What's Different about Tomorrow's Shopping Mall: You Never Have to Leave

As the saying goes, if you can’t beat ’em—mimic ’em?
As far as convenience goes, it’s hard for physical retailers to compete with their online foes, where consumers can search for the latest products without even pausing to get dressed.
But bricks-and-mortar stores aren’t giving up. In order to better compete with their Web-only counterparts, physical stores and the malls that house them are aiming to bring the ease of online shopping to the real world, utilizing a new genre of tenants and technologies.
“What we are doing as a landlord is facilitating the bricks-and-mortar retailer to compete with an online retailer as it relates to convenience, which is, ‘Give me what I want when I want it,'” said General Growth Properties CEO Sandeep Mathrani.
The new look of today’s shopping malls
As shopping mall traffic steadily declines and major retailers such as Sears and J.C. Penney shutter stores across the U.S., mall tenants have dramatically changed over the past few years, said Jesse Tron, a spokesperson for the International Council of Shopping Centers.
In place of these customary lessees, new types of tenants—grocery stores, fitness centers and even post offices—have become mainstays at many malls across America.
But these nontraditional tenants have not only helped occupancy rates at shopping centers rebound from their post-recession lows. They also help consumers combine trips to one destination, therefore encouraging cross-shopping among the mall’s other tenants.
“If you had told a developer or landlord 15 years ago that they would be putting grocery stores or fitness centers in shopping malls, they might have looked at you sideways,” Tron said. “Not only are they doing it now, but [they] are finding success in its application.”
Rick Caruso, CEO of Caruso Affiliated, one of the country’s largest privately held real estate companies, has been including grocery stores on his properties for 20 years, he said. The Promenade at Westlake, in California, boasts upscale grocery store Bristol Farms, while The Commons at Calabasas houses a Ralphs grocery store.
A proponent of altering malls’ traditional footprints, Caruso said that anchor tenants come in all shapes and sizes—including grocery stores. He said centers need to focus on giving consumers a convenient way to shop, but also on delivering a memorable experience. One example of this is the incorporation of jazz music at Michael Mina’s Bourbon Steak restaurant at The Americana at Brand, he said.
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“The place is just packed,” he said. “It just adds another dimension to the experience on the property.”
Although Caruso remains on the sidelines about fitness centers, whose visits shoppers typically don’t combine with shopping trips the way they do with other tenants, General Growth Properties’ Mathrani said their importance lies in giving visibility to his malls.
For instance, if a consumer is used to visiting a particular shopping center for their groceries or workouts, it becomes second nature to head there when they’re looking to buy a tuxedo.
“They don’t even think about going anywhere else,” Mathrani said.
Bringing high-tech to in-store
Despite a slew of new-age tenants, convenience at retail comes down to more than just storefronts. Caruso Affiliated offers free Wi-Fi at its dozen retail properties, while General Growth Properties, which owns more than 100 shopping malls, will add this service at all its locations in May. This technology allows shoppers to easily conduct product reviews and price comparisons while in-store.
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Retail apps, such as Tanger Outlets’, offer shoppers location-based offers as they browse for bargains. Macy’s Herald Square store as well as the shopping malls at Las Vegas’ Bellagio and Venetian resorts, have teamed up with Aruba Networks’ Meridian software company to offer in-store GPS to shoppers looking for a particular department or store.
But perhaps the most important development is making it simple to shop across both the Web and the physical store. According to a recent report by the Accenture consulting firm, a growing number of U.S. shoppers plan to make purchases at bricks-and-mortar stores, but they want the experience to be more convenient.
As such, 19 percent of consumers surveyed said they are reserving items in-store or buying them online for in-store pickup, while 14 percent are buying at the store and having the item shipped to them.
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Because of these blurred lines, Gap last week said it will expand its online and offline synergies, including the ability to reserve items in-store at all domestic Gap stores. American Eagle will also debut the ability to buy online and ship from the store, while Kohl’s will grow its ability to ship Web orders from 200 to 500 stores. Wal-Mart is also testing delivery and pickup of its online grocery orders through Walmart To Go.
But these innovations are not restricted to individual retailers—developers are also getting a piece of the action. Caruso Affiliated’s The Grove property offers a free concierge service, where shoppers can call up, request an item, and have it packaged and sent to their home, free of charge.
Four major mall operators, including General Growth Properties and Simon Property Group, are incorporating—and investing—in same-day delivery service Deliv. Through the program, shopping malls fund and supply runners, who collect packages from their tenants and deliver them to shoppers for $5. Customers are able to define a delivery time window that’s most convenient for them.
The system gives bricks-and-mortar stores a “huge” advantage over Amazon, Deliv CEO Daphne Carmeli said. It positions the retailers’ physical footprints to serve thousands of distribution centers, which allows for faster and more convenient delivery options. By comparison, Amazon only has distribution centers in 14 states.
“You can see how the scale has suddenly shifted,” Carmeli said.
What’s more, Mathrani said the use of bricks-and-mortar stores more as distribution centers could have deeper implications for retailers’ profitability, as it will likely lead to better inventory management, fewer markdowns and higher margins.
“If they can actually get their online inventory and the store inventory to be transparent on a real-time basis then imagine what can happen,” he said. “We’re just on the one yard line with 99 yards to go.”
By: Krystina Gustafson (CNBC)
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