The changing face of retail has forced mall owners to get creative. That's meant filling space with businesses that never used to be in a mall. That includes cosmetic service providers, as well as coworking spaces, hotels, and activity-based companies that offer experiences. In addition, some digital-native brands, like Warby Parker and Casper Mattress, have been selectively taking space in malls.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

10 stocks we like better than Walmart
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, the Motley Fool Stock Advisor, has quadrupled the market.* 

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Walmart wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of June 1, 2019
The author(s) may have a position in any stocks mentioned.


This video was recorded on June 18, 2019.

Shannon Jones: We've talked about some of the losers when it comes to the retail apocalypse. Let's talk about the winners because it's not all doom and gloom, and, as you mentioned, it's a bit overdone. What are the types of companies right now that are actually doing well in this mall environment?

Dan Kline: There are types of businesses coming to malls that we never used to have. You remember when you used to go to the mall, you'd get an Orange Julius, a pretzel, maybe a Cinnabon or something? Now, you can go to the mall and get a chemical peel and some Botox. I know my mall has at least two places that sell cosmetic procedures. I'm not fully even aware of what all of those are, but it's clearly something different that brings traffic in.

The other areas where malls are -- and these are the better malls -- they're becoming locations for digital native brands. Right now, I'm taping this in a co-working space in an outdoor mall. Right next to me is a Casper mattress. Casper is a digital native brand that's opening up select stores. The point of those stores isn't necessarily to generate sales, it's to make customers comfortable with the product. Maybe I'm coming to have dinner at the Cheesecake Factory in this plaza, and I was thinking about a Casper mattress, so I go in and lie on one. And then, a few weeks later, I buy one. Brands like Warby Parker. I know there's a Warby Parker down the street from HQ. Instead of having to have them mail you glasses, you can go in and try on a bunch of glasses, see how you look, make your pick, and have a connection to the brand that's better than the digital. Now, those chains aren't opening up thousands of stores. They're not going to fill in all the empty RadioShacks. They're going to open 100 to 300 depending on the chain. So, for malls, it's a big competition, and you're going to see the better malls get those stores.

As you move down the line, mall owners have to be creative. You're starting to see more gyms enter malls. Literally below me -- again, I'm in an outdoor mall, not an enclosed mall -- right next to the Casper is an LA Fitness. That's a store you're seeing in more traditional [malls]. The idea behind that is that a gym might bring someone in, they're going to work out, they're going to take a shower, maybe they're going to go to the mall food court to have lunch. Maybe they realize, "Oh, I need a pair of slippers. I'm going to go to this store to buy slippers." I'm not sure why I thought slippers.

Then, you're getting experiential stores. An obvious one would be Dave & Buster's, which is opening a handful of stores, and malls are coming after them pretty hard. But you might also get an old Sears that becomes a trampoline park, or even an indoor skatepark, or one of those skydiving places where you're not actually skydiving, it's just a big fan blowing you up. Malls are being really creative. Obviously, co-working spaces are going into malls. You're seeing hotels go more into malls. And that makes sense, because malls have restaurants, they have co-working spaces, they have all this stuff that business travelers might need all in one place. The mall owners have gotten very creative, and the stronger malls are actually doing very well.

Jones: You mentioned it's really about the creativity of a lot of these mall owners to bring in more foot traffic. They're redeveloping a lot of the spaces, especially the vacated spaces, into these mixed use opportunities. You've got multifamily, you've got apartments, hotels, and really, as you mentioned, too, the experience, as well. As a parent, oftentimes, I'm going to the mall now to go to the American Girl store, which is a store that I'm shocked every time I walk in it. But it truly is an experience. It's not just about buying these really expensive dolls that probably no child under the age of 15 should have, but that's neither here nor there. It's about the cafe, where you can come and sit with your doll. You can have birthday parties there, you can get the doll's hair done. They can eve their ears pierced, Dan. So, what drives me to the mall is making sure that our daughter has something to do, or at least be active somewhat, but it's really about creating these experiences.

Kline: Well, as a 45 year old man, I am not allowed to go to the American Girl store without a girl. [laughs] If I just walked in with a doll, that would not be great. But, yeah. And what you're also seeing is malls being very clever with nonprofits or performance space. The mall near me is undergoing some major transformation. It has a bunch of openings, a bunch of things under construction. They've taken some of the empty space and they've let community groups have it. One part of the mall, just like a Starbucks-sized space, is now a reading room. It has a library of books. So if I bring my 15 year old and his friend to the mall, I could go grab my laptop and go work or read a book in the reading room. Is that going to be there in two years? Absolutely not. But they're trying to fill in holes in the short term rather than just putting up signs saying, "COMING SOON." In many cases, they know what's coming, but it's going to take six months, a year, who knows how long, to make those transitions. In other cases, they're still working on the deals. The mall about 45 minutes from here in Boca is knocking down an entire wing and putting up more residential, so the stores that are in that wing are a little bit desolate. So, they've tried to have some events, live performances, people singing, who knows what, just to get you to look at that quarter of the mall. So, the mall companies have been very active in managing this transformation.