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As enclosed malls decline, ‘lifestyle centers’ proliferate

Pedestrian-friendly shopping areas are meant to resemble hometown Main Streets.

lifestyle center
Lifestyle centers have been developers’ go-to format for more than a decade.

Get ready for changes in the local shopping scene.

Trends here have matched retail shifts across the country for the past decade: the proliferation of “lifestyle centers”—those pedestrian-friendly shopping areas meant to resemble hometown Main Streets—the decline of traditional enclosed malls and the exodus of stores from downtowns.

The behemoth Mall of America, the state’s top tourist and retail attraction with 40 million visitors a year, plays by a different set of rules—as its staying power and ambitious expansion plans demonstrate.

The rest of the retail landscape, here and nationally, is being reshaped as consumer confidence grows and shoppers’ preferences shift.

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The index of consumer confidence rose to 81.5 in August, up from 81 in July. June’s reading, 82.1, was the highest since January 2008.

Shoppers who are more willing now to part with their money can expect broad changes in the retail landscape, according to industry experts.

Among them: efforts to “reposition” regional malls to make them more welcoming and add attractions such as high-end restaurants and health clubs; tinkering with the lifestyle center format, including the addition of big “anchor” tenants and grocery stores; an end to fears that online shopping would be the death knell for many traditional brick-and-mortar stores.

Changes in metro area

There’s evidence that those changes are afoot here. A Whole Foods grocery store opened in July near Maple Grove’s lifestyle centers.

“I don’t think the physical store format will ever completely disappear,” says Denise Ogden, an associate professor of marketing at Penn State-Leigh Valley who recently rewrote a textbook on retailing.

Fastest-growing U.S. retailers

Based on domestic sales increases, 2011-2012

  1. Bi-Lo grocery chain
  2. Michael Kors
  3. Sprouts Farmers Market
  4. Lululemon Athletica
  5. Apple Stores/iTunes
  6. Under Armour
  8. H&M
  9. Helzberg’s Diamond Shops
  10. The Fresh Market

Source: National Retail Federation

“E-commerce is growing at a faster rate than physical retail real estate,” she says, “but people still like the experience of going into a store.”

It’s the sort of shopping experience they’re seeking that is changing. We found a difference of opinion about the future of lifestyle centers, which have been developers’ go-to format for more than a decade.

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“We’re not seeing a lot of them anymore,” says Brian Arial, a principal at DLR Group, a planning, architecture and engineering company that’s working on the Mall of America expansion and changes to Minnetonka’s Ridgedale Center.

Brandon Norrell, senior vice president of business development at Buxton, a customer analytics company based in Fort Worth, Texas, that advises retailers on locations and customer bases, says he’s not seeing a “major downturn” in lifestyle centers.

Shoppers, he says, still want the convenience of parking near a store instead of roaming through an entire mall.

In the Twin Cities, Buxton is working with Famous Dave’s restaurants and Red Wing Shoes.

Looking ahead

Experts’ predictions:

  • New reasons to visit traditional malls. Arial says shopping center owners such as Westfield are upgrading food courts and health clubs to help offset the loss of one or more department store anchors. Ridgedale, he says, plans an interior facelift, the addition of new stores and making entrances more welcoming. Another mall change: the addition of new stores—“value components” in the business’s lingo—to vast parking lots.
  • More in-store “showrooming,” Norrell says. Richfield-based Best Buy is pioneering this trend by offering an array of electronics from different brands and at different price points and allowing consumers to touch and test the merchandise. Many customers go home to hunt for better prices online, but Best Buy hopes to reverse that pattern.
  • Smaller stores. Target and Walmart are among stores experimenting with fewer square feet of sales space. “A lot of it has to do with where they’re seeing opportunity. There’s growth in more urban settings,” Norrell says.
  • Survival of downtown stores that are willing to adapt. Merchants that will survive must “develop some kind of differentiation,” Ogden says. “Many times for smaller downtown stores it’s customer service: that good feeling people get when (store personnel) know them by name.”
  • Custom and personalized products. To counter the sense that goods are a result of mass production, Ogden says, stores are finding ways to make customers feel that a product has been tailored—sometimes literally—just for them. For example, a new Converse store in San Francisco offers custom-designed shoes. Sending personalized coupons to customers’ smart phones when they walk into a store is another way to make them feel special.
  • Pop-up stores. Specialty retailers who set up shop for a few weeks or months at a mall kiosk or vacant mall or downtown storefront can earn rack up sales without big overhead costs.

Online shopping

Arial says online shopping will never replace walking into a store. “Shopping online is not entertaining, it’s not stimulating,” he says. “Most of shopping today is about the experience. All retailers are trying to enhance the customer experience.”

Ogden says Cabella’s, the Nebraska-based outdoor store, has figured out how to return excitement to the shopping experience.

“They become a tourist attraction because it’s not just about shopping,” she says. “It’s about looking at lifestyle stories through their stuffed animal displays, trying different kinds of exotic meat in the restaurants,” which offer elk, wild boar and bison.

“That’s an experience,” she says.