by Clive Darlow
As more and more shopping centres come on stream the competition between them to attract shoppers is intensifying. To be competitive shopping centres must offer more services, amenities and attractions to tempt would-be spenders. But to provide these facilities and the luxury finishes to go with them is expensive, both in terms of initial capital investment and subsequent running costs. To date this has been funded through higher rents and/or service charges, justified by the better sales turnover achieved by tenants as a result of an increased share in retail expenditure. However, margins are being squeezed between greater competition and escalating costs — a feature by no means confined to the UK scene.
How, therefore, can investors secure an increase in their shopping centre’s share of consumer expenditure without bankrupting either themselves or their tenants? Discrete and off-the-record reports from some leading shopping centre researchers in the USA indicate that they are now focusing on a previously untapped source of income generation. This will provide the additional funds needed to pay for all those “state of the art” amenities that shoppers are now demanding. The mere suggestion of the researchers’ proposals is, to say the least, provocative. It is guaranteed to raise blood pressures in indignation, if not outrage. Hence their reticence over being quoted. At first sight what they propose sounds like a direct route to disaster. Who is going to be so foolhardy (or perceptive) as to do the unthinkable … actually charging shoppers to shop?
Among the contributing justifications cited in favour of this radical idea are: a better understanding of the behaviour of shoppers; the worldwide trend towards “market economies” and removal of subsidies; and the competitive need to offer consumers whatever they want — albeit at a price. In the background is the old American maxim “when the going gets tough the tough go shopping”.
Consumer research
Private research for some leading US retail developers has disclosed that over 20% of visitors in a shopping centre at any one time will leave without having bought anything. In the major regional malls perhaps as many as half the potential shoppers arrive without either a pre-determined specific destination shop or purchase in mind. So, argue the advocates of this apparent heresy, who needs non-spenders? They take up valuable parking space (and expensive mall sitting space) and contribute nothing financially towards the cost of upkeeping a large, private, sophisticated retail complex. That may be, concede opponents, but these same “non-spenders” provide part of the centre’s atmosphere, contributing to the colourful human mosaic which gives the place interest and variety.
Research is therefore being focused on exactly what encourages people to choose one centre in preference to another. This is especially the case where each is a replica of the others in terms of having the same range of multiples. “Where is the variety?” is a growing complaint. The catalogue of established essentials — location access, parking, climate-controlled malls, high standards of finishes, security, a comprehensive range of stores and shops, including the mandatory food court — is continually being extended. US developers, therefore, strive to outdo one another in order to extend and dominate their local catchment areas. Many shopping centres are becoming so elaborate, with unique customer-winning attractions, that visitors come and marvel at the centre itself rather than being drawn by the original motivating source of attraction — the shops. Edmonton Mall in Calgary is internationally famous for its spectacular Disneyland-style thrills and spills in the malls. In the UK, the Merryhill Centre at Dudley, outside Birmingham, now has three advanced mono-rail trains linking the various components of the development. The Spindles, at Ormskirk, promises the world’s largest expanse of stained-glass roofing for the malls and the large central rotunda.
The recently opened (part underground) multi-level centre in the heart of Monte Carlo has some of the more expensive marble finishes to its malls to be found anywhere in the world and comes complete with a sweeping curved staircase, chandeliers and grand piano.
One of the key essentials being rediscovered in the United States is good old-fashioned service. More and more centres are providing centrally located “service centres”. Under the supervision of a concierge and a staff of 30 to 40, they offer shoppers a range of services which typically will include telephone, telex and fax, storage lockers and free cloakroom; parcel wrapping; taxi, theatre and cinema reservations; pushchair and wheelchair hire; and fast film developing.
As an adjunct the local municipality is often represented with a cashier for the payment of rents, rates and sale of lottery tickets, as well as tourist information. A “quick fix” clothes-mending/alteration service is yet another extension. (The very high standard of service offered by department stores in Japan has enabled them to enjoy an unrivalled position.)
But perhaps the most popular service currently gathering momentum is valet parking. Customers draw up to the mall entrance where attendants take over and park the car, returning it on demand and loading up the parcels.
With some two dozen ice-skating rinks now incorporated in regional malls across the United States, the “fun” idea is being further extended by incorporating “games rooms”. These include a wide variety of skill games, miniature crazy golf, miniature ten-pin bowling and interactive machine games. Typically occupying 10,000 sq ft, this is seen as giving a centre the edge over the competition. Additionally “all the fun of the fair” is offered by the currently popular use of old-fashioned carousel rides located in the central square.
Everything … at a price
What, then, is so revolutionary about charging for the use of private (or indeed public) amenities? The public sector in some respects has long led the way. Remember the days when street parking, municipal car parks and public toilets were free, and toll roads and bridges were an historical novelty. Museums, galleries, parks and gardens did not always charge for admission. The trend in the harsher economic realities of the private enterprise culture, charging for everything, is spreading. For example, water is sold by volume, garage forecourts now charge customers for the use of air pumps for car tyres, supermarket trolleys require a returnable deposit.
But can this be extended to force shoppers to pay to enter privately owned shopping centres? Well, many casinos charge an entrance fee at the door — typically for the privilege of losing money at the gaming tables. The use of many of the better Mediterranean beaches can cost up to £10 per day, albeit with mattress etc included. Smart restaurants impose cover charges and many impose minimum spending. The view is growing that no “free” service is sacrosanct. “Use it and pay for it” seems to be the potentially harsh reality. And if the majority of (private) US regional shopping centres start charging shoppers, then with a quasi-monopoly position it could easily become an industry norm. If the totality of what the developer is able to offer to the shopper is so very much superior to that available from other centres then, it is reasoned, people will choose to visit it as their shopping destination even if they have to pay for the privilege. Well, not quite, because the system envisaged will reward those who actually make purchases, and encourage the spendthrift.
Ticket validation
On arriving at the mall entrance visitors will collect a date/time-stamped entrance ticket which is inserted into the automatic barrier. As purchases are made for goods and payment for refreshments and services, the ticket is validated by the retailer. Thus, the more that is spent, the longer the free period shoppers enjoy. On leaving, the ticket is re-inserted in the barrier to open the gateway. Those with tickets which have not been validated will have to use coin-operated machines to stamp the appropriate exit code on to the card.
The mall entrance fee will be an addition to any parking charges. And here the advance in technology is soon expected to revolutionise this aspect as well. Electronically read coded windscreen stickers will enable drivers to enter and leave car parks without the need to collect and then surrender parking tickets. This will eliminate queues at entrance barriers and exit pay booths. The coding on the windscreen badge can incorporate the customer’s charging arrangements — for example, a direct debit to the selected credit card or bank account. In the UK the Department of Transport recently brought into force, by a statutory order, the provisions contained in the Parking Act 1989. Local authorities can now operate cashless parking payment systems, including the use of credit and magnetic payment cards. A number of major multi-storey airport car parks, including Gatwick, already accept credit cards.
Studies have been under way for some years into the feasibility of charging drivers to enter the centre of major metropolitan zones. When, and if, this comes into operation it could transfer shoppers to suburban centres. This in turn could lead to overcrowding and thus provide the opportunity for these (private) centres to introduce entry charges, albeit at a lower rate than for town centres. Alternatively, the two separate charges — one for parking and another for entry to the shopping mall itself — could be combined into a single dual-entry ticket where everyone arrives by car.
The risks
While the risks of alienating shoppers, to say nothing of retail tenants, are obvious, there are circumstances where the “pay-to-shop” idea is envisaged by some of the leading experts. Obviously it will introduce an element of exclusivity (and charges can be varied infinitely to suit whatever the traffic will bear). Less crowded centres enable shopping to be accomplished more comfortably and more quickly. “Fast-track” shopping is yet another marketing idea under study and consumer research.
Already well established by many of the leading large stores is the “privileged sales preview” which is offered exclusively to account customers. The store will open, after hours, to allow its favoured customers to shop in comfort with additional discounts offered above those contained in the normal sale period. Convenience and efficiency are most appealing to those who are well-heeled but hard pressed for time. Add to this exceptionally high standards of amenities, facilities, services and comfort and, it is argued, the totality of what is on offer will attract paying customers.
Shop assistants are also likely to be more attentive and responsive at the prospect of a serious spender. After all, he or she will have paid to get in (or rather will have to pay to get out) unless the ticket is validated as a result of purchases having been made.
It will never happen here?
Opinion among UK experts is generally sceptical, at least in the short term. “Not now, but perhaps within the next 10 years” is a common observation. The private-sector dominance of regional malls in the United States is also cited as one of many differentiating features compared with the UK and its tradition of High Street public shopping. Russell Schiller of Hillier Parker considers that the idea would not work in UK town centres, where most shopping areas are located, except in very special circumstances such as London’s Burlington Arcade perhaps. In any event he is concerned that the mechanical entry barriers would adversely impede traffic flow into the centres.
Out-of-town regional centres, however, could be a different story, as shoppers are accustomed to paying for parking and might accept the idea of this including a charge for admission to the shopping mall.
Brian Jolly of Capital & Counties was more doubtful. He felt that the US market was so different that it was dangerous to try to apply American practices here. No end of “bolt-on goodies” could radically improve a poorly located centre’s turnover. And to charge shoppers would only compound the original problem.
Jolly also doubted whether the additional costs of introducing a charging system would be worthwhile financially. Typically his company charge for parking only where they are in partnership with a local authority and Capital & Counties do not intend to charge at their new Lakeside regional centre at Thurrock, in Essex. But by the early years of the next century things could be very different.
