Published on 23 Sep 2021

Why are some malls doing better than others?

With the impending departure of luxury boutique Pedder on Scotts in Scotts Square, it seems even a spot on the prime Orchard Road shopping belt alone cannot save retail.

Yet a few doors down, players such as Ion Orchard and Takashimaya Shopping Centre remain bustling.

While the recurring cycle of a retail slump is not new, it begs the question: Why are some Orchard malls suffering while others are thriving?

Retail experts say it is not just about location.

Orchard Road has taken a hit in general from the loss of tourist traffic - the biggest reason behind The Pedder Group's exit, say observers - but various factors can further separate the winners from the losers.

A healthy mix of well-curated tenants, strategic digital marketing and innovative concepts is needed to differentiate malls and boost their appeal to shoppers. It is how a mall deep in the heartland can fare much better than one in Orchard Road with no clear direction.

The warning signs of a struggling mall are easy to spot.

Dr Lynda Wee, adjunct associate professor of marketing at the Nanyang Business School, lists declining foot traffic, complimentary or subsidised carpark fees to entice shoppers, a decline in tenancy renewal rate and the subsequent drop in occupancy rate, and the presence of empty shops or shop hoarding as clear signs.

Poor occupancy discourages shoppers from visiting and other retailers from setting up shop, creating a vicious circle.

"If a mall is not pulling in the crowds, it fails as a traffic generator. Then tenants will not be able to do their sales conversion and may exit to find another mall," she adds, pointing to how Scotts Square is "relatively quiet".

And rejuvenating a mall is no easy task.

No longer can a mall rely on an anchor tenant to draw the crowds, says Mr Samuel Tan, head of the Smart e-Commerce Centre at Temasek Polytechnic.

The concept, he says, has become a "questionable mall strategy in recent years".

"We have seen a department store lose its attractiveness for being the queen bee in any mall. It all depends on whether the anchor tenant is capable of drawing high traffic for the 'shower effect' to the rest of the tenants," says Mr Tan.

"The cookie-cutter strategy of filling malls with fast-fashion brands, discount stores, chain sports retailers or the few supermarket retailers is another concern. Anchor tenants should help to differentiate malls from one another - but malls also have to have a balanced tenant mix that appeals to a wider target market."

It has resulted in many "clone" malls, he adds.

"Retailers today have also realised that selling in malls is not as impactful as before, and are opting for alternative distribution channels. They can have a bigger virtual shopping space and a larger target audience, sans the high rental."

Executive director of the Singapore Retailers Association, Ms Rose Tong, notes that "landlords and tenants are in a symbiotic relationship and ecosystem. Each needs the other to do well and thrive".

"Malls are also challenged on the rental front - via mandatory and discretionary rental rebates, with some malls more empathetic than others," she points out.

"With increasing consolidation and vacancy rates, they are further challenged to sustain and rightsize the desired tenant mix, while ensuring equitable rental rates for existing valued tenants and newcomers."

In certain cases, the problems run deeper than lazy marketing or a poor tenant mix.

Some underperforming malls - such as Far East Shopping Centre, Peninsula Shopping Centre and Lucky Plaza, to name a few - bear the burden of being strata-titled malls. These strata malls have fragmented ownership and are less able to collectively rejuvenate their offerings.

Realty expert Sing Tien Foo, director of the National University of Singapore's Institute of Real Estate and Urban Studies (IREUS), says: "Malls located near MRT stations and those owned by single institutional landlords are more able to transform to attract shoppers compared with strata-titled malls.

"They can attract shoppers through a complementary mix of tenants and goods, while strata-titled malls rely on destination shoppers who would patronise them for designated shopping needs."

For instance, the patrons of strata mall Far East Plaza today are largely there for beauty salon or tailoring services.

In general, malls are losing their shine as the go-to place for today's shoppers, who can find numerous options elsewhere both online and offline, experts say.

The patrons of Far East Plaza today are largely there for beauty salon or tailoring services. ST PHOTO: NG SOR LUAN

Before the pandemic, Mr Lim Zhi Kang frequented malls up to three times weekly, but now visits them two to three times a month. The 32-year-old in-house legal counsel gets most of his shopping done on e-commerce sites Taobao, Shopee, Lazada and Amazon.

When he does hit a mall, it is for dining - at Northpoint City in Yishun where he lives, Funan mall and Ion Orchard.

"For me, malls have the greatest draw when they have a speciality supermarket and good dining options. Orchard has never really been my turf as it's generally expensive branded stuff which I don't use or need."

What can malls do?

So what can a mall do to save itself? The experts have a few suggestions.

For one thing, malls can consider becoming a destination for all lifestyle needs and not just shopping. Food and beverage (F&B) may be a popular tenant choice, but it is less about the food and more in how it works towards creating a holistic lifestyle destination or "community space".

Dr Wee of Nanyang Business School says: "Going out is about lifestyle needs, not just shopping, as the digital platform has proven to be a good alternative.

"Malls that do well are 'community builders' which practise targeting key segments they want to serve well. Through their curation of shops and services, they develop their own following of customers. They don't think about shopping only - most are lifestyle-based and include services such as medical, beauty, education, and health and fitness.

"F&B is not just the way to go for malls. Think like a community centre, to serve the needs of the community."

Malls can consider becoming a destination for all lifestyle needs and not just shopping. ST PHOTO: NG SOR LUAN

Agreeing, Mr Tan of Temasek Polytechnic says: "Malls need to review their purpose. The growing importance in healthcare, elderly needs, education and entertainment is a good reason for shoppers to visit malls.

"In line with this, a revamp in product offerings and tenant mix would appeal to more shoppers. The mall could be considered as a big social or community space.

"Mall operators can no longer just play the role of being a 'landlord'. The roles of the centre management need to be reviewed. It can take the lead in the mall's digital efforts to support its success."

IREUS' Prof Sing says: "Landlords and tenants should work hand in hand to overcome the pandemic's impact. Landlords could provide more support either in terms of rental relief or creating online platforms to reach out to potential shoppers.

"The landlord-tenant relationship may have to be strengthened through better risk-sharing - in the form of rental structures to help reduce fixed costs for tenants - and collaborative models."

Source: The Straits Times