News

André Diz*

 

The first shopping mall, as we know it today, opened in the United States in 1956. Southdale Center, which was inaugurated in Minnesota, aimed at working as a shopping and service center for the population that was moving to the American suburbs, leaving behind the downtown regions and all its retail and service infrastructure. Since the distance between the suburbs and workplaces (downtown) was not negligible, the opportunity to solve the provision and shopping issue of those families came up with the development of the first Shopping Mall.

The "basic" mall model was replicated by several operators in other American cities and regions, with the rational idea of anchor stores with the power to create flow to the shopping mall, and the set of retail offers was complemented by satellite stores, which were responsible for the income generation (lease).

The first Brazilian shopping mall opened in São Paulo shortly after Southdale Mall, in 1966. Despite keeping the main market features as that of the American pioneer, the role it played was mostly linked to a real estate strategy and diversification of retail models than to serve as a source of provision and shopping in response to the city's expansion. Despite not being heavily populated at the time, the new shopping mall's location was far from being compared to the distance between the American cities and their respective suburbs.

Since Shopping Iguatemi first opened, the expansion of the Brazilian Shopping Mall industry did not occur evenly over time, and can be split into 3 distinct phases.

The first phase includes the period from 1966 to 1989, when 69 shopping malls were distributed across 40 cities, at an average rate of 3 shopping malls per year. With a significant concentration in the country's Southeast region, there were few malls that were located outside the capitals or their metropolitan areas. São Paulo's metropolitan area had 16 shopping malls, while the others were located inland. Within this period, Shopping Malls could still be seen as something new.

The second expansion phase took place from 1990 to 1998. Within a short period of time, 150 new Shopping Malls opened at an average growth rate at over 16 malls per year. Within this period, while the markets, such as that of São Paulo, had already started their regional expansion process beyond the capital and metropolitan region, markets that were important under the economic viewpoint, such as that of Minas Gerais, still kept opening new malls concentrated in the capital and metropolitan region. By late 1998, 95 municipalities already had at least 1 mall in the city, more than double of the regional coverage that had been seen 8 years earlier.

The third expansion phase covers the period between 1999 until late 2016. Within this 17-year period, despite a 4-year period of slowdown in openings between 2001 and 2004, 333 new shopping malls were designed, built and marketed, an average of almost 19 new malls per year. Although the average number of shopping malls opened per year is close to that of the immediately preceding period, their geographic expansion was more significant, and actually included municipalities with less than 100 thousand inhabitants. By the end of 2016, 194 Brazilian municipalities had at least 1 shopping mall. This number is expected to reach nearly 200 municipalities by the end of 2017. Now, shopping malls are no longer novelties in terms of a consumption experience, and are widely used and are a reference to retail malls.

The growing Brazilian domestic Shopping Mall industry is the reflection of the social and economic changes that occurred in Brazil within these past 50 years. Among the most significant ones we find the transition of a predominantly rural country into urban, the consolidation of large urban centers as points of geographical centrality, and the change in the composition of the Brazilians families.

However, society has shown very significant changes within very short periods, and Brazil is not immune to these changes.

In 2003, only 15.3% of Brazilian households had computers, a percentage that reached 48.5% in 2014. When it comes to Internet access within this 11-year period, while the number of households in the country recorded a 3.0% increase yearly, access to the Internet (exclusively via home computers) recorded an average increase of 17.3% per year.

If we consider the development of the Smartphone market, the market's quick growth is even more impressive. Launched in the United States by Apple in 2007, the Brazilian market had 15 million devices in 2008. Within a 10 year-period after being launched, the total number of Smartphones reached 168 million, an average growth rate of 40% per year.

The effect of these changes in the consumption and profile of people is huge. For instance, it is already estimated that shopping via electronic devices represents 3% of the total retail sales in Brazil.  In 2016 alone, the total retail sales via electronic devices reached R$ 44.4 billion, compared to R$ 18.7 billion in 2011 (a 121% growth within the period). This market presented about 106.2 million in purchase orders, out of which 21.5% were exclusively made via Smartphone.

So, what do we have?

 It took 50 years for the Brazilian Shopping Mall market to mature and undergo its three expansion phases, when it no longer was an element that was exclusive to some cities, and expanded its local and regional geographic scope in the cycles that followed. In turn, a market that did not exist 10 years ago, that of Smartphones, already has a penetration rate of 80% in the Brazilian population, and brought about nearly R$ 8.0 billion in sales 2016.

This evolution imposes new challenges to the Shopping Mall market, given that some cities with less than 100 thousand inhabitants already have their own local Shopping Mall. This environment of increased competition within the shopping mall industry has today, as an additional pressure, a scenario of quick technological and behavioral change that alters retail businesses in a definitive way.

The attention to maintaining the competitiveness and attractiveness of shopping malls is urgent. Mostly because the changes in consumption in the 21^st century have occurred at an accelerated pace, thus imposing the need for quicker adjustment and response on the sector's entrepreneurs' part.

 

*André Diz is the coordinator of the Economic Department. General Shopping Brasil is one of the few companies in the sector with their own economic, retail and consumer behavior study areas.