MAPIC, the trade show for the international retail property market, celebrates its 20th anniversary next week. The show, in Cannes from 19-21 November, recognises a growing trend in retail with a dedicated “retailtainment zone”. Leisure Development Partners LLP analyse the Retail + Entertainment phenomenon for Blooloop.
By Yael Coifman (Senior Partner) and James Kennard (Partner) Leisure Development Partners LLP (LDP)
The blending of retail and entertainment is a concept which has continued to develop over many years. As the growing importance of this combination has emerged, a term that has been used more and more frequently is “retailtainment”.
The terms retailtainment was coined by American sociologist George Ritzer (1999):
“the use of sound, ambience, emotion and activity to get customers interested in the merchandise and in the mood to buy”
Entertainment has emerged as a guiding paradigm for shopping mall development. This is not to say entertainment in malls is a new concept – since the first enclosed malls were developed in the 1950’s through to proliferation of malls over the last 30 years, there has typically been some form of entertainment within the programme.
Of course, many people view going to a shopping mall as a leisure activity in itself, particularly if the mix of retail is skewed towards speciality and leisure retail. In the early years of mall development entertainment may have only stretched to the inclusion of music, an area for infrequent events or shows, or seasonal greetings.
Commercial entertainment, such as bowling centres or multiscreen cinemas have since become the staple entertainment offer at many centres. Ice skating rinks, children’s soft play areas and free attractions, such as fountains, are other established forms of entertainment. This first generation of commercial entertainment has now become a standard in most retail centres and no longer a point of differentiation.
As with many emerging leisure trends the introduction of dedicated entertainment centres and stand-alone attractions originated in North America. Some of the earliest examples of major family entertainment centres (FECs) or indoor theme parks include the Galaxyland (formerly Fantasyland) in West Edmonton Mall (opened in 1985), Lotte World in Seoul (1989) and Nickelodeon Universe (formerly Camp Snoopy) in Mall of America (1992).
These still represent some of the largest indoor mall-based attractions in the world, but dedicated mall based attractions are now more widespread and diverse.
The Changing Retail Environment
So why the increasing importance of entertainment now? These traditional forms have been around for a while, yet we see an emerging trend of retail centre owners and operators looking to incorporate entertainment into the overall offer. We have identified two core reasons (amongst others) which we highlight below:
1. The increase in online shopping has made it more important for existing and planned retail centres to offer ‘new experiences’ to differentiate the experience and give the consumer another reason to visit. E-commerce is the fastest growing retail market in Europe, with sales in the UK, Germany, France, Sweden, The Netherlands, Italy, Poland and Spain expected to reach a combined total of £111.2 bn in 2014 (€155.3 bn or $212.8 bn).
The Centre for Retail Research expects online sales in the US to reach $306.0 bn (€224.0 bn) in 2014. In addition, online orders made using mobile technology (smartphones and tablets) in 2013 were 8.0% of all online sales in Europe but as high as 13.8% in the US.
Clearly, as consumers enjoy more and more options to purchase goods without going to physical retail centers, another driver is needed.
2. The increase in in-home entertainment and gaming is making the more traditional forms of commercial entertainment in malls less of a draw. Internet streaming of movies and ongoing improvements in technology has created competition for the traditional movie theatre experience.
In-home gaming (both on-line and interactive such as the Wii) has similarly detracted from the more traditional games such as bowling. These commercial entertainment offers are constantly working to enhance the experiences via food service, VIP, events etc. in order to compete; nevertheless the traditional offer is not the draw it once was for most typical retail malls.
As such, innovative entertainment concepts and attractions are needed to differentiate a shopping mall and give the consumer another reason to visit.
Middle East is King
As well as in North America, mall based attractions have become the norm in many of the Middle Eastern markets (Dubai, with more retail space than any other country in the region, is the obvious example with a range of current and planned mall based attractions) but is also increasingly popular in Eastern European centres.
Western Europe boasts a number of very good examples of retailtainment and mall based entertainment (the Trafford Centre in Manchester is good example of a clustering of a selection of mall-based attractions), but in some markets development feels behind the curve, particularly when compared to places like the Middle East.
The dearth in quality mall-based entertainment in some European markets are as a result of shopping malls being either developed before the real importance of entertainment was realised, or when markets were less competitive and therefore there was less pressure to diversify the product.
But Europe is catching up. LDP have recently worked with a number of shopping malls (from Romania to Switzerland and the UK amongst others), where an existing or planned centre is looking to add entertainment or retailtainment in recognition of its importance.
What are the benefits of Retailtainment?
Adding dedicated entertainment space to an existing mall or to the plans of a proposed centre has multiple benefits. Whilst malls typically draw from relatively localised markets (with most visitors sourced from within 30 minutes’ drive time), good quality attractions can extend the catchment up to a two hour drive time. Attractions are also very effective at drawing repeat visitors, particularly from school groups during the week and family groups at the weekend. For the family groups, an additional benefit is that parents can leave the children to play whilst they go and shop if there is suitable monitoring and care available for the children.
Generally speaking, the success of attractions is driven by throughput as opposed to on a sales per sqft basis, and this is what really benefits the mall. The presence of attractions and entertainment also differentiates the overall mall appeal in the eye of the consumer and in ever more competitive markets. As stated earlier, malls are not only facing ever more competitive physical retail environments, but the growth of online shopping is making it ever harder to capture footfall. Again, entertainment can help to draw these people back out of their homes.
Retailtainment Benefits Reciprocated
And the benefits are reciprocated. Being located in a mall with a heavy existing footfall represents a real opportunity for the attractions. Rather than being in an isolated building, attractions can be well integrated within the mall making the attractions visible and able to capture the footfall with more success.
When testing the feasibility of proposed attractions in a mall we adopt a traditional approach using benchmarking and a market penetration analysis. It is incredibly important that the attraction responds to market demand and has sufficient support to be self sustainable. It is also important to note that attractions should be treated as key anchor tenants when negotiating lease terms. In fact, in some cases, part of the initial capital investment is paid by the mall developer themselves, recognizing the deep impact that a signature attraction (such as indoor Ski) can have on surrounding tenants.
However, as a useful sense check, the chart here shows the ratio between attendances at selected FECs and their host mall. FECs typically achieve attendances at around 5 percent of the mall footfall. Whilst this might not seem very high, it is important to note that these are buyers, and not casual browsers that pass through numerous retail tenants before purchasing. It is also important to note that often the attraction itself is the primary reason for going to the mall. Other retail tenants and F&B outlets then benefit from this visitation.
By integrating attractions in the mall, and by adding more than one attraction, a critical mass of entertainment can be established. If the attractions are located near public spaces, such as the food court, diners can also watch their children or other attraction goers while they eat, if the activity is entertaining to watch (eg ski domes and other sport-based attractions).
The attraction in this case not only creates a fun and atmospheric environment, but also the retail around the attractions (especially if it has synergies with the attraction e.g. sports leisure wear) and the food and beverage will benefit in term of spend and, ultimately, rental returns.
Popular Concepts & Branding
Commercial entertainment, including cinemas and bowling, has long been a popular retailtainment anchor for shopping centres. This type of entertainment, which has a relatively short length of stay can work very well with in-mall dining. However, these are not new concepts and therefore it has become increasingly difficult to find gaps in the market. As stated earlier, with ever improving in-home entertainment and gaming, such as live movie streaming and interactive games consoles, there is need to provide more ‘hands on’ entertainment.
Ride-based FECs are still a popular genre and again, the Middle East that has the highest number of these types of attraction per head of population anywhere in the world. But there are a wide variety of other attraction genres which work well within a mall environment. Concepts which target young adults (such as Dave and Busters in the US which has been around for over 30 years) which mixes eating, drinking and entertainment have been successful. The ‘edutainment’ products such as KidZania, which is a hugely successful and innovative product, and Lego Discovery still feels fresh and interesting.
Ski domes and other adventure sports also work well in shopping centres. Ski domes, such Ski Dubai, make can be good anchors for the mall as they can draw a large number of visitors and if well planned provide an interesting environment.
Other adventure sports, such as indoor surfing, are typically low capacity and therefore throughput but are interesting to watch for visitors not participating.
The diagram below illustrates the retail development cycle and how attractions and how various concept sit. Branded attractions in particular provide important image benefits to retail centres, drive visits and encourage spending.
What’s Next in Retailtainment?
We see further integration of entertainment in retail as inevitable in increasingly competitive markets. Shopping centres are competing with each other and on line shopping. Retailtainment can be a key anchor both in terms of driving footfall and spend, but also enhancing the image of the centre.
As Nathalie DePetro, Director of MAPIC states, ‘The customer will still visit shopping centres with the goal of purchasing, but he will also come to spend a day of fun, fellowship and leisure with his family and friends.’