Summer 1996
by John Campbell

Shopping is now America's primary leisure activity (television being a passivity). Americans spend more time in retail establishments -- almost an hour a day -- than anywhere else outside of home, work, and car.

Catering a fantastic variety of goods and services to shoppers forms a large share of the economy: Consumer spending at retail accounts for about one-third of the gross domestic product, and retail employment for 18 percent of total employment. Along with America's affluence, the amount of retail space per capita has steadily grown throughout this century, particularly in the second half, and the range of shopping opportunities has multiplied as well.

To some people, any form of shopping is drudge work and they try to accomplish the chore with a minimum of effort. Others actually seek out shopping experiences. The nation's most popular tourist destination may no longer be Disney World or the Grand Canyon but the Mall of America in Minnesota, with its hundreds of stores, seven-acre amusement park, and dozens of smaller attractions.

The dynamism of retailing and its geography, where and how people shop, is tightly bound to the value of consumers' time. New locations and formats supplant the old because they are more convenient, saving precious time, or more pleasurable, enhancing the leisure

consumed. As time has grown increasingly valuable to certain segments of society, the patterns of shopping have changed significantly across New England, in its cities and suburbs, and within the shopping center itself.

The Region

VACATION SPLURGE

Looking from on high, at satellite distance, one sees a surprising pattern of economic movement in the six-state region over the past twenty or thirty years. Retail activity, as measured by employment, has migrated north; New Hampshire and Maine in particular grew retail-intensive. New Hampshire's zero sales tax partly accounts for retail growth among its border counties. But the broader, underlying force is that retailing has closely intertwined with recreation and vacation. Stores and small malls -- notably clusters of factory outlets in a handful of small northern towns -- have responded to a shift in how many people allocate their leisure time.

When on vacation away from home, an increasing number of people make shopping excursions a central piece of the trip. Some locations have long been associated, on a modest scale, with vacation-time retail: Cape Cod's art galleries and souvenir shops come quickly to mind. But starting in the late 1970s, an explosion of tourism led to a new extension of retail as an integrated part of the holiday package: a trip to the factory outlet center.

Many of the outlets are owned and operated by a manufacturer; more than six hundred national manufacturers now pursue this retail strategy. They typically sell brand-name clothing, crafts, toiletries, housewares, or outdoor equipment. Such outlets first opened in distant areas because powerful department stores threatened to cancel their accounts if the manufacturers opened nearby. In New England, the most visible factory outlet clusters are in Kittery and Freeport in southern Maine, North Conway in eastern New Hampshire, and Manchester in southwestern Vermont.

Shoppers on holiday often splurge, treating themselves to goods they might not buy at home. In that sense, these goods, even if affordable to a mass market, are luxuries, the very opposite of toothpaste. Once a few factory outlets cluster together, they can become a tourist attraction. And when they get large, they draw from a primary trade area of up to 120 miles versus thirty miles for a regional mall. Spinoff retail and services often develop in the form of restaurants, hotels, and convenience stores.

Freeport had been a quiet, economically depressed town after its several shoe factories closed. But an unusual retail core existed in the L.L. Bean catalog sales operation and its twenty-four-hour store. A downtown fire in 1982 prompted townspeople to hire an outside planning firm, which recommended creating a mall-like atmosphere on Main Street, mixing storefronts and houses. Cole-Haan, a shoemaker, and Dansk International Designs, purveyor of dishes and cookware, soon opened factory outlets. At the same time, Bean was shifting beyond its traditional hunting and fishing lines into apparel and sportswear, and the company renovated its main store. Volvos and minivans started to fill the parking lot alongside pickup trucks.

Today almost four million people visit Freeport's 110 stores each year. The Freeport Merchants Association markets primarily to the two- or three-day visitor, increasingly from abroad. "La fameuse 'Maine Hunting Shoe'" holds the same iconic status for Elle, a French fashion magazine, as a bottle of local wine does for an American touring a Loire valley castle. European and Japanese visitors can buy merchandise in Freeport for one-quarter the price charged at home, and the spread of brand-name goods makes foreign visitors confident in knowing they'll be presented with a selection of a certain quality. Package tours are now marketed abroad for the month before Christmas, with the specific aim of loading up on goods in Freeport and other New England mass luxury centers.

Most visitors, however, start from eastern Massachusetts, Connecticut, and New York. They come to ski a mountain, view fall foliage, cruise a harbor, and also to shop, hunting among the brands. Where else, some ask, to go on a rainy day? Others consider factory outlets the main point, and chartered buses ferry them there and back for an entire weekend.

The ideal site for a factory outlet lies between two major cities, or on the way to a major tourist destination. North Conway sits in a valley of the well-traveled White Mountains. In the wake of a successful tennis tournament in North Conway in the mid-'70s, which drew even more tourists than normal, developer Stanley Tanger built the first outlet mall, and the town now has 210 retail stores.

Kittery's retail growth was perhaps more improbable, being on the border of New Hampshire. For years, the Kittery Trading Post and the Weathervane restaurant had drawn vacationers driving Route 1 or Interstate 95. Then Dansk opened a factory outlet in 1976; now there are 115 stores. New Hampshire's no-tax status, which has stolen retail business from the border counties of Vermont and Massachusetts, was swamped in Kittery's case by the critical mass and tourist appeal of its stores. Indeed, a factory outlet mall built in adjacent Portsmouth, New Hampshire, during the late '80s failed and was converted to an office park.

Tourism in northern New England has spread beyond the traditional Memorial Day to Labor Day stretch, with distinctive shopping being a key reason. Vacation retail has become the major export activity in some of these towns, in contrast to most areas, where competition among retailers is often a zero sum game. The sharp growth of these few retail clusters reflects the fruition of mass luxury consumption, both of goods and of the act of shopping itself. This type of shopping is obviously a pleasurable way to consume time for the people who travel such great distances. In a concentrated town center such as Freeport's, strolling from store to store, stopping for an ice cream cone, and watching other people do the same, can be supreme entertainment.

The Metropolis

A CULTURE OF CONVENIENCE

Back in the city, the search for goods, whether pleasurable or not, consumes a great deal of time. Shopping competes with other activities and the geography of retailing has always been driven, in part, by the need to economize on time. Minimizing procurement time underlies the existence of retailers in the first place. It usually takes less time for a shopper to reach a nearby middleman than to seek out a separate manufacturer for each purchase. The middleman also allows shoppers to buy related items, such as dress shirts and ties, in one place. And retailers tend to cluster together so that consumers can more readily search for and compare goods in a single trip, which is why auto dealers often congregate in an "automile." Convenience, one of the most enduring themes of retailing, thus has driven the geographic arrangement of stores through cities and suburbs.

Clusters of merchandise or of stores need a high volume of traffic. The emergence of department stores in large downtowns by the mid-nineteenth century depended on streetcar access by crowds of city dwellers. As the population decentralized, so did retailing. A few small "shopping villages" emerged during the early 1900s in suburbs that encircled American cities, at important intersections with plenty of free, off-street parking, writes architect and historian Witold
Rybczynski. The first shopping center, with six stores, opened at the turn of the century five miles north of downtown Baltimore. When the automobile grew more affordable, by the early '20s, strip malls and supermarkets began to dot the landscape.

Retail development then paralleled the expansion of the highway system, with the first enclosed, suburban mall opening near Minneapolis in 1956. Malls and stores clustered at major transportation junctures, such as Burlington and Woburn, Massachusetts, at Route 128 and Interstate 93. The mall emerged as the most successful format; no longer the nearest market but the most convenient one. Once established at key crossroads, clusters tend to attract still more stores. Real estate economist William Wheaton, of the Massachusetts Institute of Technology, notes that towns specializing as retail centers have five times as many retail workers, relative to population, as do towns not specialized.

Concentric rings of retail in the metropolitan area respond to our need to economize on time. Neighborhood shops cluster in groups close to residences. The strip center lies a bit farther away, but offers more stores, often next to the much-frequented supermarket. Large, regional malls are even more distant, but house dozens or scores of stores. Retailers address convenience not only by where they locate within a metropolis, but also with whom they cluster. Small strip centers tend to include stores selling goods purchased frequently, such as a supermarket, drug store, and liquor and video stores. Jewelry or photography districts, which minimize the costs of searching and comparing goods for infrequent but expensive purchases, are common in large downtowns. Regional malls tend to house goods that people are apt to buy during the same trip: shoes, clothing, jewelry, and housewares.

Whether or not Americans' leisure time has actually decreased over the past thirty years is a matter of debate. What's clear is that time has become very precious. Among ever-expanding obligations, choices, and desires, an increasing proportion of Americans tell surveys that they feel rushed, and that they want and plan to spend less time shopping. The time crunch is felt more acutely by women, who account for 70 percent of shoppers.

Given this perceived time pressure, shoppers cherish convenience. Much neighborhood retailing has maintained its value for this reason. Neighborhoo d strip centers lost market share in the 1960s, to be sure, as the federal highway system expanded and early regional malls were built (see chart). But since the mid-'70s, as more women surged into the paid workforce and thus had less time for long jaunts to the mall, neighborhood strip centers have held their share.

Neighborhood retail survives by being close to home and by filling immediate or frequent needs -- groceries, medicine, clean clothes, a perch to sip coffee and chat. Successful neighborhood stores thrive by catering to local tastes (women's fashion or ethnic food) or offering extensive service (bicycle or electronics repair). The convenience of proximity, however, is essential to all of these. Convenience stores themselves offer the highest-velocity goods, such as gasoline, cigarettes, snacks, magazines, and lottery tickets, at bustling locations.

Neighborhood retail space may be even more prominent in much of New England. The construction of large suburban malls has been limited in the region, says Stephen Karp, CEO of New England Development, by relatively high costs, a shortage of developable land, and numerous local permit restrictions. Even during the real estate boom of the '80s, many small-town New Englanders resisted discount chains such as Wal-Mart by wielding local growth management and environmental codes. So the region remained less saturated with large malls, and more reliant on older formats, than elsewhere.

Come the recession, however, a surge of construction has moved through the region. Previously reluctant communities grew more accommodating, Karp explains, welcoming Wal-Mart, Home Depot, Circuit City, and the like. Developers rebuilt old malls, and broke ground on new ones. After a decade of looking to develop a regional mall near Route 495 ringing Boston suburbs, New England Development has finally just opened one in Marlborough.

The latest incarnation of convenience is the "power center" full of stand-alone "category killers" such as Toys R Us and price clubs such as BJ's. Such stores were enabled by advances in computers and communications that allowed innovators to reduce inventories and cut costs of distribution. Many power centers respond to consumers' perceived time pressure, as well as to the stagnant real incomes of the lower and middle classes. Designed around a central parking lot, power centers allow shoppers to locate the item they want and move in and out of facilities quickly. The typical shopper spends 45 minutes in a power center or price club warehouse, compared with two-and-one-half to three hours in a regional mall. Offering the widest possible selection in popular categories, category killers can attract from a large area, and thus undercut merchants at other locations. Home Depot tends to steal business from the hardware store in a neighborhood strip center, while Bed Bath & Beyond is more apt to take business from a department store in a regional mall.

The recent transformation of two major malls in Natick and Framingham, Massachusetts, illustrates the point. Shoppers World, forty-three years old, and the adjacent Natick Mall, nearly thirty years old, were long overdue for renovation. Their primary trading area had a large, affluent population. But competing ownership raised a risk to any developer sinking the necessary capital into one of the malls; he didn't know how the competitor would respond, and the trading area could not support two regional malls. It took the acquisition of both properties in 1992 by Homart, a development firm based in Chicago, to break this impasse. Homart invested $300 million in the properties. The firm completely renovated and expanded Natick Mall and was able to attract many smaller tenants new to the Boston area. Homart turned Shoppers World into a power center, and built a new movie complex between the two.

Both centers and the cinema are doing well. Natick Mall now gets all of the super-regional mall rent in the area, and sales are running more than $400 per square foot, high for the region. Shoppers World, meanwhile, has stolen additional sales from local merchants. General Growth Properties, which recently bought Homart, is betting that synergy will come from owning both huge retail clusters and thus dominating the trade market. "Although there may not always be crossover on a single trip," says Joseph LeDuc, first vice-president of General Growth, "people do get accustomed to driving to that location."

The Shopping Center

CONTROL AND ENVIRONMENT

What makes the mall such a resilient and powerful way of organizing retail activity is central management. When a single manager controls a large piece of suburban real estate, he or she can respond to opportunities and threats far more easily than can an unorganized collection of retailers downtown.

One essential goal is attaining a sufficient scale to reduce the shopper's cost of comparing products. The interdependence of separate stores, spurred by the dynamics of how people search for goods, was not at first obvious. But the owners of that first enclosed shopping center near Minneapolis, with its innovation of common public walkways, discovered this connection quickly. One department store had convinced a rival to jointly develop the center in order to reduce construction costs. To their surprise, the merchants discovered that placing two department stores in one shopping center increased business for both.

The variety of stores within a mall also is critical to the success of any single one. Major department stores attract shoppers who then spill into the small shops nearby. Leasing structures made possible by central management recognize and support this interdependence. Anchor stores usually receive deep discounts in ground rent, as their reputation and advertising expenditures help identify the mall's character and draw traffic. In addition, mall owners often collect overage rent, a cut of the tenant's gross receipts above a deductible amount. This gives the owner an incentive to care about each tenant's business, and his income rises when each store reinforces the others, drawing shoppers likely to make joint purchases.

Interdependence changes over time, and retailers are constantly uncovering new linkages. Food courts started in the early '70s as a way of keeping shoppers in the mall during lunchtime. In recent years, full-scale restaurants have moved into regional malls, and grocery superstores have incorporated dining areas.

As retailing has grown more saturated, store styles and formats depreciate faster. Nearly half of the nation's enclosed malls are older than twenty years, well past their prime and burdened with dark, somber, mediocre designs. Renovation and reconfiguration thus has become the main way to respond to competitive threats and opportunities. Some B-level malls, such as Rockingham Mall in Salem, New Hampshire, have switched to a power center configuration, signing on large, off-price retailers and eliminating most small tenants. Other malls have converted some space to nonmall uses including health clinics and tax accounting offices.

The coming of power centers has also pushed regional malls in another direction. Since consumers tend to drive to the power center with a specific purchase in mind, many malls are trying to target the more recreational, impulsive aspects of shopping. They are making themselves over to look more like their prototype, the glass-roofed nineteenth-century galleria in Milan, Italy. Renovations commonly feature dramatic entrances, brilliant lighting, and architecturally rich layouts with lavish materials and sophisticated design.

The renovated Natick Mall, for example, aims to both save and enhance the time spent shopping, says John Cole, principal at the architectural firm Arrowstreet, which designed the renovation. Homart positioned different zones within the mall for different incomes and lifestyles, and clustered some similar merchandisers (appliances, women's fashion) together rather than dispersing them throughout the mall. The layout partly intends to make visits more efficient, given the sheer size of Natick Mall; shoppers quickly learn where to park for a set of stores. But the design also encourages people (particularly women) to stroll through its greenhouse filigree and garden motifs, and linger over food. Natick, like other large malls, also attracts teenagers who enjoy shopping, playing video games, eating, and just hanging out.

Entertainment as accompaniment to consumption dates at least to the Roman public baths in the second century B.C., according to Wilton Thomas Anderson, marketing professor at the University of Texas at Austin. Baths provided games, musical performances, places to shop and to seek entertainment. They combined the essential ingredients of social life in one open forum: passive leisure, active recreation, shopping, gossip, deal-making, and people-watching.

America's department stores, while addressing shoppers' time constraints, always considered pleasure to be an important part of their package. The grand department stores of the nineteenth century, writes historian Rita Kramer, offered elaborate display windows, marching bands, and fashion shows. When big stores opened in big cities, ambulances often had to be called for those who fainted in the excitement or were wounded by the press of crowds. These "cathedrals of commerce," as Kramer calls them, provided a vision of stylishness and the good life for ordinary people.

By the 1980s, the public and developers increasingly thought of malls as a place to enjoy spending several hours at a time. Entertainment-anchor malls are now moving further down that path, by incorporating theme restaurants, nightclubs, virtual-reality game arcades, art galleries, and live entertainment in public plazas. Similar to the experience of tourist/retail towns such as Freeport, shoppers consume the physical habitat of the mall along with the assemblage of merchandise. But unlike Freeport and most other downtown districts, mall developers can fine-tune new linkages among stores. General Growth's planned mall in Waterbury, Connecticut, thus will group its entertainment-oriented tenants together, so that the cinema will generate spinoff sales to a nearby bookstore, music store, and coffee bar.

Cyber-threats

WILL PHYSICAL SPACE MATTER?

Retailing can no longer be identified only with a physical store. The technology of "smart shopping" threatens to render obsolete many facilities. Dell Computer and Land's End eliminate the store, stock room, and warehouse, choosing instead to maintain toll-free telephone lines and network servers, and they enjoy far lower costs as a result. Other entrepreneurs hope eventually to profit from online retailing. On-line supermarkets offering home delivery or in-store pickup have already begun. As a key barrier--the lack of security--starts to fall, Internet transactions could expand into more lines of retailing, and the "soft" city could blow out the hard, saturated retail landscape.

Perhaps. For decades, marketers have been predicting an extensive role for teleshopping and the automated store. But cable-channel shopping has not been an unqualified success, and catalog merchants have been experiencing lower operating margins and sales growth, along with the rest of the retail industry. In-store retailing, moreover, shows remarkable tenacity; about 94 to 97 percent of total retail sales estimated by the U.S. Bureau of the Census take place through stores, as opposed to catalog, phone, or direct sales. That's been true for many decades.

We go to a neighborhood store to buy toothpaste because it's convenient. When buying clothes, or furniture, or books, we still find it informative to touch and try on the product. And for those who enjoy window-shopping or hunting for bargains, computers can't replicate the experience of an urban downtown or a north-country village. While one can't predict the future of retail, the need for convenience and the desire for entertainment and social interaction could give the physical store, however configured, a very long run. (1)

A Brief Guide to Retail Clusters

NEIGHBORHOOD DISTRICT - Stores on city or village streets. Usually no common ownership of buildings. Sometimes an association formed to address common concerns such as street cleaning and security. Occasional theme clusters, as with bookstores in Harvard Square in Cambridge, Massachusetts.

STRIP CENTER - Stores fronting a common parking lot, usually in linear fashion. Often anchored by a supermarket and drugstore, with a few small stores such as dry cleaner and photo developer. 30,000-100,000 square feet of gross leasable space. Typically visited four times a week.

COMMUNITY MALL - Organized around enclosed common space. Typically twenty to thirty stores, including a local department store, variety store, or category killer. 100,000-250,000 square feet.

REGIONAL MALL - Near intersections of major highways. Two or more anchor stores and dozens or scores of smaller merchants. 300,000-800,000 square feet of space. Visited once a week.

SUPER-REGIONAL MALL - Attracts from a fifty- to one-hundred-mile radius, so often includes a food court and entertainment. More than 800,000 square feet.

POWER CENTER - Large strip center with at least five to ten anchor tenants, consisting of warehouse clubs or category killers that are regionally dominant. Few small retailers. Visited once a week.

FACTORY OUTLET CENTER - Manufacturers unload seconds or discontinued lines, or sell regular lines at a discount. Some 650 national manufacturers now operate outlets. Often between two major cities and on the way to a tourist destination. Visited three times a year.

Sources: David E. Bell, "Note on Store Location," Harvard Business School; Urban Land Institute, "Remaking the Shopping Center"

Don't Let Them See That Anchor

Joel Garreau, chronicler of the fringe cores known as edge cities, cites the developer's first law: An American will not walk more than six hundred feet -- two football fields -- from his or her car. The exceptions are inside an old downtown, and inside a mall. There, people have plenty of interesting choices. This floor plan of one level of the Natick Mall in Natick, Massachusetts, shows how developers think.

First, developers make exits to parking difficult to find. They also break the line of sight, so shoppers never know exactly how far away the next anchor store is. Otherwise, shoppers might go out to their cars planning to drive to the other end, and then might decide to leave the mall entirely.

The best locations, according to Stephen Karp of New England Development, are corners and center court, because people congregate there. Jewelry stores, which can afford the higher rent of a corner, often locate there, and developers try to create as many corners as possible.

A New Cathedral of Commerce

Built in the mid-1960s, the Natick Mall had drab finishes, dim lighting, and excessively wide corridors. The architect, Arrowstreet of Somerville, Massachusetts, redesigned the mall not only to save a shopper's time but also to enhance the time spent there, by creating a space that's pleasant to stroll through. It evokes a Victorian England conservatory, with ornate steel lattice and railings, large skylights, and floral-patterned light fixtures and air grates. The design encourages people to linger and consume the physical habitat along with the goods, and sales are running high at more than $400 per square foot.