If not a natural born developer of American retail, Rick Caruso would certainly be a celebrity of this universe. With more than 10 awards for bold architecture of their projects and how their ventures promote the connection between consumers and community, the curriculum of Caruso also includes the creation of 15 shopping centers in the United States since 1987. Of these, two are at the top of the ranking of the largest sales per square foot in the world.
Caruso became known by traditional retailers for challenging their business model, saying if they did not change it, it would break. In his new plan, he says that many malls in the United States – the land of consumption – are outdated and need to urgently connect their consumers to their stores by offering differentiated services, sophisticated entertainment, high-quality cuisine and cozy living areas, modern and balanced architecture: all within the same space. “It will be a lot of work, because the shopping malls today are very large and uncompensated. The ideal is that we’re smaller and more balanced,” he says.
In short, the message to navigators of retail is that the rebirth of shopping centers and the tenants will be the enhancement of experience between the consumer and the environment provided. The challenge is to create places of belonging, hospitality and open to the community for people to feel welcomed.
His company, Caruso Affiliated, is one of the largest real estate developers in the USA. All their properties are distinguished, according to experts, by a combination of excellence in architecture and design, experience of conviviality and for providing services for the local community, transforming them into central points of meetings for residents and tourists.
His most famous projects are The Grove and The Americana at Brand, in California, the first to use the concept of multipurpose spaces with residential, commercial, recreation and services. The Grove attracts more customers per year than Disneyland.
In the US, the average consumption is twice that of regional shopping centers, and the sales growth is three times higher than that of traditional malls. Currently Caruso leads one of the largest commercial enterprises in Carlsbad, California. “I generate $80 million per year in new taxes for the state and municipal governments, as well as 11,000 jobs during its construction and 8,000 permanent jobs.” Caruso Affiliated also has other projects in development, including the Pacific Palisades and Brentwood, California. All follow the same high usual standards.
Caruso gave the following interview to Valor, by telephone, from the headquarters of his office in Los Angeles. Caruso spoke about the new trends and everything that the retail (shopping and street) should do to suit them – always using it as a basis of comparison the largest shopping center in the world, the USA. Their analysis indicates the directions that retailers must follow the tone that should prevail in conversations between malls and retailers in the coming years.
Valor: In a seminar at the National Retail Federation, held in January in New York, it was said that we need to reinvent the current model of shopping center used in the world. How can this be done to attract more and more consumers?
Rick Caruso: I believe that there is a combination of things that need to be made. Part of it has to do with experience, architecture and balance between what´s inside shopping malls and shops, its programming and what consumers want. There is plenty of space within the shopping malls still to be completed. AND this has to be done in a correct and balanced way. People want to walk in shopping malls and be involved; they want to have other types of experiences in addition to the purchases. They want to be enticed to stay in the mall for a long period of time. Not only enter, buy and quickly exit. Many things need to be done to ensure that the model is successful. But the main thing is that you have to reinvent the experience of shopping through balance between vacancies and the spaces. For this reason, it may be necessary to create smaller spaces. I think shopping malls are very large. They should be smaller, which would make the possibility of harmonization of spaces easier.
Valor: How do retailers react when the landlord says that this rebirth will bring more value to the customer and their experience? What is the best way to accomplish this?
Caruso: There are many things that large, medium or small retailers can do to extend this experience to consumers. AND some have done our best to provide and connect customers with the services they offer to make your store more interesting. Offering new experiences that can delight and engage customers. Customers begin to compare the shops and what they offer for your well-being. AND opt for the best. Those who do nothing will not survive.
Valor: How can retailers combine the humanization of shopping malls with the guarantee of good financial results? Many initiatives have been taken in this direction to add value to the brand, but cause little impact on sales. What is it that retailers are missing?
Caruso: I do not know what they are doing wrong. What I can say is what they can do right. There are good examples in the US retail, with distinctive design of shops and a good offering of services, leisure, dining and creative product. I believe that the main thing that consumers are looking for, in addition to obviously good prices, is the connection with the shops. How are the services and how much they believe that will help you in some way I really don´t think that this is complicated. I think that many retailers can easily do this. The fact is that the shopping malls eventually become large boxes where people do not want to go further. There is no more traffic of people in some shopping malls in the US, because they are becoming obsolete and decaying.
Valor: Can you give an example of a shopping mall that managed to have success in the adoption of this new model and how it can attract the public?
Caruso: Yes, of course. One of the many examples I have is ´The Americana at Brand´, which is located in Glendale, California, that combines world-class retail, new entertainment experiences, luxury housing, stunning landscaping, fine dining and a multitude of services to guests.
Valor: Looks great. But, in terms of numbers, how can we measure the results?
Caruso: The property receives on average 16 million visitors per year; 92% of visitors make their purchases on site. Consumers spend twice the time and spend triple on sales there if we compare with what they spend in traditional shopping centers. The annual growth of 15% on average.
Valor: What will happen to those who do not adjust to the demands of the new consumer?
Caruso: Sales will fall substantially. Retail is a very competitive market. If you do not offer the best in your business to attract and captivate people, they exchange for another with ease and speed.
Valor: If you look at the business model of shopping malls in Brazil in the last ten years, it is possible to say that it was very successful with significant results. Does the landlord need to be aware of the change in shopping malls?
Caruso: The flow of people is decreasing within the shopping malls in the US. Since 2006, there are new models of malls being built. Is this because the people do not want to go? Of course you want to go, but no one admits it. Vacancy rates are increasing in shopping malls and retailers prefer to be on the street. Then there is no other reason to go to the shopping malls.
Valor: In the past year, we have seen some problems starting to happen in this industry in Brazil, as it is a greater difficulty to rent in areas where there are small shops. Does this represent a limit to expand to this model?
Caruso: They are developing their business as well, but not properly before the new demands. The companies in the industry have been growing in a sustainable way with sales rising 20% per year over the past 12 years. This shows they had a lot of people doing things right. The shopping always amazed me, but now it is time for a change.
Valor: In your opinion, has the retail sector grown as much as it could? Is slower growth perhaps a level of the new times? And how is the traditional retail in relation to shopping?
Caruso: The retail market can grow at the same pace of shopping malls. But the malls could grow even more.