I had a \”history brought forward\” moment last week. It was a discussion with Rick Caruso, CEO of Caruso, one of the largest and most admired private real estate developers in the U.S. In fact, \”most admired\” would be an understatement from my point of view. In addition to being an innovator, civic leader on several fronts in LA and a generous philanthropist, he\’s also a giant visionary in the retail world who began successfully implementing his vision in the early 90s.
Theory to Practice
Caruso has an uncanny ability to see what\’s coming before it arrives. Yes, he\’s a visionary who has actually delivered his vision. And he should rightfully expand his visionary models beyond Southern California across the country. Localized, mixed-use lifestyle communities are the future, and Caruso is its pioneer. Think: an open-air neighborhood with gardens, fountains, restaurants, movie theatres, streets of shops and boutiques of all types, residential and commercial real estate, and topped off with glamorous, empathetic service. As he says, \”It\’s the character that creates the space.\”
[callout]Rick Caruso: “Market share is interesting and important, but what\’s more important is \’heart share,\’ the emotional connection.\”[/callout]
So, the history moment for me was being reminded of Caruso\’s prescient keynote presentation on the big stage at NRF\’s Big Show, in 2014. I replayed the 28-minute futuristic vision and without drilling down too far and risk underplaying his most important points, Caruso predicted at the time that we were in a moment of rebirth for brick-and-mortar retail, propelled by technology. Referring to the thousand-year-old Souks (the markets, trading and gathering places) in Marrakech and the historic street and boulevard cultures in Europe, he made the point that they\’ve endured this long because…well…people love to go there for all the obvious reasons and not just to shop for stuff.
He encouraged reimagining a \”place,\” a bigger and richer concept than a store; a place to create a sense of belonging and hospitality, inviting and interactive. Atmospheric shopping. And during this retail rebirth he stressed that the focus must be on what has always been and will always be what people want: social engagement and an inviting, immersive experience. He adds to go deeper and think like a merchant, not a transactional retailer. How many times and in how many ways do we have to continue to hear that, before we actually do it?
Caruso knew it from the get-go and he did it. He understands the larger social issues of the need for people to feel connected in meaningful ways, to counterbalance the loneliness of living in a digital, screen-dominated reality – especially during a pandemic. He adds his centers are not designed for people to shop, but rather to enjoy, adding that when they feel good …they do shop.
Predictions Come True
He also made a darker prediction that suburban malls developed in the 50s and 60s, \”in 10 to 15 years, unless completely reinvented, will be a historical anachronism, a 60-year-old aberration that no longer meets the public\’s needs, the retailers\’ needs or the communities\’ needs.\” I believe the pandemic accelerated that prediction. He then showed pictures of those bleak malls, asking, \”does this look like the future to you? It\’s outlived its usefulness.\”
Keep in mind, this presentation was seven years ago in 2014. Of the thousands of retailers and other industry players attending that keynote, I know many of the big 50s and 60s developers (who will go unnamed) were in the audience. And they\’re a pretty smart bunch, so I doubt they would argue about consumers wanting an experience. But what in the heck would they have to do? Either tear them down and start over, or completely transform the insides of those monoliths — and transform to what?
Perhaps Caruso should launch a consulting practice to advise the old mall guys on how to create a vital, thriving community. Those old malls were built around the time of the construction of about 54,000-plus miles of interstate highways. The intersection locations between cities and regions were ideal to capture the increase in numbers of travelers. And if the malls were a 20-minute drive away, there were enough retailers and food courts to browse through to make the trip worthwhile.
No longer. The internet, mobile devices and desire for social and community gatherings and experiences — on top of desire for the convenience of a local neighborhood gathering spot with compelling experiences — have redefined consumer expectations. A Salesforce study reports that 83 percent of consumers favor experiences over products and services, and 59 percent say they would pay more for such. Unfortunately for the old, poorly located malls of yore, transformation to a new model is a do or die reality.
Caruso was once quoted as, \”There is a desire to remain local. The arc of retail was really coming full circle to people wanting something of their own.\” He also said, \”Market share is interesting and important, but what\’s more important is \’heart share,\’ the emotional connection.\” Purpose-driven, his sense of social justice is loud and clear in his current founder\’s message to Angelinos, citing, \”And as we begin anew, I hope that our properties can be a place of connectivity, of meaningful change and a place of joy and understanding – a place for every member of the community to gather… I believe in the fundamental goodness of humanity. I believe in the good people of our great city.\”
Caruso revered Walt Disney and likened the community experiences he was creating to that of a great movie that would make you feel something on an emotional level. In fact, during the 90s he hired The Three Amigos production designer, Richard Sawyer to guide him in creating the right environments in his projects. Sawyer said, \”he is probably the closest developer that might equate to a director-producer.\”
Today Caruso runs 10 neighborhood experience centers (the word mall or shopping center is not in my vocabulary when referring to Caruso). Two iconic centers are The Grove in central LA (opened in 2002, an impressive 19 years ago) and The Americana at Brand in Glendale (opened in 2008) and are among the top 15 shopping centers in the world. According to Yahoo Finance, The Grove clocks some 20 million visitors a year (context: more than the Great Wall of China or Disneyland) and yields over $1600 per-square-foot. The Americana tops $1100.
The Wall Street Journal called Caruso a retail mastermind. And Vanity Fair magazine dubbed his properties as the main street of dreams. Guests visit his properties three times more often than traditional malls. They stay twice as long and spend twice as much.
The Numbers? Does It Even Matter?
Caruso is a privately held company, and he\’s a self-made billionaire. Various articles note his net worth at $5 or $6 billion. As I got to know the humble nature of Caruso, reviewing his many videos and articles about his philanthropic endeavors as well as his civic accomplishments, it occurred to me that the \”numbers\” are an afterthought to him.
He grew up around the Farmers Market in LA, (which is where he created The Grove). About money as an afterthought, he was quoted, \”If you provide something that is unique and relevant, in a setting that people find captivating, you will do well. Retail has gotten sideways because it became the commodity. It is not about being high tech; it is about understanding what your customer wants.\”
Maybe that\’s why he revered Walt Disney. He called him \”one of the true geniuses of the world.\” Is there anybody else in the world who could imagine and then create the magic that Walt Disney blessed us with? Maybe Disney was the inspiration that led Caruso to imagine, and then create neighborhood communities, where people can find an experience unlike any other in the archaic world of retailing.
Caruso\’s creations are a model for the future of retail; his stage should be the world.