Experiential Retail Was Brick And Mortar's Big Bet On The Future. Coronavirus Has Put That On Hold.

For the past decade the mantra of retailers and shopping malls has been experiences will save us. Give shoppers something they can't get online-in-person, hands on, face-to-face, physical experiences-and they will beat a path to your store or mall.

Then came the coronavirus crisis.

The strategy of turning stores and malls into social gathering places doesn't work in the new age of social distancing, when shoppers are being told that the safest thing they can do is stay in their homes.

The resulting shocks from the crisis will trigger a retail reset, as retailers pivot from planning giant flagships with in-store experiences, to investing in better online experiences in order to be prepared for the next pandemic.

The risk in betting on experiences hit home Friday when the American Dream mall in the New Jersey Meadowlands, the first U.S. mall designed with more square feet devoted to experiences than retail, announced it was shutting down for at least the rest of March.

The mall had planned to hold an opening celebration March 19 for its Dreamworks-themed indoor water park, and was scheduled to unveil the first section of its retail store wing on the same day.

The project has been plagued by delays for the past 18 years, and now it faces the additional bad luck of having scheduled its most crucial openings at a time when much of the world is shutting down.

American Dream isn't the only retail complex that has had to shut down experiences designed to draw crowds of potential shoppers.

Hudson Yards, the Manhattan project that also bet big on experiences, opened its new sky-high glass observation deck, The Edge, on March 11, only to announce two days later that it was closed due to the health crisis.

Even before the coronavirus crisis intensified this month, consumers were saying they planned to avoid shopping malls and stores. A Coresight Research survey in late February found that 27% of the U.S. consumers were already avoiding public spaces, while 58% said they would avoid them if the outbreak worsened.

Shopping malls ranked third as places or activities most likely to be avoided due to the crisis, just behind public transportation and international travel. Close to half of those surveyed, 47.2%, said they already were staying out of malls and 74.6% said they would shun them if the outbreak spreads.

"The coronavirus has already caused a big shift in terms of where people go and what people do," said Paco Underhill, who has studied shopper behavior and psychology for decades as head of behavioral research consulting firm Envirosell, and as the author of Why We Buy: The Science of Shopping and other books.

The question now, Underhill said, "is what happens on the other side of it, when we're not longer being warned every 90 seconds that our lives are in danger and that we risk infection by getting within coughing distance of a stranger or a friend."

Apple, which pioneered experiential, high-touch stores, last week decided to close all of its stores outside of China. (It recently reopened its stores in China after closing them during that country's peak coronavirus crisis.)

Other retailers have also announced store closings, and more are expected.

Direct-to-consumer brands like Glossier, Buck Mason and Everlane, which were rushing to open stores to expand their reach, are now shutting those stores-at least temporarily.

Retailers that draw shoppers with high-touch store experiences are making changes as well. Ulta Beauty announced on Thursday that is was suspending in-store makeup and grooming services and that it had adopted a "no-touch" rule for its sales people when they are assisting customers.

Malls and retailers in the past have recovered-in some cases surprisingly quickly-after events such as the 9/11 attacks that brought shopping to a halt.

Many retail experts believe that Americans, and people in general, are inherently social, and once social distancing restrictions and recommendations are lifted, pent-up demand will bring crowds back to malls.

"It is true that the very thing we consider to be the future of retail-rewarding social interactions and experiences shared with family and friends-has temporarily become something to be avoided," James Cook, director of Americas retail research at real estate services and investment firm JLL, said.

However, "when the dangers of this virus have passed, I expect a surge in visits to shopping malls, movie theaters and other retail and entertainment venues," Cook said.

Joe Pine, co-author of The Experience Economy, also believes that the experiences now being shut down will draw crowds again in the future.

"We are social beings and we crave social environments," Pine said. "While the experience economy might be a new thing, the desire for experiences is from time immemorial."

The biggest impact, Pine said, could be retailers realizing they have to be able to provide interactions and experiences online, in order to be prepared for future health crises.

"Some retailers haven't put a lot of effort into their online presence and now they have to," he said. "Eventually they will have to make it more of an experience."

That could include in-store demonstrations live-streamed to online shoppers, Pine said.

"There's a lot of innovation we need to get to and this can very well be the instigator of much of that innovation," he said.

Paco Underhill, however, raises the larger issue of how the current crisis highlights the mistakes American malls are making in adding experiences.

Unlike malls in other parts of the world that have become "alls"-places to live, work and play, with schools, libraries, daycare centers, doctor's offices, and multiple reasons for daily visits-U.S. malls have been sticking with an outdated business model.

"It's a myopic view of the American shopping mall industry that somehow if they opened a few restaurants and put in an amusement park that their solution is going to work," Underhill said.

American Dream, he said, may face a larger problem than the current crisis. "It is really hard for me to see a shopping mall in the Meadowlands competing with New York City as an experience," Underhill said.

L'Occitane, one retailer that uses a high-touch sales strategy in its stores, offering hand massages and mini-spa treatments in its stores, is now promoting a different kind of experience. It is inviting shoppers who feel in need of sanitation to stop in and use the store sinks, any time they want, with complimentary soaps.

Welcome to the new world of retail, where hand-washing replaces hands-on, and the new industry trend is online, or "keep your distance" experiences.

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