Online shopping will not go away anytime soon.

As stores decline and commercial spaces become vacant, receivers charged with preserving and improving value as well as preparing and positioning assets for sale have opportunities to take advantage of and unify different stores and restaurants. Receivers can create a conceptual experience that connects retail, restaurant, and hospitality. When focused on the bigger picture, receivers can create a turnaround for a new foothold for shopping centers in the modern, retail world.

Retail Traffic Is Slowing

The numbers don’t look good for retail shopping centers. A report from Cowen and Company places the decline of shopping mall traffic at 5% between 2017 and 2018, with an overall retail decline of 7%.¹ In the face of this decline, many retailers known for shopping mall presence are closing stores across the country.²

It’s not just smaller stores that are closing. Sears is occupying anchor locations while it faces potential implosion at any time, so more empty store spaces looks to be looming.

This change is the result of online shopping. Indeed, 2019 has seen online shopping volume surpass in-store retail.³ No surprise: Amazon leads the way. But the online space has diversified and matured. The convenience and cost of online shopping will always win out over going to a retail store. People can fulfill all their shopping needs without ever leaving home.

However, retail stores are not completely going away. Shopping malls and retail merchants are learning something restaurants and the hospitality industry have long known: Opportunities exist for businesses beyond offering commodities.

It’s time to create experiences for shoppers. When a shopping mall goes into receivership, this is where a court-appointed receiver can add the most value by creating an experience for the customer.

Receivers and Mall Restaurants

Traditionally, a receiver for a restaurant begins by focusing on the numbers. A restaurant in receivership is often failing on a basic economic level: extraneous spending that doesn’t translate into profits and must increase revenue or cut spending. Or both.

Receivers’ advantage over restaurant or franchise owners, in part, is that they aren’t married to practices that may have contributed to the failure in the first place. The receiver can identify better purchasing strategies, revise bad contracts, replace faulty equipment, and address financial issues immediately.

Typically, mall restaurants are franchise outlets, with a theme and structure – brand – overseen by a corporate office. Some operations options open to a standalone restaurant are not necessarily available to franchises. A restaurant cannot always “start from scratch” in this type of environment.

On the other hand, what if the ability to change doesn’t stop at the entrance? Shopping malls have always offered a kind of convenience. Shoppers could spend a day dining and shopping for anything they need, including ideas. It was a world of interconnected commerce and there was nothing like it. Since the online shopping boom, retailers need to offer something unique and they need to offer more.

Receivers and Shopping Centers

This is where a success-oriented receiver for an entire mall can accomplish more. Malls are fading because Amazon and other online options are more convenient than physical shopping centers. To counter that market truth, malls must develop an experience that will capture shoppers’ interest. Is it still possible to redevelop a retail space that once again resonates with shoppers?

Part of the solution is finding the right retail mix within a shopping mall. Restaurants dropped acquisition of new shopping mall space, from taking 20% in 2017 to only 13% in 2018.⁴ The limited options available to customers in that same area make it harder for any business to do well. Restaurants are making the adjustments needed. A mall receiver should focus on getting the right blend of restaurants and retail to maximize performance throughout the complex.

Beyond the right mix, receivers should examine how to make the most of non-retail space. A receiver should be looking to maximize revenue, but more can be less. Trying to cram more retail stores into available space isn’t the fix. Creating attractions, entertainment activities and a more interesting roaming space can pull more consumers into the mall.⁵ This benefits all businesses.

Mutual Opportunities for Shopping Centers, Restaurants and Hospitality

A shopping mall can seem almost quaint in some ways. It can conjure images of shoppers flocking to Montgomery Ward. Mall walkers in tracksuits still stride up and down the linoleum hallways that connect all the stores. For a receiver charged with performance upturn, focusing on tradition won’t be as profitable as following the future: creating in-store retail experiences.⁶

Receivers charged with turning around one restaurant or a specific location in a mall can redevelop a traditional connection. Stores, restaurants, and hotels in a shopping mall can unite in ways that make it foolish not to pursue.⁷ Choosing to work in a silo limits opportunity and cuts off the best paths to growth.

A receiver for a retail store, a restaurant, a hotel in a mall, or shopping center complex should keep these points in mind:

• To succeed in today's environment, stores and restaurants should focus on delivering a compelling experience for consumers.
• Building-out on shopping and dining experiences rather than focusing exclusively on cost-cutting may provide the most preservation of assets, increased income and improvement to real estate value.
•  Restaurants and stores can and should feed off each other. In shopping malls or retail districts, everyone thrives when the experience extends beyond each store’s front door.

Receivers should look at the big picture. The shopping mall that exists as a series of individual establishments crowded together will become nothing but a slower, outdated and inconvenient version of what the internet offers.

However, a cohesive system in which shoppers find variety and fun offers something beyond what’s online. In today’s world, receivers should strive to connect retail, restaurant, and hospitality to increase the potential of every unit and the shared ecosystem they inhabit.

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1 https://www.forbes.com/sites/pamdanziger/2018/10/14/the-fall-of-the-mall-and-three-ways-to-make-them-rise-again/#7e630a292a26
 
2 https://www.cnbc.com/2019/03/08/these-retailers-have-announced-store-closures-in-2019.html
 
3 https://www.cnbc.com/2019/04/02/online-shopping-officially-overtakes-brick-and-mortar-retail-for-the-first-time-ever.html
 
4 https://www.nreionline.com/retail/shopping-mall-s-savior-starting-eat-itself
 
5 https://www.usatoday.com/story/money/2018/12/19/malls-back-thanks-gen-z-millennials-and-brands-such-winkylux/2264799002/
 
6 https://www.cnu.org/publicsquare/2019/09/23/‘retail-apocalypse’-myth-and-thats-good-news-shopping-industry-and-downtowns
 
7 https://www.interiorsandsources.com/article-details/articleid/22106/title/ intersection-hospitality-retail

*Dennis Gemberling is a Receiver, Interim Property Manager and Consultant specializing in hotels and resorts, restaurants and retail, bars and nightclubs, and mixed-use real estate with receivership appointments in Federal and State Courts. Mr. Gemberling has over 35 years of hospitality industry experience and is President of Perry Group International based in San Francisco with satellite offices in Los Angeles and San Diego. He is also a Past President and Board Member of the CRF Bay Area Chapter.