Jacqueline Haynes, DTZ
Despite the buzz about the popularity of online shopping, less than 10 percent of all retail sales take place via the Internet. According to the International Council of Shopping Centers (ICSC), online retail sales in 2013 were nearly $263 billion, accounting for a mere 6 percent of total retail sales. In-store sales accounted for the remaining $4.3 trillion, according to the U.S. Commerce Department.
It’s clear that while some consumers find online shopping convenient, the majority still prefer the shopping center experience. In particular, millennials, who are 74 million strong with a buying power of $174 billion, demand that experience. Last fall, Indianapolis-based Simon Property Group forecast that 89 percent of millennials would shop at a mall over the holidays.
Surprisingly, millennials use technology to conduct research about products, but they generally prefer to visit stores to make purchases. Millennials will read product reviews online but they want to touch the merchandise, feel it, experience it and then tweet about it to friends. So, while the entire shopping process revolves around technology, the most critical factor is the physical experience.
Retailers’ Tech Toolbox
Retailers are looking at ways to make shopping more exciting. They are using technology to track shoppers’ habits through applications such as Target Cartwheel or Key Ring. The data gives retailers a better understanding of buying habits, providing them with opportunities to react quickly to product demand and customer trends, including where and when they should locate their next store.
If you subscribe to the Key Ring app and have a CVS rewards card, you will get an alert on your phone whenever you are near CVS and the alert will tell you there are savings nearby.
Online retailers like Zappos, Amazon and Boston Proper are opening brick-and-mortar stores to offer the consumer experience — recognizing they can’t afford to remain one-dimensional in their sales approach. Amazon is opening a fulfillment store at Purdue University in nearby Lafayette.
For years there have been concerns of shopping centers being replaced by the Internet. Well, the sky hasn’t fallen. ICSC President and CEO Michael Kercheval recently said, “We believe the industry is poised for unprecedented success going forward — not in spite of e-commerce, but because of it.”
In the Indianapolis retail market, high-end luxury malls are featuring experiential retailers such as Tesla, Apple and Microsoft. Such retailers are often tech-driven and/or interactive. For example, Tesla allows shoppers to test drive its $100,000, high-end electric car at the mall. Sales for this type of retailer are greater per square foot than what traditional department stores are generating, giving luxury malls a financial boost.
Some retailers are offering their customers specialty services such as ordering items at the store to be shipped home. Other retailers are delivering out-of-stock items directly to the store while consumers continue shopping at the mall so that they can pick them up on their way out. Some stores are sending purchases to a central location where an Uber driver delivers it to shoppers’ homes.
The One-Stop Shop Kroger
In Indiana, The Kroger Co. is rolling out five Kroger Marketplace stores, each 100,000 to 125,000 square feet compared with Kroger’s usual footprint of 50,000 square feet. Two stores have opened in Fort Wayne, two stores are planned for Indianapolis and one each in Fishers and Columbus.
In addition to providing a full-service grocery and pharmacy, these superstores feature an array of merchandise ranging from electronics to toys to furniture. Kroger Marketplace offers an artisanal cheese shop that features an expert who offers recommendations as well as samples. A wine steward creates wine and food pairings and may even cook a steak on the spot. There are also wine tasting events, cooking classes, a jewelry store, Starbucks, and a clothing department.
Movie theaters also are answering the call for a more engaging experience to stay competitive with in-home entertainment systems. Regal Cinemas, United Artists and boutique cinemas like Studio Grill are trading stadium-style seating for fewer, luxury reclining seats and some are offering full-menu service. This concept is selling out more shows and filling seats on off days during the week.
Texas-based Flix Brewhouse is opening a combination movie theater/microbrewery in the 40,000-square-foot space that was formerly occupied by Hobby Lobby in Carmel. When finished, the venue will seat nearly 1,000 and feature eight movie screens, seat-side dining and a microbrewery.
The Road Ahead
The overall retail market has yet to see a full transition to these new amenities and services, but the retailers first out of the box are enjoying success. Both in-store and online sales are on the rise. Healthy retailers make for healthy shopping center investments.
Retailers will continue to move away from the one-dimensional shopping experience and more toward multi-platforms to make the experience more enjoyable for their consumers. Look for more brands to co-exist under one roof, similar to a Kroger Marketplace, Ikea or Eatly, where you can have several retail experiences in one shopping spree.
By Jacqueline Haynes, senior vice president, CCIM, DTZ. This article originally appeared in the March 2015 issue of Heartland Real Estate Business magazine.