Upon reading his obituary in the newspaper, Mark Twain famously replied, “The reports of my death have been greatly exaggerated.” That’s how 2017’s constant headlines about the collapse of brick-and-mortar retailing in America are starting to feel as 2018 opens a new chapter in the history of the shopping center industry.
To be sure, there is too much retail space per capita in America and there are many retailers (Toys R Us, Sears, Payless ShoeSource and Gymboree, to name a few) who have not yet identified a way to keep up with changing consumer habits as well as Amazon can. Retailing in America is an active dog fight. Some retailers are going to be eaten, some will be maimed and many will be victors.
As of mid-January, there have been several positive sales reports from name-brand merchants, as identified on the holiday same-store sales comparison chart.
So, while some retailers are struggling, others have taken the Amazon challenge and are fighting back by reimagining and redefining what the face of retail will look like in the future.
Omnichannel selling is here to stay, so the best merchants are investing heavily in various platforms to reach consumers. Walmart purchased Jet.com for $3.3 billion last year to further develop and deploy this app across all mobile platforms. The company’s goal is to provide as wide an array of merchandise as Amazon, using the physical store base as pick-up and delivery locations. Walmart already has more than 1,000 pick-up locations open. The company’s 11,500 U.S. locations are located within 10 miles of 90 percent of the U.S. population, so the proximity for the last mile of delivery is unparalleled by any retailer, including Amazon. Walmart also is purchasing stand-alone online retailers like ShoeBuy, Bonobos and Moosejaw to further broaden its platform.
Target has taken a slightly different approach. While also investing in digital platforms and fulfillment through its acquisition of Shipt and Grand Junction, Target has focused on improving the in-store customer experience by remodeling more than 100 stores last year. The company is committing to remodel 325 stores in 2018 and over 1,000 by 2020 for a cost of $7 billion. Sales at these next-generation stores increased by as much as 4 percent last year. At the same time, Target is opening smaller-format stores in urban infill areas where larger stores cannot penetrate. Target also is rolling out same-day delivery in New York City.
Kohl’s has taken yet another approach by agreeing to test selling Amazon products and accepting returns in 82 Los Angeles and Chicago area stores. This seems like a match made in heaven for Kohl’s, whose stores are 40 percent too big, and for Amazon, who is leading the pack among e-tailers going to brick and mortar with its purchase of Whole Foods.
My personal favorite innovation is Nordstrom’s new Local concept, which opened in October in West Hollywood. The store is 3,000 square feet, compared to the company’s typical 140,000-sf full-sized footprint. Local carries no dedicated inventory. Instead, customers can pick up and return online orders, have clothes tailored, and enjoy a glass of wine, cup of espresso or cold-pressed juice while meeting with a personal stylist, who will help them select and order clothing from the website. Customers can even get a manicure before heading to an evening event while they wait for same-day tailoring on the new dress that was delivered that morning. The new Local store is near two full-sized Nordstrom locations and caters to the busy lifestyle of the company’s customers who want ease of access and returns, but also personal service and attention.
Apple’s most recent concept is creating “Town Square” stores like the one it opened in Chicago last fall to replace the flagship North Michigan Avenue location. The store is designed as an indoor plaza, complete with trees and comfy seating. It’s a cross between a gathering place, retail store and an education center. For example, think of an Apple park as a place where you can hang out to engage in person with Apple products, take a class on photography, learn to code or just see what’s new. Considering only 10 percent of iPhones are purchased in stores, creating Apple playgrounds makes all the sense in the world for millennials who crave experiences, especially if they center around their phones.
What I love most about retailing in America is the open laboratory of ideas that competition among retailers promotes. Yes, several of today’s retailers and a fair amount of their space will disappear over the next decade, but well-located shopping centers with innovative merchants who focus on customer service and exciting experiences will continue to thrive. Sales per square foot may even increase as great retailers flock to hub destinations favored by millennials.
Mark Twain also said, “It’s not the size of the dog in the fight, it’s the size of the fight in the dog that matters.” I’m betting that the retailers I’ve mentioned have plenty of fight in them to challenge Amazon and each other to deliver what the consumer demands.