Malls are pumping up entertainment and digital attractions to keep shoppers coming, as consumers increasingly shift to online shopping.
Cadillac Fairview Corp., one of the country's largest mall owners, is doubling its marketing spending next year while studying ways to keep shoppers coming back, John Sullivan, chief executive officer of the developer, said on Wednesday.
"We will put a fairly significant investment into an entertainment component in many of our malls," he told a panel session at an International Council of Shopping Centres conference. Options could include borrowing from the playbook of a mall in London, which holds rock concerts.
Mall owners must find ways to lure shoppers as digital alternatives such as global powerhouse Amazon.com Inc. make it harder to attract consumers.
Last year, e-commerce made up just 4.5 per cent of total Canadian retail sales, but it is expected to jump to 8.2 per cent, or $43.95-billion, by 2018, according to researcher eMarketer.
The changes, although arriving more gradually to some retailers such as fashion specialists, are prompting an "evolution" among mall operators, said Roman Drohomirecki, co-chief operating officer at Ivanhoe Cambridge Inc., another major mall owner.
He pointed to Canadian Tire's Sport Chek chain as deserving a "gold star" for drawing shoppers to malls with new flagship stores that feature digital screens and interactive displays to keep customers entertained. But Mr. Drohomirecki said adding technology is very expensive and needs constant updates. "The life cycle is not like an escalator or an HVAC unit."
As an example of the challenges, fashion chain American Eagle Outfitters recently introduced a 25-per-cent discount that could be downloaded from its app. But customers couldn't always access it because they couldn't get Wifi in a mall store, said Joe Megibow, a senior vice-president at American Eagle. "It was kind of a mess" because mall customers sometimes had to leave the store to download the app, noting the "hoops we were putting our customers through."
Big-box retailers, such as electronics specialist Best Buy and office supplies purveyor Staples, are feeling the pain of e-commerce sales more than fashion retailers, which dominate so-called regional malls that are run by Cadillac Fairview and Ivanhoe.
Cadillac Fairview, whose malls include Toronto Eaton Centre and Vancouver's Pacific Centre, is seeing rising sales at its Canadian centres, but shopper traffic is "flat to down," Mr. Sullivan said.
Still, "there will always be a place for the regional mall," Mr. Sullivan said. "We don't think the regional mall is about to disappear."
He pointed to overblown predictions in the 1990s that office buildings would disappear as workers shifted online and worked from home. Workplaces shrank as companies used less space per worker, operating more efficiently, he said.
Malls will also start to use space differently, he said. Some retailers already are using some space for e-commerce pick-up order depots.
"There are department stores that are oversized," Mr. Sullivan said. "In some instances they may not exist in a little while. There will be opportunity to repurpose space if the need is required."
But retailers and malls are focusing on figuring out how to economically operate the "last mile," that is, delivering e-commerce orders to customers. Mall retailers with pick-up depots raise logistical challenges as more trucks arrive with inventory and shoppers come to pick them up, Mr. Megibow said. The process is more difficult for malls in congested city centres such as the Toronto Eaton Centre, but easier for suburban malls, Mr. Sullivan said.
"Digital blows up everyone's business model," said Duncan Fulton, chief marketing officer at Canadian Tire's sporting goods and clothing divisions.