Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)
Issue link: https://sct.epubxp.com/i/400168
growth; the opportunity to tailor tenant mix to meet the needs of increasingly important demographic groups such as Hispanics and Millennials; and success- ful efforts of mall and shopping center landlords to broaden the appeal of their properties, in part through more-creative tenant mix. Growing interest in brick- and-mortar space among formerly online- only retailers such as Athleta, Bonobos, Boston Proper and Warby Parker is also fueling growth. Shoppers at Bonobos' 10 brick-and-mortar stores spend about twice as much as its online customers, CEO Andy Dunn says. And even Amazon.com reportedly is taking over a building in New York City where customers can pick up orders placed online. Though the report's focus is the U.S., the rest of the world can draw sanguine conclusions from it as well. After all, if the shopping center industry is thriving in the most developed market in the world, it follows that things are likely to be equally if not more vibrant in the less developed markets. The physical store remains the primary source of merchandise every- where as developers all over the world work overtime erecting shopping centers. Given the ubiquitous story line that e-commerce is killing brick-and-mortar retail, assertions that online sales could actually help the industry might seem counterintuitive. But precisely because online retail offers such an easy and convenient way to buy commoditized goods, its popularity has forced develop- ers to think harder about how to create high-energy experiences at their proper- ties, says Mark Toro, the partner who heads the Atlanta office of Cincinnati- based North American Properties. The long-term effect of this pressure from online retailers is a paradigm shift that will strengthen the industry, he says. "Instead of providing the most conve- nient, quickest way to shop," he said, "we're providing guests with a place to be, which extends dwell times." Regional centers will continue to fo- cus on the experiential dimensions of their properties by adding restaurants, entertainment and outdoor spaces and the like, says the ICSC report. Neighbor- hood centers, by contrast, will keep lever- aging convenience. Indeed, convenience- oriented shopping centers still dominate the industry. As of January 2014, they accounted for roughly 100,000, or 88 percent, of the shopping center proper- ties in the U.S., the report notes. "Those centers provide local consumer needs — grocery, dry cleaners, barbers, commu- nity banking, shipping services and thou- sands of other services of which the vast majority do not compete with non-store channels," says the report. Meanwhile, the trend toward inte- grating retail with nonretail uses will continue to evolve. North American Properties' Avalon mixed-use project is an example. The first phase of this $600 million property opened in the Atlanta suburb of Alpharetta last month. The 500,000-square-foot retail component brims with bars and restaurants, fash- ion boutiques, service providers and fit- ness and lifestyle tenants, plus a Whole Foods market. North American Proper- ties has encouraged retailers at Avalon to make maximum use of the property's public spaces, Toro says: Lululemon is free to conduct yoga classes outdoors on the plaza, and sporting-goods retailer Orvis may teach fly-fishing in the Avalon fountain. "Today your customer can buy stuff sitting in traffic or putting on her makeup," Toro said. "But humans are social animals. If we want to have an ex- perience, we have to go to a public space and commune. That is what people are craving, because they are so isolated in their online worlds." The ICSC report seeks to place the challenge posed by those online worlds in perspective. The report's authors cite several sources to paint the Internet as an ally of brick-and-mortar retailers, not an enemy to be feared. On average, they note, omni-channel customers tend to shop three times more frequently and to spend three-and-a-half times more than do single-channel shoppers. "The Internet and e-commerce are providing consumers and retailers with brand- new tools that enhance the shopping experience and ultimately drive sales in stores," Kercheval writes. "The retailers that survive and thrive will be those who are best able to seamlessly integrate the physical and virtual channels." And yet the brick-and-mortar store still enjoys certain advantages over the screen: In-store conversion rates continue to be four times higher than online-only conversion rates, the au- thors note: "Consumers still prefer in- store shopping. Ninety-four percent of total retail spending happens within the four walls of a physical store." (Last year online retail sales came to some $263 billion — only 6 percent of total retail sales, according to the U.S. Com- merce Department; in-store sales ac- counted for all the rest — some $4.3 trillion in total.) But why is in-store spending still so popular if shopping on- line is supposed to be so much easier and more efficient? A survey conducted by ICSC and research firm Alexander Bab- bage in April sought to find out. Asked to cite some of the most important fac- tors influencing their decisions to shop in stores rather than buying merchan- dise online, nearly three-quarters of the respondents said they wanted to touch 44 S C T / N o v e m b e r 2 0 1 4 Convenience is key to remaining relevant for some shopping centers. For others, it's all about creating an experience to increase dwell time.