Location remains retail’s MVP
You’ve heard the argument that location is less critical to retail success today since consumers are going online to buy the goods they need and want. Perhaps there is some truth to that, but on the whole, location remains a critical factor when it comes to store traffic and revenues for both established and emerging retail brands.
Recently, Credit Suisse published a list of MVP (most value properties) shopping malls. MVPs were determined by high traffic counts and sales-per-square-foot. Credit Suisse analysts began with 2,101 malls to come up with a list of 95 MVPs. Some of the facilities making the list were Town Center at Boca Raton (FL), The Mall at Short Hills (NJ), and The Galleria (TX).
The research found that some retailers are particularly adept at locating in MVP malls. Six businesses — Apple, Cheesecake Factory, Louis Vuitton, Lululemon, Nordstrom and Tiffany & Co. — were identified as having a high percentage of their overall store bases in these locations.
Nordstrom, in particular, stood out, with 62 percent of its stores in MVP malls. Of the chain’s 120 total, 75 serve as anchors in MVPs.
Interestingly, Credit Suisse’s research found that the growth of e-commerce has brought about some diminishing returns for well-established softline brands in MVP malls. On the other hand, it appears to be a boon to emerging labels such as Baublebar and Bonobos — which brings us back to Nordstrom.
“Nordstrom is already a leader in offering emerging brands; it distributes six of the key 33 ‘online-born’ brands identified by the softlines team, including Bonobos and Baublebar,” Michael Exstein, Credit Suisse analyst, wrote in the report (via MarketWatch). “The only other mall anchor retailer to distribute any of the brands identified is Bloomingdale’s, which distributes three.”
While some predict the continuing decline of malls, others see MVPs growing in value because of omnichannel initiatives. A 2015 report by the International Council of Shopping Centers predicted rents will likely increase in the future as a result. This could benefit Nordstrom as other emerging brands look for partners in prime locations at rents they can afford.
- The six stores you’re almost guaranteed to find in America’s ‘most valuable’ shopping malls – MarketWatch
- Nordstrom: Credit Suisse’s Department Store MVP? – Benzinga
- Why Online Rretailers Are Flocking to Nordstrom – Fortune
- Will omnichannel success drive up retail store rents? – RetailWire
Galleria Dallas – Photo: Simon Property Group
DISCUSSION QUESTIONS: How important is location to retail success today? What do you take away from observations of the role that location plays for emerging brands versus those that are already established?
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17 Comments on "Location remains retail’s MVP"
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For years location has been important, and it will continue to be so for brick-and-mortar stores. The best real estate will continue to be expensive. Nordstrom’s ability to attract emerging brands due to its preferred locations will play a critical role in its story. And emerging brands would be wise to seek out these opportunities while pursuing an online strategy.
As long as online sales remain the smaller portion of a store’s sales, location will remain important.
For those not shopping online, even if it’s anecdotal, a shopping trip is all about destination. A declining mall with less than hip or mainstay stores is not going to be a destination of choice, so MVPs clearly are important. For the experience of shopping in person a great assortment of retail brands, a clean and inviting building with pleasing architecture, easy accessibility and even possibly a great food court or selection of restaurants are clearly important customer lures. Emerging brands probably aren’t any different than established brands when it comes to reaching brick-and-mortar consumers: location, location, location.
Yes, being in “the best malls” in a given metro area is important for retailers such as Nordstrom and Apple. As the discussion points out, these companies are especially smart about expanding at a deliberate pace in order to maintain their brand equity along with the halo effect of comparable brands in a high-traffic setting.
But location choices matter to all types of brick-and-mortar retailers, not just those located inside high-traffic malls and upscale town centers. Costco, for example, thrives in locations that might not be considered high-traffic (or high cost) because of its strength as a destination store. Being a magnet for a wide trading area in a low-cost location can be just as important for reinforcing a retailer’s branding message.
Since 90 percent of all retail sales come from stores, location is still very important. And the brands that are in MVP malls are “experience” retailers and brands. Consumers go to Apple, Nordstrom, Lululemon and Louis Vuitton not only to buy, but to research, connect, touch, feel and enjoy. They cannot get this online.
As long as the experiential lifestyle dominates, location will remain a key to retail success.
In addition, as long as our backward looking KPIs on retail sales — analytically and conveniently — segregate the world into physical and digital, we will not be able to see that retail’s future is hybrid and experiential. Such a future embraces all interaction points, inside and outside a retailer’s proverbial four walls, as well as infinite paths to consumption.
Location, location, location was, and will continue to be, a cornerstone of brick-and-mortar retail. Given the added dimension of online retailing and sales, location will unfortunately not be enough. The location must also become a destination valued by today’s shopper. The shopping and purchasing experience and journey must be seamless and enjoyable. This adds to the pressure on brands to make certain they address the expectations of the shopper. The “shop-in-shop” concepts will be a great vehicle for emerging online brands to work with anchor retailers like Nordstrom, Bloomingdale’s and Macy’s.
Location still equals traffic so it’s still important. However I think retailers will need to reinvent some of their stores which will have to include facilities for click-and-collect and ship from stores in a more optimized fashion. So multiple types of stores, a quality location “brand store” and a regionally located multipurpose store.
Dick’s Sporting Goods notices a 25 percent bump in e-commerce sales in cities with a physical store present. The branding power of physical presence cannot be underestimated.
One role of a retailer’s location is to create and support brand awareness for the retailer. If consumers are visiting malls, with or without a shopping motive, the visibility of the brand/store reinforces its presence in the shopper’s consideration set, off or online.
Finally, the references to “location, location, location” for retailers bring to mind a brick-and-mortar visual. However, location today is the broad perspective of all points of intersection for the retailer and consumer. Hence online is part of that “location, location, location” adage. Making your presence known on terra firma gets support from cyberspace and vice versa.
I don’t see “location” as ever diminishing in importance for retailers. I also don’t see physical stores going away anytime soon, so this remains a key consideration in retail expansion strategies. MVP malls are busier than ever, and people are not just “window shopping.” I am seeing heavy purchasing, especially at major outlet malls.
The person saying retail location is not important must be a real estate agent trying to sell a bad location. One of the food online growth areas is online order with store pickup. If the store is not convenient, this will not work.
The issue is not one of emerging versus established it is the product. Some items work well online and some don’t. There is a difference between first time and repeat purchases. The retail industry has guessed wrong many times, but with trial and error we are understanding what sells where.
I’m not sure what the point of this “analysis” was: stores with high dollar sales per square foot have a lot of their stores in malls which also have high dollar sales per square foot … gee! Who’d have thought?
None of this, of course, is of any value if your offerings aren’t compatible with your neighbors — think Tiffany vs. a dollar stores. Nor does it address the many locations — think convenience stores — which have value precisely because they ARE standalone.
Yes, location definitely matters and it’s only growing as these MVP type malls flourish at the expense of everyone else. Another “winner take all” pattern in our society and economy.
I will caution that the Credit Suisse study may be confusing correlation with causation. Apple is such an outlier in terms of retail metrics and the presence of an Apple Store in these malls skews their sales per square foot much higher than the mean. Which came first, the chicken or the egg?
Part of the answer lies in what business the retailer is in. For example, Apple is both a destination for consumers and draws a lot of walk-in traffic from the general mall shoppers. Others like convenience stores are highly dependent of location. The vast majority of their locations are not destinations. They are built on the intercept business model of getting their consumers who are on their way somewhere else.
Convenience is even more important for physical retailers now that they are competing with online, and location is critical to providing that convenience. In grocery especially we’re already seeing forays into more, smaller stores — and the goal here is to locate them more conveniently to customers who would increasingly prefer a limited selection nearby than a 20 minute drive to a big store.
For physical stores, location is still very high on the list of priorities. The exception would be very unique stores that use e-commerce to drive a very loyal or curious clientele to a less desirable location. It is the same principle as chefs who opened restaurants in odd locations but draw a cult following because of their food, the same could apply for specialized retail which uses social media and e-commerce to drive shoppers to seek out unusual and unique products.