We recently had the pleasure of hosting Nick Egelanian, president of SiteWorks as a guest speaker whose topic was relatable to all of us in commercial real estate: its future. The information wasn’t necessarily new but the context in which he placed it, and the statistics he referenced certainly gave us an enlightened perspective. Three points he made are particularly worth sharing.
#1: Online shopping is NOT what is killing the mall.
Metro has been documenting the decline and subsequent reimagining of malls and department stores. Often it has been the Internet that is credited with the mall’s decline. But in fact, online sales accounted for just 9.1% of US retail sales in the third quarter of last year. An earlier influence on the state of the mall was the development of the power center. As big box stores clustered themselves in suburban areas with lots of parking, shoppers found them to be easier to shop than the mall. Category killers such as PetSmart, Staples, Lowe’s, and Best Buy enabled the power center to surpass the mall as a more targeted, convenient and efficient use of consumers time vs. wandering the mall corridors or 200,000 SF department stores. E-commerce will continue to grow and chip away at brick and mortar, but it is only the most recent challenge to traditional retail. There have been many other factors and the retail scene will continue to evolve.
#2: There are two distinct types of retail.
So-called commodity retail is responsible for 85% of retail sales. But as the name suggests, these are commodity goods and sales are driven by price and/or convenience. With e-commerce giant Amazon providing optimal convenience at one end and low pricing at the other, commodity retailers in the middle (convenience stores, discount stores, warehouse stores and others) are battling it out. That places specialty retailers (with 15% of retail sales) in a unique position in that they can cement their relevance to shoppers with unique products and with an emotional connection. More and more retailers, and their landlords, are taking a page out of the Disneyworld playbook and creating a vibrant and vertical retail mix curated around the consumer experience. They’ve discovered that a mixed-use center such as Suburban Square or Bethesda Row can be a full-day of shopping/dining/entertainment. With interesting shops–offering goods not easily found online–and with the feel-good energy of a bustling district, specialty retail locations can be better than relevant. They can be destinations for a unique experience whether you are picking up your morning latte, entertaining friends for dinner, or even going to your favorite spin class or yoga instructor.
#3: Show me the data!
Think about the tech giants that have changed our world: Google, Apple, Amazon and Facebook. In addition to changing how we communicate, shop and work, a huge component of each company’s value is its ability to collect data. Not only are they collecting user data, they are leveraging the information to create unique user experiences for us, their customers. This is a lesson that landlords can take to heart: creating a unique user experience that will build loyalty and return visits. In our world, that can be done with geofencing—the industry term for when you walk into the supermarket and their promotions pop up on your smart phone. Geofencing uses GPS or RFID technology within the device as well as an app that’s branded for your center. When a customer’s device registers that the customer has entered you center’s geographic boundaries, it triggers a pre-programmed action like a coupon. Voila! You’re on your way to learning more about your customers so you can make sure you and your retailers are relevant to their lifestyle.