ues that once relied on fashion for the lion’s share of the tenant mix with a conundrum. Who will replace the fashion retailers? Time to stop thinking about the fashion mall and start thinking about the health and beauty mall. In many instances, it’s a case of fine-tuning an existing shopping centre as leases expire – gradually rebalancing the tenant mix over time. For new retail projects though, developers starting with a blank slate can think about creating a materially different concept – one that focuses on health and beauty and de-emphasises fashion that isn’t relevant to an active lifestyle. Bursting the bubble Hints of a change can already be seen in the US, where the pressure on fashion chains is most acute because of the rapid growth of ecommerce. Several major apparel retail chains, including The Limited and American Apparel, have already gone bust in recent months and most of the other iconic chains that formed the nucleus of the American shopping centre tenant mix are aggressively closing stores. This includes Urban Outfitters. CEO Richard Hayne lamented in a recent conference call that the rapid pace of fashion store openings in the 1990s and 2000s was like the housing bubble that led to the global financial crisis. The fashion real estate bubble, according to Hayne, had now burst, and in its wake will be an awful lot of store closings. Hayne is right, but the silver lining for shopping centre operators is that while fashion retailers ‘right-size’ their portfolios, health and beauty retailers are expanding rapidly. Two chains in particular have been stepping into the gaps left by the fashion players – Ulta and Sephora. These target different demographic segments. Ulta, with approximately 950 stores averaging a little around 930 sqm each, is the mid-market favourite. Bloomberg, citing data from Euromonitor, gave Ulta number one ranking among specialty beauty retailers with 27 per cent market share in 2015, squeezing Sephora into second place. And according to a survey by Piper Jaffray, Ulta was the favourite beauty destination for 29 per cent of ‘average-income’ American female teenagers. Ulta’s popularity stems partly from its format and partly because of its accessible price points. Although it sells ‘prestige’ brands, it also offers a range of popular mass-market brands – the kinds you find in pharmacies and supermarkets. On top of that, Ulta sells a formidable range of haircare products and each store houses its own hair salon. Sephora, which is now a well-established international player, attracts a more affluent customer and doesn’t make any pretense of covering the waterfront of brands and price points. But it is still incredibly popular and its democratic ‘open plan’ selling floor has thrown down the gauntlet to department stores, whose traditional beauty counters vie with each other to hold a customer captive. Where do retailers like this fit into the concept of a health and beauty mall? Two to tango? The possibilities are intriguing, because beauty products and services have a rich menu of complementary tenants. Fitness centres, both large all-purpose gyms and specialised ones like indoor cycling studios, are an obvious place to start. Throw in a supermarket, healthy eateries, health food and vitamin shops and maybe a farmers market. Add in performance apparel stores such as Lululemon, Nike, Athleta and Lorna Jane. A sporting goods store also makes a good fit. So do digital technology retailers. Round out the mix with services such as eyecare, medical and banking. Suburban Square, a lifestyle centre in suburban Philadelphia, was one of the high-profile traditional retail projects to remake itself in this way. Once anchored by a Macy’s department store and lined with mainstream apparel and home furnishings boutiques, Suburban Square was tired and staring into the face of obsolescence. It winnowed out its tenant mix, booting out underperforming fashion and home goods stores to make way for tenants like Sephora, Lululemon, SoulCycle, Apple, a vegan restaurant, Trader Joe’s gourmet supermarket and a farmers market. A similar transformation is evident in other shopping venues around the US, particularly in smaller neighbourhood and community shopping centres that can operate in affluent pockets of suburbia. Collaborating, not dictating Fashion then, which has always led beauty in the hierarchy of shopping centre tenants, may well be headed for a different role in the future, particularly as shopping centres get beyond their obsession with being all things to all people. In this new role, more specialised concepts that complement health, well-being, beauty and services are equal partners in the tenant mix, rather than an overwhelmingly dominant presence. This is not to say that fashion shopping centres will die off as a concept. The best ones – often the largest – will continue to thrive and they will incorporate the Ulta’s and Sephora’s of this world, just as they do now. But there will be fewer of them, and as fashion retailers right-size and focus their capital investment on their most profitable locations and e-commerce, there needs to be a conceptual shift in the thinking of retail landlords. The health and beauty mall is one option well worth a look. Michael Baker is a Sydney-based retail consultant and former head of research at the International Council of Shopping Centers. michael@mbaker-retail.com