Mall of America weathering financial storm

The Mall of America's North Garden.
Courtesy of Mall of America
The Mall of America’s North Garden.

This is the first in a series of special MinnPost projects done in coordination with the School of Journalism and Mass Communication at the University of Minnesota. For the fall 2008 semester, a news team of eight students reported, wrote and edited the projects, which combine news stories with archive pages, through various traditional and multimedia journalism tools. The program is designed to immerse students in the ever-changing world of online journalism, while adding dimensions to the content delivered at MinnPost.com.

By Trevor Born | Thursday, Nov. 27, 2008

Strip malls across the nation may be shutting down or lacking tenants, but the nation’s largest mall is staying strong in an economic crunch. The Mall of America has remained near maximum occupancy, and has bucked the trend among retailers with rising sales numbers.

After a record-breaking $50 million jump in sales last year, Mall of America sales are up around 4 percent this year, according to Public Relations Director Dan Jasper. While other malls plead for tenants, rent for some Mall of America stores, according to David Gingold of the soon-closing Ultra Diamonds, is increasing “on the order of nearly double.”

“Obviously, they must not be doing too bad,” he said.

Some experts say that the Mall of America will always take less of a dip than other retail businesses because of its identity as a destination, and not just a place to shop.

“That’s the thing, it’s not just another ‘-dale,'” said George John, professor of marketing at the University of Minnesota’s Carlson School of Management, referring to the four other major malls in the Twin Cities — Southdale, Rosedale, Ridgedale and Brookdale. “They’ve made it successful because they’ve made it non-comparable.”

That includes a $25 million renovation of the indoor theme park, now called Nickelodeon Universe, which finished in March, as well as a remodeled movie theater, underwater aquarium and mini golf course. And on Nov. 15, the Mall heralded the opening of a new store, American Girl, with long lines that underscored, perhaps, the durability of the Mall’s long term plans.

Almost any way you look at the economic downward turn, things look bleak for the retail sector. But through the prism of the nation’s largest retailer, things look surprisingly good. 

Oddly enough, the increase in sales might be a result of the struggling economy, as international shoppers have taken advantage of the decreased value of the U.S. dollar. Minnesota is a particularly cheap destination: it is one of only four states with no sales tax on clothes or shoes. 

About 2 million international tourists came to the Mall of America last year, a number which has increased the last two years and Mall studies show that foreigners spend an average of 250 percent more per visit than local customers.

“We understand how big of a role that’s been playing in our sales recently,” Jasper said. “There’s no question they’ve been a big part. We’ve been lucky with some of the circumstances, like the weakening dollar, to be able to provide a great bargain for them here.”

Tourism near and far
How important is tourism to the Mall? Deep in its bowels, among the loading docks and windowless offices, is its own in-house tourism bureau.

There, Director Doug Killian and his four-person staff coordinate travel packages and marketing campaigns for Minnesota’s largest attraction.

Defining a “tourist” as anyone who lives more than 150 miles from the Mall, Killian said tourists comprise about 40 percent of the Mall’s annual traffic and 50 percent of its sales, a number that has risen about 25 percent the last three years.

While domestic tourism slightly increased last year — the widespread industry fear that people wouldn’t make road trips due to soaring gas prices over the summer never materialized, Killian said — the Mall’s international tourism grew the most, increasing 10 percent last year.

Killian’s packages include “Shop Till You Drop”: People fly from London to Minneapolis on Friday, shop open-to-close on Saturday (11 ½ hours), shop early on Sunday, fly back to London and go to work Monday morning.

“The international tourists are power shoppers, no doubt about it,” Killian said. “When the Mall first opened, we sent a group of people over to Piccadilly Circus in London and bought a bunch of high-fashioned goods. They came back and bought the exact same products, and the cost savings, we showed them, more than pays for the three-day, two-night vacation here.”

Catering to tourism
England is the second largest source of international shoppers behind Canada, Killian said. After England, it is Japan, Germany and “Nordic countries” — Norway, Sweden, Denmark and Iceland.

Allison Langan, a manager at Burberry, a British luxury clothing store that opened last fall, estimated that half of the store’s business is from international customers.

“International shoppers really are looking for the upscale kind of things, and that’s what we carry,” Langan said. “We’ve especially benefited.” 

In response, many of the 25 stores opened in the Mall this year, many of them upscale clothing stores, have been aimed at tourists.

Despite economic hard times, sales are up at the Mall of America. (Video by Ali Haupt)

International tourists’ tastes have led to the opening of stores like Gilly Hicks (the second of its kind in the world), Rule (the third in the nation), Burberry and True Religion.

Meanwhile, stores like the iconic American Girl, a Columbia sportswear outlet (the second in the world) store and a new Best Buy store will bring families from neighboring states and from across the country, Jasper said.

American Girl opened Nov. 15 to three hour lines, and made for one of the top-10 busiest weekends in Mall history.

“We want to be focusing on people in-state, too,” Jasper said. “A lot of these stores are opening their first or second or third location anywhere, and that’s the kind of things that brings people to the Mall. We’re starting to pick-up on some of the people who previously would’ve been headed to Chicago.”

Karen Billingslea, a German student working on her masters thesis in Minnesota, said she could buy a lot of luxury goods at the Mall for around half of what they would cost in Germany.

“Some of the stuff here is an unbelievable value,” Billingslea said. “Most people I know from Germany now love to go shopping New York because and say it’s such a bargain, but it’s the same here, if not better.”

Market ‘softening’
“Of course,” Billingslea added, “it would’ve been even better a couple months ago.”

The dollar hit rock bottom against the Euro in April, at $.625 U.S. dollars per Euro, but was as low as $.6283 in July. The drop of gas prices has pushed the U.S. dollar back up, and on November 3 it was up to $.792.

The dollar’s rebound is one of several reasons Killian expects the international tourism market to soften in the coming months.

Several airlines have cut international service to Minneapolis, and the recent Northwest-Delta Merger — Northwest was a major force in bringing international traffic to the Mall — could make things worse.

Currently, Killian said, Northwest has suspended service between Paris and Minneapolis until April and Iceland Air has suspended all direct flights to Minneapolis until March.

Iceland is another problem all together. Formerly one of the largest factions of tourism at the Mall because of direct weekend flights from Reykjavik to Minneapolis, its economy has all but collapsed, which will also leave a void in tourism.

And of course, stores still close, like Gingold’s Ultra Diamonds. Jasper said there hasn’t been a trend of stores failing, but that “just like everyone else, we’ve had stores close, and many hurt by the downturn.”

“I think they’ll see that international tourism is more icing on the cake,” Carlson’s John said. “You can’t run the whole Mall on foreigners. Iceland’s broke, so they’ll have to be nimble enough to replace that.

“Maybe they’ll do it with Norwegians, or maybe with families in South Dakota. Either way, they’ve shown thus far that they’re pretty nimble.”

Trevor Born is a sophomore journalism and African-American studies student at the University of Minnesota and owner of Purple Press Magazine. He has written for the Associated Press, the Star Tribune and the Minnesota Daily.


Related links:

Phase II for the Mall is on hold
Mall of America timeline
Crime and security at the Mall

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