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Has Omnichannel Retailing Made Malls More Relevant?
A study from Coresight Research found traffic at U.S. shopping malls has strongly recovered to surpass pre-Covid levels. The research firm believes brands within malls are benefiting from the “halo effect” created by having both online and offline channels, “brand synergy” alongside other mall-based stores, and being able to leverage omnichannel practices.
The “halo effect” refers to when brands get boosted sales by having both physical stores and an online presence. For instance, customer acquisition is supported when a consumer performs research online and then again when they make an educated purchase in a physical store.
For direct-to-consumer brands, having physical stores has become a more cost-effective way to support discovery as online advertising costs have soared, the study found. At the same time, a strong online presence is more important for established brick-and-mortar chains because online plays a bigger role in discovery and sales. Coresight states, “Investing in physical stores that are independently profitable also enables e-commerce brands and retailers to tap the halo effect of driving online traffic without any of the associated costs.”
“Brand synergy” refers to the benefit of having stores within malls in close proximity to “other high-value or sought-after” brands to leverage those brands’ fan bases.
For instance, UNTUCKit, a maker of men’s dress shirts, prefers to have physical locations adjacent to other men’s brands, particularly popular legacy brands like Brooks Brothers or J.Crew, the study noted. Express, the women’s chain, seeks to co-locate near fashion-forward apparel chains such as Aritzia, Banana Republic, H&M, J.Crew, and Uniqlo. Coresight said this enables a retailer to “attract lookalike customers to its existing customers as it positions itself in the same tier as its neighboring tenants.”
Finally, Coresight noted that shopping malls are increasingly being recognized for supporting omnichannel behavior. This includes serving as locations for consumers to drop off online returns, which offers convenience and reduces return processing costs for retailers. Same-day and next-day shipping can also be sped up by accessing in-store inventory at malls. Additionally, online search tools can help shoppers find products they can pick up at nearby mall locations.
Top-tier malls were found in the report to be flourishing, outperforming the average mall in terms of revenues, occupancy rates, and foot traffic. Coresight said that top-tier malls “enjoy a more affluent customer base and are located in desirable areas for retailers to build and maintain their brand image.”
In comparison, occupancy levels at non-top-tier malls remain subpar and below pre-pandemic levels, but foot traffic has also recovered above pre-pandemic levels, with many likewise positioned to tap some of the omnichannel benefits of having physical stores.
Overall, a core message of Coresight’s study was that predictions around shopping malls being “dead” are oversimplified. Coresight wrote, “Dying shopping malls have become cultural symbols in the US, evoking nostalgia among Americans who reminisce about their experiences in these once vibrant centers. However, the reality of the American mall landscape is more nuanced than the popular narrative suggests.”
Discussion Questions
Do you see the “halo effect,” “brand synergy,” and omnichannel reach helping revive the viability of shopping malls? Is talk of “dying shopping malls” an oversimplification, or does it hold some merit?
Poll
Loading …BrainTrust
Neil Saunders
Managing Director, GlobalData
Shep Hyken
Chief Amazement Officer, Shepard Presentations, LLC
I am not sure that this is being looked at in the right way. Malls never stopped being relevant. Physical retail never stopped being relevant. The truth is people like to shop online; they also like to shop in stores. They blend the two according to their needs. Good retailers and mall owners know this, and they think carefully about how physical fits into consumer lifestyles and what shoppers want from the spaces they visit. Bad retailers and mall owners do not do this, and they underperform or fail as a consequence. Sure, omnichannel plays a bigger part in malls now, especially in terms of collecting orders or making returns, but I don’t see this as the savior of the mall because neither of these things are primary motivators for mall visits by consumers. Other factors such as wanting to socialize, having fun, making specific purchases, browsing, etc. are all more important drivers of visits to malls.
This is another “dog bites man” revelation. Malls were always relevant and those who talked most about their demise are now touting their “comeback.” I can still remember an article, that got blasted around the universe, saying that a) 7.5 million retail jobs were going away and b) 23% of malls would be closing. It took me a long time, but I finally tracked down the source. Two recently minted MBA’s were commissioned to write a report for one of the brokerage firms. They knew Excel really well….retail, not so much.
As it turns out, malls can be profitable if they can be sticky and interesting. Having said that, “second tier cities” do have a dearth of malls, while tourist destinations like Miami, have 2 of the country’s biggest (Sawgrass and Aventura) and another 6 in case that wasn’t enough for you. Other places like Allentown have nothing interesting.
It’s the experience, kids. People come for the experience.
The talk of “dying shopping malls” is an oversimplification, since many malls are performing well, and not surprising, the shabby, run-down malls are dying – and they should. Retailers have been making thoughtful decisions about where they locate their stores for decades – the “halo effect” and “brand strategy” may sound impressive, but there’s nothing especially new about these ideas. And I would argue that just because you locate your store next to a high traffic magnet like an Apple store, for example, does not guarantee that your location will be successful. However, malls providing better omnichannel support for mall-based tenants is an important, newer feature that grew as a result of the pandemic. All malls need to consider how they can support their tenants’ omnichannel efforts.
The death of the mall has been greatly exaggerated. Malls have always been “relevant,” but only in the locations that have survived. Yes, lots have malls have closed entirely, but new town centers and top-tier or “A” malls have sprouted up elsewhere and are thriving and becoming increasingly popular. Let’s not forget that mall tenant occupancy in viable malls flagged during the pandemic but never to an alarming level. So, today’s environment is ripe for all the benefits of omnichannel retailing, as long as you have the ideal location, location, location.
D2C brands are beginning to understand the value of a physical presence and the benefits of brand synergy, where price anchoring probably also has an effect. But there are also profitability boosts to be gained via the logistics of multichannel. BOPIS, in-store pickup, and in-store returns are just a few of these that come to mind.
Talk about conclusions that aren’t in the data. These conclusions can go back to the ’50s and ’60s. Brand Synergy is why malls first became successful. Brand synergy is why Burger King is across the street from McDonald’s.
As far as malls dying. there are almost 20 fewer malls today than as recently as in 2018. Shouldn’t the remaining ones experience more traffic?
While I don’t beleive online retail will equal brick& mortar by 2027, it eventually will.. Malls are a fixed asset for the retailer. The only way to make the bottom line on a fixed asset is to increase the top line. Trends are going in the opposite direction.
Malls benefit from our omnichannel habits. Social, multisensory experiences and certainty of fit are benefits e-commerce can’t match.
Agile malls will thrive; irrelevant malls will fade away.
The ability to return or deal with items purchased online alone is reason enough to want physical stores, everywhere including malls to flourish in support of omnichannel retailing. I recently ordered shirts and sneakers online – at least a month ago and have yet to receive them. Tracking them down has been a time waster. When I order online and have a physical store to work out any issues is always preferable.
Just like ecommerce never became the destroyer of physical retail, I don’t believe malls are dead though no one will deny that malls need to adapt in order to become more relevant. However, there is ample evidence to suggest that some malls are dead or dying like one of the two, “legacy” malls within 30 minutes of my house. The dead-mall near my house was once buzzing with activity and now is completely empty, with its once popular AMC Theatre being the last to go. I think that omnichannel and unified commerce strategies are essential if not critical to today’s modern retailers so the “halo effect” isn’t just a “mall thing” and likely not contributing to the “revival” of malls. And I think that “brand synergy” is a legacy strategy so that’s likely not contributing to it either. Part of the issue is understanding why malls lost favor with shoppers and crowds. As a kid, we went to the mall to socialize, to just hang out. What changed? Why? I believe we need to understand the root cause to formulate an effective solution and I don’t believe the solution to the real problem has much to do with halos and synergy.
Malls are by no means dead, but they have been largely excluded from the e-commerce economy. Mall tenants have traditionally owned direct consumer connections that translate into digital relationships. All of that is set to change as mall owners awaken to the potential to take ownership of the physical and digital experiences that consumers crave. Mall owners can and should unlock the power of malls to monetize beyond the square foot and forge long-lasting digital relationships with shoppers. I discussed this at length in a recent podcast interview. bit.ly/45NrE9e
I recently saw some data that said department stores started losing market share back in 1992. 1992…30 years ago. They’ve gone from 10% market share down to 2%. Somewhere in there malls started losing market share. Yeah…Internet…big shock. That plus department store and mall thinking that remained embedded in the 60’s and 70’s. And we kept building malls. But overbuilding and lazy thinking doesn’t mean malls became irrelevant. Customers fell in love with the Internet, but soon discovered that the discovery process on the Internet was not as fulfilling as shopping in real life. Explore + Experiment + Execute = Experience³. Customers could Explore on the Internet but they couldn’t Experiment. Retailers and brands could Execute on the Internet, but somehow a 2″ x 3″ picture didn’t do justice to a whole bunch of products. Shopping on the Internet lacked facets of the overall Experience that customers yearned for. Back to the mall. Physical retail and the Internet reinforce and magnify one another. Yes, some malls will falter and will be repurposed. Other malls will thrive. And the shopping/buying process will continue to evolve.
Malls are a key element in product consumption which includes browsing, purchasing and returning. The fact that the country has been overstored for many, many years resulted in far too many malls, much like too much stuff, devaluing the excess. Retail is right sizing, where the fittest will survive, and the stragglers will be devoured, whether that be retailers, or mall locations. Its a necessary economic cycle, and will result in a better, stronger environment.
There seems to be some confusion about how a mall can leverage omnichannel and how the retail tenets in that center are leveraging omnichannel.
Great retailers know that it’s crucial to engage customers across multiple channels. They present their value prop as a “brand” with great experiences regardless of location or channel. Great retailers also know the value of good real estate. Well-run centers and malls that are updated, safe, and have great entertainment and shopping experiences are thriving, not because they have a presence online, but because they’ve been able to create an environment where customers want to come and be entertained, which in turn draws retail brands who want be where the action is.
Meanwhile, many local malls and shopping centers, which haven’t kept up with their customer’s demands and were failing before the pandemic, will continue to become offices and condo developments.
I agree with everyone saying malls aren’t dead. I also think it’s important to note that while some malls couldn’t maintain relevance and others have thrived, depending on a range of variables, “DTC Rows” have popped up in many cities. These rows have the same energy as malls in my opinion- clusters of stores that would draw similar audiences. The more things change, the more they stay the same.
For years we talked about the US having way too many malls, and more Retail square feet per capita than any other nation on earth and by a wide margin. As the retail scene, with online et al heads for a better balance, it’s hard to now be taking the other extreme and bemoaning the loss of stores and malls. Just as churning water reaches a stable equilibrium, so will stores/channels and shopping.
No doubt there was a drop in foot traffic and sales in malls – but not all malls. Demographics, the economy, shifts in population, and over-building (and more) all played a part in a change that caused some malls to fail if they didn’t properly adjust. I’ve always preached that malls must find a balance between retail and entertainment mixed with a retailer that has a good balance between its brick-and-mortar stores and online presence. The phrase that comes to mind is “adapt or die.” Those who made the effort to adapt to the changes are surviving, if not thriving.
I’m sorry, but the premise here makes no sense: more importatant than….what, exactly?? More importantly, certainly, than we’d expect from the doomsday predictions that “malls are dead”. But that really says more about the silliness of the claim than it does about mall health. And as one reads further into Tom’s post, the truth starts to emerge: occupancy levels at non-top-tier malls remain subpar and below pre-pandemic levels, So Malls are doing great, except when they aren’t. This isn’t serious analysis, it’s a happy talk sales pitch from brokers.
Friend and colleagues, we can agree that malls aren’t dead. But we would be being dishonest and blind to that fact that at the peak in 1980 there were 2500 malls and now there are 700 left. Not dead, but not exacrly thriving. There is a place for malls and mall culture, but we have to be realistic and not on some “I told you malls weren’t dead” high horse.
Terrific !additional context! That’s some swing
😉
I don’t think that anyone is surprised that 1) ‘A’ properties are successful while B and C malls are in big trouble 2) omnichannel customers spend more with a brand and 3) DTC need a physical presence to generate margin and growth.
In addition to shopping, malls offer a variety of avenues such as dining, gaming, movies, and more, making them the perfect destination for socializing and enjoying quality time with loved ones. However, with the rise of eCommerce, OTT services, and the introduction of “small-store formats” in local areas, mall exclusivity has dwindled as customers can now get whatever they need right at their homes.
Nonetheless, it appears that malls have found a new purpose as “omnichannel retail” grows in popularity. Since customers want faster fulfillment, merchants are using their mall-based stores to fulfill online orders with the “Buy Online Pick-Up In Store” initiative. This approach helps retailers meet customers’ expectations for same-day or next-day fulfillment, but it may also encourage customers to make unplanned purchases while in malls. This not only simplifies the online buying experience for customers, but it is also bringing them back into malls.