Many shopping centers today are challenged by a fluctuating visitor count and a decrease in tenant turnover.  These challenges have grave consequences, resulting in shops and even entire shopping malls closing down, all over the world.

Take Macy, as an example, who in 2020 closed down half of its' 125 underperforming mall locations.

Was Macy's a one-off in the industry or should shopping malls be on guard? What is the reason for the fluctuating visitor count and lack of tenant revenue?

In this article, we will make an educated guess.
‍

Challenge #1 - Growing e-commerce

It's no secret that the average share of e-commerce in Europe has been growing at an alarming rate, these last years.

According to Eurostat (2022), e-sales had a 22% market share across the EU in 2020, the highest share being in Ireland, where the number is 40%*.

Ecommerce in Europe was worth 575 billion euros in 2020 (ecommcercenews.eu), and the profit made in ecommerce goes straight to the retailers with an online presence, whether or not they have a presence in brick-and-mortar shopping malls.

Now, those numbers are obviously high, in part, because of Covid, which made physical retail a serious health hazard. But, while they were inflated from the pandemic, ecommerce's growing share in retail is nothing new.

What's more is that consumers are becoming more and more attached to their phones. In 2020, 87% of EU enterprises with web sales used either apps or their own websites (Eurostat).

The enormous amount of online spending shows that consumers have their shopping needs covered online, resulting in less frequent visits to their local shopping mall. This might be one of the reasons for fluctuating visitor count and lack of tenant revenue.
‍

Challenge #2 - Lack of customer insights

Online retailers have the advantage of a range of unique customer insights. They know who their customers are down to every single individual - which means they know what attracts different customer segments, how often they visit and what they buy.

These customer insights mean online retailers can communicate to their customer in a personal and relevant way, increasing the impact and return of their marketing budgets.

To malls, customers are often ghosts. Meaning that shopping malls typically have very limited customer insights. Oftentimes, they work with revenue numbers or on a categorial level combined with visitor

That means very little information about the characteristics of the different customers is know.

While revenue and visitor numbers are important indicators of the shopping centers performance, converting these indicators into insights on how to improve and personalize communication is a challenge.

Because of this, mass marketing plays a significant role for many shopping centers' marketing efforts, which is an issue as the modern customers are expecting personalization.
‍

Challenge # 3 - marketing channels are loosing impact

A lack of customer insights limits the opportunities to communicate sufficiently relevant to customers. This is an important explanation to why traditional marketing channels are losing impact.

Shopping centers, who have yet to adjust their marketing mix to allow for the use of data-driven marketing channels, are now at risk of facing decreasing visitor count and revenue.

A study was made for a Scandinavian shopping center with 110 stores, measuring the impact of printed magazines, show that the mall pays more than 66€ per customer influenced to visit the mall with an intention of buying.

With the average basket size of a customer in the mall being 37€, this result is far from satisfying.
‍

As shocking as these results are, this is not a singular case.

And, that is why many shopping malls have reacted to the decrease in impact of traditional marketing channels. Now, choosing to prioritize new, digital and cheaper marketing channels, such as social media, emails and apps.

This, is a sensible prioritization, as it safeguards the shopping centers and prepares them for the future by increasing the chances of staying relevant for consumers and attracting visitors and revenue to brick-and-mortar stores.

If you're interested in learning more about what you need to consider when digitalizing your shopping center, have a look at our guide to digitalization.

(*note: examples in this article has been updated since publishing to keep up with current events)