Retail Traffic
The Mall of America Takes on the Great Recession

The Mall of America Takes on the Great Recession

It might come as a shock to many mall owners who spent 2009 struggling to reconcile their budgets, but it turned out to be a pretty good year for the Mall of America.

The 4.2-million-square-foot Bloomington, Minn.-based behemoth, which boasts 2.5 million square feet of retail space, reported a 3.5 percent increase in shopper traffic last year, to 42 million annual visitors. Sales rose too, by 1.5 percent.

This wasn’t because the mall has proved immune to the worst recession in 80 years, says Maureen Bausch, executive vice president of business development with the property. Shoppers there have spent less and like every other retail property in the country, the Mall of America received a number of rent concession requests from struggling retailers.

But while many property owners have walked a fine line by trying to maintain a quality of service while cutting back on cleaning, security and marketing, the management at the Mall of America made a strategic decision not to institute any cost-cutting measures that might adversely affect the property, says Bausch. In fact, last year, management did not reduce its maintenance schedule and held about 400 events on its premises, including celebrity appearances, cooking demonstrations, book signings and even a cheerleading competition.

“The key is to keep people coming in your door—we had record traffic last year and sales were up and that was marketing,” Bausch says. “If you have a customer, everything else falls into place, so we did lots of promotions, lots of discounts, lots of events; things we knew would draw traffic.”

To be sure, the Mall of America has several advantages over your standard regional mall. It is an internationally known property and a tourist destination in its own right. The complex also includes a seven-acre amusement park, an aquarium, a speedway and a golf course, among other attractions. The mall’s iconic status also helps draw celebrities who realize that an appearance at the property means easy exposure to a wide audience, Bausch notes. All of that keeps people coming even in the worst of times.

“What they are doing is they are taking advantage of what makes them distinctive and desirable to a consumer,” says George Whalin, founder of Retail Management Consultants, based in Carlsbad, Calif. “The Mall of America, because of its sheer size, is unique. Between its restaurants, and its movie theaters, and its other amenities, it’s a unique destination for people. I don’t know that the average retail mall could do that.”

In 2008, for example, the mall added six new rides to its Nickelodeon theme park, including the SpongeBob Square Pants Rock Bottom Plunge roller coaster and the Avatar Airbender, which features spinning seats on a giant swinging surfboard. The improvements cost somewhere in the neighborhood of $25 million. But Bausch says the price was worth it. She estimates that about 30 percent of the mall’s annual visitors come specifically to visit the park, not to shop. But after they go on a couple of rides they might grab a bite to eat at one of the property’s restaurants or catch a movie at the on-site movie theater or make an impulse purchase after passing a store window.

Even if they don’t spend on that trip, the theme park is a great branding opportunity as it keeps the mall at the top of customers’ minds when they do think about going shopping. (Admission to the park is free, but the cost of a one-day unlimited access pass to rides has gone up $5 since the new rides were added, to $29.95 for those taller than 3’11. The cost of an annual pass has gone up to $250.00 from $99.00.)

Lessons for others

While owners of smaller centers might not have the money to offer non-retail amenities on quite the same scale as the Mall of America, there are lessons that can be applied, including that they might want to consider investing in non-retail uses.

To succeed in the future, most retail properties will have to follow the Mall of America’s lead and become public spaces first, sales centers second, according to Paco Underhill, founder of Envirosell Inc., a New York City-based research and consulting firm and author of What We Buy: The Science of Shopping and Call of the Mall: The Geography of Shopping. As part of that effort, they will have to provide a range of different activities and create draws for children, who often decide where families spend their free time.

“Developers all across the world are focusing on the ‘all,’ rather than the ‘mall,’” says Underhill. “They are recognizing that malls often have the potential of becoming edge cities.”

Adding entertainment amenities to attract more traffic is the first part of the solution. The second is to make sure the mall offers a wide variety of public events that tie into those amenities and to promote the property as much as possible through a variety of channels.

Overall, Bausch estimates that the mall generates about $400 million in publicity every year.

“Keep your mall top of mind,” she advises property owners. “You want them...

Keep reading. think of you first. Do whatever you can to keep your name out there.”

Organizing free events is “doable for any regional mall,” Whalin adds. “One of the things that tends to happen in recessions is that businesses of all kinds, including malls, cut back on promotions and special events because it saves money. I think that’s just foolish—you have to give people more reasons to come to your center in a recession, not fewer.”

Promotion is key as well. The Mall of America spends on advertisements in print and on TV and also frequently posts information to social media sites. Its Facebook page has more than 63,000 fans and its Twitter feed has more than 2,300 followers. Both groups are much larger than what many other retail properties have been able to generate.

Throughout the downturn, the Mall of America’s marketing team has been using its fine-honed publicity machine to lure customers to the center with the promise of fun, free things to do, as well as a variety of discount offers.

For example, the mall grants free admission on family-friendly movie showings every Saturday morning at the Theatres at Mall of America. The movies are announced ahead of time on Facebook—on Jan. 16, for instance, visitors got to see Lassie. On Jan. 23, it was Kung Fu Panda. The logic is that people will come in for the free movie screening, but then might spend a little money at the mall’s shops and restaurants.

In another example, during 2009’s Black Friday, the mall featured a Lucky Bag contest—the first 300 people who lined up at the center’s Rotunda after the property opened its doors at 6:00 a.m. received a bag containing a $25 Mall of America gift card and a Mall of America coupon book. In addition, about two dozen of the bags also contained special tickets that entitled their recipients to an upgraded gift bag, filled with products ranging from $500 to $5,000 in value.

The swag included merchandise from some of the mall’s retailers, tickets to entertainment events, spa packages and trips to Las Vegas, Mexico and the U.S. Virgin Islands. The event, which was promoted on the Mall of America Facebook page and on Twitter, attracted about 3,000 people, some of whom lined up for a chance to get the Lucky Bags at 2:00 a.m.

Another high-profile event involved a December book signing by Republican 2008 vice presidential nominee Sarah Palin. Palin’s appearance not only drew traffic to the center—by some accounts, the line of people anxious to meet her stretched all the way outdoors—but provided a sales boost for the mall’s Barnes & Noble.

Customers who purchased a copy of Palin’s book from the on-site store received a special wristband that gained them admission into the autograph line. The event received a lot of attention from local media outlets and was a big hit on the blogs. During the same month, the Mall served as host for the 2010 U.S. Olympic Women’s Ice Hockey Team. Members of the team were announced in the Rotunda, after which they were available for autograph signings.

The Mall has also been trying to offer its guests value packages built around various holidays. For example, over the Valentine’s Day weekend this year, the center offered those who bought two tickets to “Valentine’s Day” at the Theatres at the Mall of America a $20 package including popcorn, a bottle of wine, a box of chocolates, a rose, two tickets to the House of Comedy and a gift card to an on-site restaurant. Meanwhile, those heading to the Underwater Adventures Aquarium would find its 300-foot tunnel lined with tables for two. Guests who made reservations got a tour of the aquarium and a three-course dinner, along with complementary champagne and two movie tickets to the Theaters at the Mall of America.

All of the above events were promoted through the Mall’s Facebook and Twitter pages, as well as through other media sources.

“We used our [attractions] to help our retail tenants, particularly during the long winter, to bring people back and make sure our retailers had enough customers,” Bausch says.

The right stuff

Nevertheless, the Mall has faced some challenges in the past year. Even prior to 2009, the Mall’s ownership, Edmonton, Alberta-based Triple Five Corp., began to look at ways to cut expenditures as it became clear the retail market was in for a huge dip, Bausch says.

The company instituted a salary freeze...

Keep reading.

...for the year and tried to minimize health care costs by organizing wellness education events for employees, including yoga classes and a smoking cessation program. When vending contracts came up, everyone was encouraged to negotiate as hard as they could to lower prices. Though there have been no layoffs, the Mall’s management tried to shuffle workers’ schedules to further trim its budget.

In addition, Bausch admits some tenants approached the management with rent relief requests as they couldn’t meet their performance expectations in a down economy. The Mall of America had to grant some of those requests, though the management team first spent a lot of time with the retailers looking at their operations and marketing efforts and trying to figure out new ways to drive sales.

The measures seemed to have helped—though the Mall’s owners don’t release official numbers, Bausch estimates the occupancy rate at the Mall is currently at about 95 percent, within its historical range. But both the business development team and the leasing team are aggressively searching for new concepts that would work with the center’s demographic and image to make sure that if any spaces become available they are not leased haphazardly to the first taker.

“Sometimes it’s easier to just lease the space, but you have to get the tenant [your customers] want,” Bausch notes. “That’s the first thing, because if you have the right mix of tenants, you are golden. We read everything we can get our hands on, we do research constantly to see who our customers are, who is our most productive demographic and what they are looking for. And then we look at who are the new tenants out there and can they fill that need?”

For example, last year, Bausch saw a newspaper story about Mattel Inc. partnering with department store chain Bloomingdale’s to open Barbie shops inside Bloomingdale’s locations for the doll’s 50th anniversary. She reached out to the company and Mattel ended up opening a pop-up shop at the Mall of America in the fall of last year. The pop-up proved successful enough that Mattel is now thinking of taking a permanent location at the center.

The mall also spent close to 10 years trying to bring in the American Girl Store, but the timing was never right. Finally, in November of last year, the company opened its first store at the Mall of America. “If you know something would be right for your mall, you just have to keep going at it.” Bausch notes.

Overall, she advises mall owners not to skip on any expenses that would impact the quality of service at their center. “I certainly think that if you cut in critical areas, it will come back to bite you,” she says.

The mall’s performance in the last year certainly goes to show that expensive can be cheap.

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