NORWALK, Conn. – The hottest trend in online marketing these days is to open up an old-fashioned bricks and mortar store, according to the Financial Post.
That sentiment was one cited by Doug Adams of GGP (General Growth Properties) last week as he tried to assure members of the West Norwalk Association that the age of the mall is not dead.
“We see strength. In the retail industry, retail is challenged overall, we see good retail in good places doing better,” Adams said. “For people, it’s a social activity. Online retailing is about six percent of our overall sales. I can tell you that online retailers are opening – Amazon is opening a story in New York. It’s been around long enough, you’ll read more and more about it. I’ll give you an example. There are locations where, I think it was Macy’s, had a strong online business. They chose to try to close a store. Within five years, the sales in online for that area tanked. I don’t mean they went down. I mean they tanked. They then moved to reopen the stores.
“So there are examples where what we call Omni-channel, where you’re going to see retailers taking a physical location and using everything online, the sam- day delivery, which we have in many of our centers now,” Adams continued. “… We have actually seen pretty strong growth in our portfolio.”
A little bit of research online quickly turned up information.
“Simply put, it’s the notion that consumers use more than one channel (web, catalog, mobile, store) to make a purchase,” Brian Kilcourse wrote on Retail Systems Research. “The idea reflects the fact that consumers don’t see channels, they seek solutions: either a retailer satisfies a need or it doesn’t. Increasingly, consumers use the digital channels to make a purchase decision even if that purchase is ultimately completed in a store. Therefore, the notion of channels goes away.”
“Two-thirds of online consumers interact with the brick-and-mortar store at some point along their path to purchase… we cannot only measure a store’s importance by how many actual transactions are made within it,” according to an article on Thriving Malls, a GGP blog.
Macy’s has posted $1 billion in revenue growth through online sales, according to Quartz, described by Atlantic Media as a digital guide to the new global economy that launched in 2012. Most of Macy’s core brands aren’t found on Amazon or anywhere else, and shoppers go to the store to try on clothing and then order online, the article states.
About 15 years ago, Internet retailers raised seed capital for their businesses as predictions that malls were dead circulated but went bust, according to the Financial Post.
But while Amazon is opening a store in New York City, according to the Wall Street Journal, Wired suspects it will be there as more of a mini-warehouse to service same day deliveries of groceries than as a place to shop. Wired also speculates that having a big sign on one of the country’s most traveled roads, 34th Street, will be great advertising for Amazon and the company will be able to showcase its own products.
Adams provided NoN information to support his statements in two documents written by A.T. Kearney, a global management consulting firm. They are attached below.
“The first piece, titled ‘9 Things You Should Know About Malls and Mall REITs,’ has some information that is focused directly on GGP’s segment of the industry,” Adams wrote. “Here are a few headlines from pages 12-21.
“1. Mall supply is growing slowly and demand remains strong resulting in a balanced industry and steady rise in occupancy rates
“2. Retailers are willing to pay higher rents for new and renewed leases. This demand is being driven by retailers’ continued focus on brick-and-mortar
“3. Malls are making e-Commerce part of their strategy. Retailers with a multi-channel strategy (stores and online) are in best position to succeed, and owners like GGP are providing a platform to deliver on both strategies
“4. Mall performance is tied to discretionary spending and not any specific retailers, and overall retail spending is healthy
“The second piece, “On Solid Ground,” speaks more directly to the importance of brick-and-mortar stores in the retail landscape,” Adams wrote.
“1. Only 5 percent of U.S. retail sales are pure-play online sales. Five percent are multi-channel online sales (i.e., a visit to the store resulting in online purchase from store’s website); 90 percent are physical store sales.
“2. Overall, consumers prefer in-store pickup to home delivery. GGP at the cutting edge with its Same-Day Delivery service created in partnership with Deliv.
“3. Retail is following a ‘click-to-brick’ path. Many retailers incubate online and then open stores: Warby Parker, Bonobos, Athleta, and Boston Proper are prime examples.
“4. Shoppers will continue to prefer a robust variety of shopping options, anchored by a physical store.”
Adams comments at last week’s meeting stemmed from a question about the potential of GGP building part of a mall in South Norwalk and then letting it decline into a vacant dilapidated half-built eyesore.
“We are investing our money to build it all at once. We’re not going to be testing the waters. It doesn’t work. We can’t build a little piece of it and see what happens so we’re going to build it all. That will require commitments,” Adams said.
GGP has relationships with every major retailer, he said.
“Our portfolio, which we consider Class A malls – now that doesn’t mean all upscale it just means well-performing malls – are up year after year over the last three years,” he said. “We are very low-leveraged relative to our industry … We have the staying power.”