions and lose sight over the number goal of retail leasing: grow sales volume.
Sales volume is the lifeblood – literally – of a mall and without revenue a mall or any enterprise cannot survive. This is obvious, but what we are seeing today is many owners of B malls losing sight of this goal. The first sign of a mall beginning its slide is the weakening of sales. Instead of combating the soft sales with marketing tactics or other ways to drive traffic, many mall owners shift hard and go into survival mode. Growing sales of your mall is a long-term process, but when sales begin to soften, many mall owners start focusing on rent and occupancy. Now, don’t get me wrong, rent and occupancy are critical metrics to watch, but they are short-term in nature.
Many owners will also start to chase deals and slip into survival mode. Recently I saw a struggling mall add a non-traditional anchor filling the center’s last remaining anchor pad. The rent was a big boost to the NOI, making the owner gleefully excited. Unfortunately, this excitement will only be temporary. The non-traditional anchor is not going to help the sales of the center, and I know many of the merchants are paying substitute rent because of co-tenancy violations and others have kickouts. My guess is sales will continue to slide and in about a year, the vacancy rate will skyrocket and the center will be on its way to www.deadmalls.com.
I am not trying to indict non-traditional anchors; non-traditional anchors work and in many cases do drive traffic and increase sales. However, in this case, doing the first deal and chasing short-term rent could lead to the mall’s demise.
The bottom-line is a better course of action would be to focus on adding retailers, restaurants or uses that are going to drive sales. From a landlord’s perspective, all roads lead to high rent, but you can’t get there unless you maximize the sales of your mall.
Making wise long-term leasing decisions that grow sales is the key, but growing sales is more than just good leasing.
When an owner shifts into survival mode and focuses on chasing any deal, the marketing program gets squashed.
Marketing today is not expensive like it was years ago. Social media is a wonderful way to grow sales, but if a mall is in survival mode this is often ignored. Put together a good marketing program with the goal of increasing traffic and sales.
Last summer I saw a struggling C mall eliminate all of its marketing. Fast-forward to this summer and many of the tenants are kicking out or closing. This was a center was worth saving and there were some strong performing retailers. I am not saying the marketing program would have saved the center, but a strong marketing program would have boosted sales and bought the owner some time to work toward a bigger repositioning plan or redevelopment plan. I imagine this owner spent the last year trying to chase deals to no avail. When sales are sliding it is very difficult to add quality retailers. It can be done, but is a sliding-sales environment the retailers you are going to attract are probably not going to help your mall survive.
Chasing deals in sliding-sales environment is survival mode and it is not fun nor is it a recipe for success. Instead of chasing deals that are not going to help you long-term, work with your existing tenants. Get engaged with your anchors and find out how you can help them grow their sales. Make suggestions. Don’t be afraid to add additional brands to their offering. I have seen a department store add a successful brand like Michael Kors and it increased their overall store volume by 10%. Encourage them to clean up their store or improve their signage. Whatever it is, work with your anchors to get their volume up.
This approach shouldn’t be limited to the anchors. Get down to the store level and find out what is happening. Figure out how you can help your retailers grow their volume. A great example of this I recently saw was Victoria’s Secret had a store that was performing but then ran into a few months of soft sales. The mall manager found out the store had lost a manager. The GM of the mall went to work and was able to provide a couple of manager-candidates. Ultimately, Victoria’s Secret hired one of the candidates who turned the store around and increased the volume.
In short? If you’re an owner of a mall that is fledgling, don’t drink the proverbial sand! Focus less on occupancy and more on growing your mall’s overall sales. Get creative and think outside the box. Consider traditional anchors, non-traditional tenants, amped-up social media and working with current tenants – all are healthy solutions and acceptable tools to use to keep you (and your mall) out of survival mode.