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10 YEARS AFTER...
HOW ONE MEGAMALL CHANGED THE INDUSTRY

By Debra Hazel

The 4.2 million-square-foot Mall of America attracts more than 43 million visitors a year and boasts annual sales of $860 million.

It’s now such an institution that many forget that people once wondered if Mall of America would ever be built at all, let alone survive.

Celebrating its 10th anniversary in August, the 4.2 million-square-foot Bloomington, Minn., megamall has defied naysayers to become a pioneer in so many ways: the retail-entertainment combination; co-tenanting of department store anchors and big boxes; incubation of new retailers; marketing to teen-agers; tourism programs and corporate sponsorship. Through these innovations, not only has Mall of America thrived, it has transformed the very industry that once questioned it.

“We’ve become a bellwether, an icon, a laboratory in a sense,” said John Wheeler, CSM, Mall of America’s vice president and general manager.

Mall of America’s first pioneering move was its merging of retail and entertainment on a scale not seen before — or since — in the United States. Until the early 1990s shoppers visited regional malls for shopping (and perhaps a movie), but they sought their amusements elsewhere. Only West Edmonton (Canada) Mall, built by Mall of America co-developer Triple Five Group, had combined a shopping center and amusement parks.

By incorporating Camp Snoopy, Lego Imagination Center and a fourth-level nightclub area, Mall of America has shown that malls can capture more of shoppers’ time by becoming entertainment venues, thus opening a new world of co-tenancy possibilities.

“Mall of America helped retail developers see the possible synergies that existed in aligning the traditional format with entertainment elements,” said Lee Wagman, president of TrizecHahn Development Corp., Los Angeles, among whose projects is the theater-anchored Hollywood & Highland. “It has inspired many of us and encouraged us to seek alliances beyond our traditional retail partners.”

Mall of America influenced the architectural side as well, including RTKL Associates’ work on Centro Colombo, outside Lisbon, Portugal, and The Gateway mall in Durban, South Africa, both of which contain substantial entertainment elements, said Thom McKay, vice president of the Baltimore-based design firm. “Every client we had after [Mall of America opened] asked, ‘Where’s the entertainment component?’” he said.

Big boxes and little startups
The incorporation of big boxes into a mall was another innovation credited to Mall of America. The sheer size of the megamall meant that Melvin Simon & Associates (today Simon Property Group), the managing partner, would need more than just multiple units of specialty stores to fill the space between anchors Bloomingdale’s, Macy’s, Nordstrom and Sears. So the mall added such big boxes as Filene’s Basement, Linens ’n Things, Marshall’s, Oshman’s Sporting Goods and Service Merchandise. Up to then, such tenants had located only at power centers, not super-regional malls.

“It was the first time I ever saw a mix of full-price linked with off-price stores,” said Roy Higgs, CEO of Baltimore-based architectural firm Development Design Group.

Today many regional malls, such as Palisades Center Mall, West Nyack, N.Y., include category killers in their tenant mixes.

Many small retailers can thank Mall of America for their entry into malls, too. The megamall launched its Retail Development Program about two years before it even opened. It was the new kid on the block reaching out to help other new kids. Among the pioneers was bedding manufacturer and catalog retailer Select Comfort, which opened one of its first three units at Mall of America. Within weeks the store’s sales were at about $1,000 per square foot; today Select Comfort has hundreds of stores, including boutiques inside Bed Bath & Beyond stores. Other tenants launched at Mall of America range from mom-and-pop startups to such household names as QVC.

“Mall of America will be somewhat successful as entertainment, but not as a shopping center,” predicted one developer in a July 1991 SCT article.

While expanding its tenant mix, Mall of America also developed marketing programs to expand its customer base; it quickly targeted the teen-agers who were flocking to the center. At the time, most mall managers considered these youths a nuisance to be tolerated rather than customers to be courted.

The center created an advisory board of teen-agers and commissioned research (another industry rarity at the time) that discovered the kids were there to shop as well as socialize. Over the years, the mall has added 25 stores catering to them, including Aeropostale, Rampage and Steve Madden. Developers now routinely target this market, with some devoting entire sections of their centers to teen-oriented stores. The Zone at the Glendale (Calif.) Galleria is one example.

Ironically, Mall of America also pioneered another type of teen-related initiative when in 1995 it imposed a curfew banning unescorted youths on weekends. This was in response to a situation that tenant Benjamin King, owner of King Jewelers, described as “horrible, with fights, shootings and stabbings.”

“It was done as a last resort but has worked really well,” said Maureen Bausch, Mall of America’s director of business development. Nevertheless, only a few centers have taken this road; Mall of America is the only mall in Simon’s portfolio that maintains such a curfew, and fewer than 10 centers in the United States have instituted similar restrictions (SCT, October 2001).

Mall of America pioneered product branding that has become increasingly common in malls.

Mall as tourist resort
Mall of America was also the first U.S. regional mall to make a point of attracting tourists. Until then, tourist sales were considered a lucky bonus from outside a center’s market. The megamall created a department promoting itself to travel agents and visitors from far beyond a traditional regional mall’s 15- to 25-mile radius. Today some 40 percent of the center’s sales come from shoppers from outside the Twin Cities, and it is a household name in Europe and Japan.

“It began to change the way other shopping center marketers think about who their target market is,” said Charlotte Ellis, SCMD, president of Cary, N.C.-based marketing consulting firm Ellis & Others. She noted that outlet centers now routinely market to tourists. Developers with projects in major cities, such as Taubman Centers, have created packages that include center discounts and hotel stays.

Equally groundbreaking has been Mall of America’s courtship of corporations through sponsorship programs. Though malls around the world had sought and obtained corporate underwriting for individual events, no corporation had ever signed long-term exclusives to have its name closely associated with a center. Drawn by the promise of traffic and the ability to interact directly with consumers, Ford Motor Co., Northwest Airlines Corp. and PepsiCo became sponsors at the center’s opening.

Maureen Bausch

At the time, industry observers joked about renaming the center “Pepsi Mall.” Today developers, too, are laughing — all the way to the bank. In November Mills Corp. opened Discover Mills, having sold the naming rights for its Atlanta-area value megamall for an undisclosed sum. TrizecHahn sold the naming rights for the theater anchoring Hollywood & Highland to Eastman Kodak Co. for $75 million.

Current Mall of America sponsors include Dairy Queen, Northwest, Pepsi, QVC and Visa International. In October 2000 Sam Goody, a division of Musicland, purchased the naming rights to a 5,000-square-foot court, which is now used as a regular concert space for such performers as Garth Brooks, Martina McBride and 98 Degrees.

“Mall of America clearly has established itself as a visitor attraction,” said Musicland vice president Bruce Martin, adding that the location gives the company the opportunity to hold events that can be linked to contests for the 2 million members of its loyalty program.

Other developers, such as Westcor Partners, Phoenix, have followed Mall of America’s lead by creating corporate departments dedicated solely to finding and signing corporate partners.

“We thought if Mall of America can do this in Minneapolis, we can do the same in Phoenix or Pittsburgh,” said Sue Martinez, CMD, Westcor’s vice president of strategic partnerships.

So perhaps Simon and Triple Five can be forgiven for crowing a bit. The mall that many had expected to fail — “The megamall is a megamistake,” one Midwestern developer told SCT 11 years ago — has reshaped agendas for the industry. Mall of America has drawn more than 270 million visitors since it opened, averaging 43 million shoppers a year. Sales totaled $860 million in 2001.

“It’s completely changed the balance of power in retail shopping in the Twin Cities,” said Michael Scott, senior vice president of retail at Minneapolis-based commercial real estate brokerage United Properties.

But the megamall is not sitting on its haunches.

“We’re looking to grow other demographics,” said Mall of America’s marketing director Jeff Hoke. The mall is courting a more sophisticated, affluent shopper by adding such tenants as Apple Computer, Bose and Coach; it has also begun advertising in black and Hispanic publications, and is test-marketing to gays.

Hoke and his team also are looking to expand the center’s draw. Historically, the center has attracted visitors from Britain, Germany and Japan; now, it is eyeing South America and expanding its domestic target from a six-state region in the 1990s to 11 states today.

Mall of America is planning a physical expansion, too, beginning in 2004 (see story).

But expanding such a center may be easier than duplicating it. As much as Mall of America has influenced the industry, there has yet to be another such center built in North America. In the mid-1990s Triple Five proposed but never built American Dream, a retail and amusement mall to be built near Washington, D.C.

One barrier is the sheer cost of such a project; Mall of America cost $650 million. Joseph Luik, senior managing director at Teachers Insurance and Annuity, said his company would be loath to concentrate so much capital in one project today. (It provided the permanent financing for the mall.) Since the megamall’s opening many shopping center developers, including Indianapolis-based Simon, have gone public, and Wall Street would be unlikely to approve of such a risky undertaking.

The center’s market is difficult to duplicate, too. Try finding nearly 80 vacant acres less than five minutes from an international airport and on a major highway. At the time, Minneapolis/St. Paul was under-retailed for a metro area of more than 2 million people, and, with its fierce Minnesota winters, conditions were ripe for an indoor environment offering a variety of services.

“Those would be factors that are hard to match,” Wheeler said.

So, it is likely that Mall of America will remain sui generis.

“You have a combination of retail and entertainment that draws a number of tourists,” Luik said. “That is terribly unique.”

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