Our Malls, Ourselves
Malls changed how Americans shop--and how the FORTUNE 500 sells.
By Paul Lukas

(FORTUNE Magazine) – IT'S NOT CLEAR WHO FIRST EMBLAZONED T-shirts with slogans like "Born to Shop" and "I Shop, Therefore I Am." But we do know the starting point for the modern shopping culture that gave rise to those clichés. It began in the Minneapolis suburb of Edina, where a shopping center called Southdale opened in October 1956, a year after the FORTUNE 500 made its debut.

Shopping centers weren't new, but Southdale featured several revolutionary concepts and amenities. For starters, it was fully enclosed. Underneath a center skylight was a garden courtyard, which at the time was one of the largest indoor public spaces in America, complete with a goldfish pond, an aviary, hanging plants, and artificial trees. Southdale was also "introverted," meaning its exterior walls were largely blank and the merchants' display windows were all indoors. The facility's 72 shops were anchored by two competing department stores, a particularly radical idea at the time. And to concentrate the shopping experience, Southdale was built up instead of out: Stores were on two levels, with two-tiered parking for easy access.

Today, of course, we have a simpler term for an enclosed, climate-controlled shopping center with that type of layout: a mall. Southdale was the first one in the nation, and it forever changed American shopping and retailing. If features like multilevel parking and shops spread out between two department stores sound unremarkable today, that's a testament to how iconic Southdale's blueprint has become in less than 50 years. The mall is as integrated in American life as the pharmacy, the post office, and the movie theater--all of which are now commonly found at the mall itself.

The FORTUNE 500 rankings didn't include merchandisers until 1995, but the mall's impact can be seen in other statistics. America now has more shopping centers than high schools, for example--47,000 of them. The facilities attract more than 200 million shoppers each month, employ more than 17 million workers (about 12% of the nonfarm labor force), and generate nearly $2 trillion in annual sales (about three-quarters of the nation's retail activity, not counting cars and gasoline), plus another $84 billion in sales-tax revenue.

Malls have also affected us in ways that are harder to measure but are easy to see. By providing an alternative to downtown shopping, malls both contributed to and were fed by the growth of suburbia, leading to changes in how we eat, how we socialize, how we work, and, of course, how we shop. Those changes led to further shifts, including the rise of chain retailers at the expense of independent Main Street merchants. That development has culminated in the supremacy of big-box stores like Kmart, Target, and especially Wal-Mart, currently No. 1 in the FORTUNE 500 rankings.

But the mall's status is now in flux, as newer shopping formats are developing. Love them or hate them, however, malls gave rise to American retailing as we know it. The great irony, as we shall see, is that they were invented by an Austrian socialist.

AS IT TURNS OUT, AMERICANS REALLY WERE born to shop--or at least shopping and America were born around the same time. The verb "to shop" first appeared in the late 18th century, about the time of the American Revolution. (In what may be an even more telling coincidence, 1776 was the year Adam Smith published The Wealth of Nations.) It took more than a century for shopping to evolve from trading posts and general stores to the urban department stores that ruled the retail roost around 1900. But as more people purchased automobiles, downtown streets designed for horses and carriages couldn't handle the traffic and parking demands. So strip malls and outdoor shopping centers began appearing around 1920, especially in outlying suburbs.

The modern mall probably would have emerged from this incubatory period much sooner, but the Great Depression and then World War II put a damper on retail activity and building. At the war's conclusion, with America's pent-up shopping impulses yearning to be unleashed after two decades of scrimping, and millions of returning GIs creating a housing crunch that spurred the development of suburban tract homes, the time was ripe for a new kind of retail architecture. The man who took advantage of that opening was named Victor Gruen.

Gruen was a Viennese architect who fled the Nazis in 1938. He arrived in New York City with $8 in his pocket, soon talked his way into redesigning the window displays for fancy boutiques on Fifth Avenue, and then turned his increasing fascination with retailing into a career as America's foremost shopping-center designer. Like most Viennese Jews at that time, he was a socialist, and like so many socialists, he was a dreamer. In Gruen's case, that led to an almost charmingly idealistic view of how business could transform society. "It's the merchants who will save our urban civilization," he once declared. On another occasion he explained that shopping centers should be filled with public artwork because "as art patrons, merchants can be to our time what the church and nobility were to the Middle Ages."

However far-fetched those pronouncements must have sounded, they didn't impede Gruen's career. By the early 1950s he had designed Northland, a 163-acre outdoor shopping center in the Detroit suburbs with almost 10,000 parking spaces. But Southdale, with its enclosed architecture, was the first full realization of his vision.

Southdale was a hit. It opened to nearly unanimous praise from the media (including FORTUNE, which described it as "strikingly handsome and colorful"). Within a few months it had surpassed its developers' forecast of 20,000 customers a day. As its success led to more malls sprouting up across America, a new form of retailing emerged, one based primarily on planning and control. By creating a completely enclosed environment with no exterior windows, mall developers were able to use an array of cues to keep shoppers moving: clear handrails to provide unimpeded sight lines, artificial trees to create a sense of verticality that encouraged customers to take the escalator to the next floor, lighting to simulate an eternal sense of midafternoon so that people didn't get a sense of how long they'd been shopping. In the words of Donald Dayton, one of Southdale's department store presidents, "We plan to make our own weather at Southdale. Every day will be fair and mild."

That fairy-tale dreamscaping echoed the methods of another mid-1950s developer: Walt Disney. It's no small coincidence that Disneyland opened in 1955, just a year ahead of Southdale, or that one of Disneyland's top attractions was a faux street scene called Main Street USA, which mimicked a downtown business district just as Southdale did. "I don't want the public to see the real world they live in while they're in Disneyland," Walt once said. "I want them to feel they are in another world." Victor Gruen and his developer clients couldn't have put it better.

Many of today's malls include actual theme parks and other entertainment features that simulate a vacation-like setting (in part because people spend more when they're on vacation). But in retrospect it's clear that malls were essentially theme parks almost from the beginning, thanks in large part to the rise of chain stores, each of which provided a mini-theme in the form of an idealized brand experience. Only 5% of Southdale's original shops were chain operations, but the mall's programmatic template soon made it easy to increase that ratio--when the Randhurst Shopping Center opened outside Chicago just six years later, it was 100% chains. Today mall-based business has vaulted many chains, such as Gap, Foot Locker, and Radio Shack, into the FORTUNE 500 rankings. Malls have also allowed department stores, which used to be tied to a particular city or region, to become national chains, which is how Nordstrom, Saks, and Federated Department Stores (parent company of Bloomingdale's and Macy's) have become mainstays of the 500 too.

WHILE THE MALL HELPED BUILD UP THE SUBurbs, it caused problems for American cities. In 1954--the year construction on Southdale started--suburban shopping centers surpassed urban downtowns in total retail sales. The proliferation of post-Southdale malls accelerated the trend, and soon dozens of cities were questioning the viability of their business districts. Many of them opted to shut off traffic from their downtowns and convert them into pedestrian malls. It was a rich irony: The mall had brought a simulated downtown to the suburbs, and now cities were trying to create a mall downtown. In a further twist, many of those cities hired the same designer who was arguably most to blame for their troubles: Victor Gruen, who obligingly reinvented himself as a city planner and began revamping urban downtowns all over America. "Maybe our guilt complex got us into it," one of his partners told FORTUNE in 1962, acknowledging the damage the mall had done to urban America.

But most of the projects did little to stem the tide. By 1976 major department stores were tallying 78% of their sales in their suburban branches, and cities began looking at other ways of capturing some suburban mall-like foot traffic. Today the default option is tourism, as cities have repurposed their former downtown and industrial areas as entertainment districts, usually featuring chain venues like the Hard Rock Café, Planet Hollywood, and Niketown. The net effect is that the city has become a kind of theme park--call it Urban Town USA.

Back in the suburbs, the mall came to symbolize the problem of sprawl. In the spring of 1966--less than a decade after Southdale's opening--FORTUNE singled out shopping malls as "graceless buildings [that] are little more than merchandise barns," part of a larger "squalor-of-affluence spreading across the U.S. like a Technicolored fungus mold," created by "pathologically profit-minded enterprises striving to outdo each other in the creation of eyesores."

Okay, so FORTUNE got a bit carried away. But buried beneath the hyperbole was a subtle point: The solution to sprawl, said FORTUNE, lay "not in raising the quantity of goods consumed but in lifting the quality of American life." In other words, a healthy national culture should entail more than being born to shop. But by then it was too late. Government programs had been promoting spending and consumption for years, first as a bulwark against another depression and then as part of a Cold War mindset that equated consumerism with patriotism and democracy. As author and historian James J. Farrell put it in his book One Nation Under Goods, "In the process, the American standard of living came to substitute for the American way of life, with its social, political, and religious activities." That transformation reached its apotheosis on 9/11, when Mayor Rudolph Giuliani advised shell-shocked New Yorkers to "take a day off.... Go shopping."

Malls weren't supposed to have that effect. Victor Gruen, true to his socialist ideals, usually included land in his mall designs to be set aside for community and civic functions. But those provisions rarely made it into the final projects, primarily because building a mall usually raised surrounding land values, so developers--who tended not to share Gruen's high-minded politics--found it more profitable to sell off the civic- targeted land to speculators, who inevitably put commercial enterprises on it. This is how the mall begat sprawl, which in turn begat more malls, and so on.

By the 1970s a bitterly disillusioned Gruen had abandoned his naive dreams of a merchant-driven utopia and returned to Vienna, where he decried what had become of his life's work. He called contemporary shopping malls "land-wasting seas of parking," and declared, "I refuse to pay alimony for those bastard developments." He died in 1980, convinced that his ideals had been corrupted by profiteering developers.

Meanwhile, millions of Americans, none of whom had ever heard of Victor Gruen, kept shopping.

CONTEMPORARY CRITICS OF THE COUNTRY'S "mallification" often pine for the good old days of the small-town Main Street, gleaming with Americana. Leaving aside the question of whether Main Street was really so idyllic (a black shopper in 1950s Alabama probably wouldn't think so), it's worth noting that two generations have now grown up with the mall serving as their Americana. Those shoppers have no more nostalgic interest in Main Street than a 1904 Macy's customer had in returning to the trading-post era.

Modern shoppers would also have a hard time imagining a world without the mall's many offshoots, the most important of which is the mass-merchandising discount store. The key moment in that format's development came in 1962, when three new stores all opened their doors. All three would eventually cause a sea change in American retail, but at the time nobody paid much attention to the first branches of Kmart, Target, and Wal-Mart. (For more on Target, see separate feature story.)

Chain discounting wasn't a new concept--Frank Woolworth had opened more than 1,300 stores between 1879 and 1919 alone. But the new suburban discounters took their cues not from Woolworth's five-and-dime model but from malls, incorporating large floor plans (hence the term "big box"), ample parking, and enough volume to allow for loss leaders. Although Kmart set the early pace, opening 162 stores by 1966, it was Wal-Mart that eventually took control of the discount market. The company had its first $1 billion year in 1979; by 1993 it had its first $1 billion week. Since 1995, when merchandisers were incorporated into the FORTUNE 500, Wal-Mart has never ranked lower than No. 4, and it has now held the top spot for three years running. Target currently sits at No. 23 and Kmart at 67, although the latter's 2002 bankruptcy has placed its future in question.

Wal-Mart's success has inspired other mall-derived variations on the big-box format, including warehouse clubs like Costco and so-called category killers like Home Depot, Lowe's, Staples, and Toys "R" Us (although Toys "R" Us's recent announcement that it may abandon the toy market because of intense competition from Wal-Mart is a potent reminder that Wal-Mart can render categories moot). All those companies are ranked in the upper half of the 500. And all, in their way, are the progeny of Southdale.

But not all malls are thriving. A 2001 study by PricewaterhouseCoopers found that 19% of shopping malls were either dead or dying, a figure that won't surprise anyone who's seen the abandoned, weed-thicketed mall lots sprouting around America. Dead malls have become such a phenomenon that they're now the subject of websites, blogs, and urban reuse design competitions (finalists in one such program included proposals for a housing development, a women's prison, and a combination wetlands/wind farm).

"Eighty-five percent of the malls in America are more than 20 years old," says Paco Underhill, author of Call of the Mall and Why We Buy. "Many of them will meet their ultimate fate with Mr. Dynamite. And we've reached a critical mass in terms of population density and development density: Nobody is building malls in North America to serve a new audience; they're building malls to co-opt or steal somebody else's audience."

Underhill thinks the mall will survive, but in a more complex form. "Many of the developers now want to be in the 'all' business, not the mall business," he says. "That means doing the hotel, the office block, and often the residential housing as part of an integrated community. It's a development process that's a better integration of public and private interests." Sounds a lot like what Victor Gruen had in mind all along.

The other big challenge, of course, is the Internet. Several online retailers have made significant inroads, ranging from Amazon (which entered the 500 listings in 2001 at No. 492; it was No. 342 on the most recent list) to Apple's popular iTunes Music Store. The most successful model may be eBay, which is essentially the world's biggest mall. (eBay is not on the 500--yet. For more on the company, see separate feature story.)

And more-exotic shopping technologies may be coming. One idea currently in development involves a special button on car radios that would allow drivers to send a "Buy now" signal for any product being advertised at a given moment. The signal would be sent to a satellite, which would in turn access the driver's preregistered payment and shipping information to complete the order.

Virtual-shopping technology will no doubt continue to evolve. But it's unlikely that cyberspace will ever completely supersede the mall, as some trend forecasters originally predicted, if only because most of us still like to see and touch much of what we buy. Besides, most people think going to the mall is fun, all the more so as malls have loaded up on entertainment features--you can't rappel down a climbing wall on the Internet.

As for Southdale, it's still there in Edina. Its plain, windowless exterior design looks more generic than ever now that it's been copied so many times--as the cultural critic Malcolm Gladwell has written, "It does not seem like a historic building, which is precisely why it is one." But Southdale is no longer suburban Minneapolis's most famous shopping mall. That honor goes to the Mall of America, which opened in 1992 and is located just a few miles from Southdale. At 4.2 million square feet, it's the country's largest retail and entertainment complex, featuring 520 shops, 50 restaurants, eight nightclubs, an aquarium, and America's biggest indoor theme park. It employs more than 11,000 people and attracts 42.5 million customers annually.

But the most sublime thing about the Mall of America is its brilliantly reductionist name. An instant classic, it's a fitting epithet for a country that shops as if it were, well, born to it.

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