BrainTrust Query: 7 Years for 7 Reasons - The Decline of the Power Center
From its inception as a commercial real estate concept in the 1980's, the long-term viability of the power center has been a topic of running debate. While they are clearly not great achievements in design, the decline of the power center will have much less to do with aesthetics and much more to do with powerful social and economic forces beyond their walls.
The power center will begin to decline in seven years for the following seven reasons:
The Aging of the Baby Boomer: The sheer size of many big box stores will begin to present real physical challenges to baby boomers. As eyesight begins to wane, reflexes slow and hearing diminishes, driving becomes less desirable and perhaps impossible. Look for boomers to shop close to home whenever they can, favoring pedestrian shopping venues, Main Street type business areas and mixed-use retail development.
The Gen X Deficit: Their smaller size as a generation makes it virtually impossible for Gen X to rise to Baby Boomer levels of consumption. Until Generation Y moves into the driver's seat, there will likely be a general decline in consumption of many categories of goods and services.
E-commerce, M-commerce and In-home Service Will Grow: On-line shopping will steadily increase due to improved technology, pervasiveness of high speed connections and the added buying power of Gen X and Gen Y consumers. Improved hand-held browser technology will make mobile commerce progressively more comfortable, trusted and intuitive, further reducing reliance on immense bricks and mortar stores.
Conspicuous Consumption Isn't Cool: "Frugal chic" has replaced the unbridled spending that fed the growth of power centers over the last twenty-five years.
Rising Fuel Costs Will Hurt Everyone: The big box business model is predicated on buying vast amounts of product and shipping it via boat, truck and train across the globe. Rising fuel costs will strain the efficiency of this supply chain model, if not cause it to implode.
Generation Y: The big box buying model is predicated on steady, dependable demand, annual line-reviews and minimal assortment change, whereas Generation Y will seek out retailers that respond to new and exciting product trends. As a generation that has always been plugged into what's new, they will not simply accept the "stack it high and watch it fly" mentality of many mass merchants.
Environmental Pressure: The stripping of land for the development of these centers will be met with increasing resistance by municipalities and citizens alike.
What about the retailers that currently call the power center home? I would look to brands like Wal-Mart, Home Depot and Best Buy among others to start playing with smaller footprint concepts outside the power center and big box formats. With smaller stores and at least a partial return to domestic supply, they will work to become more responsive to changing fashion and styles in an effort to capture a younger consumer base.
Perhaps the greatest irony of all is that for some big box retailers, the next 20 years will be a matter of learning how to succeed in the very place they started...on Main St.
Discussion Questions: What do you think of the long-term viability of power centers? If you agree that power centers are headed for a decline, what will replace them or how can they be reinvented?