Should Shopping Malls become more like Big-Box Retailers?

by Andrew Martineau

Photo by Magda Ehlers from Pexels

I’ve always wondered why Shopping Malls didn’t market themselves like a Big-Box Retailer. Both are usually indoors, both occupy an enormous amount of physical space, and both offer a variety of products to its customers. We can certainly argue that the most significant difference is that a Big Box Retailer is mostly a single housed store that offers one-stop, purposeful shopping to clients at usually lower prices, and a shopping mall provides multi-store shopping at prices set by each retailer with many opportunities for gathering and leisure.

I’m certainly simplifying things a bit, but humor me for a bit. The Big-Box Retailer - Target is poised to be a top e-commerce player in 2020, notwithstanding the effects of the coronavirus. They have become the 8th largest e-commerce player in the U.S, according to eMarketer’s latest market share rankings and have figured out a robust e-commerce strategy that gives its customers options to purchase either online or offline. Now, of course, store renovations, in-store pickup, drive-up and delivery with Shipt (recently acquired by Target) has something to do with their rise to the Top 10, but shopping malls can adopt all these strategies in a very similar way. 

If shopping malls were to up their e-commerce game, or have one, to begin with, their retailers could use their brick-and-mortar locations to fulfil additional online orders and the many mom-and-pop retailers that are in all B & C malls that don’t have a website, can benefit from the digital strategies of a powerful e-commerce platform at their respective mall locations. Not to mention, being able to analyze customer behavior by getting real-time updates of popular categories, searches and products that could influence tenant mix for leasing agents to prospect in the future. It is certainly understandable that revenues from e-commerce sales on a shopping malls website are going to be less profitable than a Big Box Retailer. Still, if they were to mimic the compensation structure of an Amazon seller which can range from $0 to $39.99 per month for Account fees, and 6% to 20% of the product’s selling price for Product fees, with the average seller paying 15%, it can be a tremendous boost to every mall’s bottom line and allow for continued sales in Pandemic situations, like the one we find ourselves in today.

Malls have always been a good reflection of American Culture as they provide a place for gathering and enjoying experiences. But, American Culture along with the rest of the world has undoubtedly gravitated to spending quite a bit of time online as opposed to a physical location, and malls never really invested a ton of time or money in joining them. We can certainly see what not investing much in a digital presence has done for many Big-Box retailers looking to catch up with Amazon and in a smaller sense what it has done to traditional retailers that are still working on perfecting their digital presence. And while many brick-and-mortar retailers play catch up, Amazon is getting into the brick-and-mortar game and able to leverage their dominance of online to leverage their learning curve for brick-and-mortar.

So how do Shopping Mall owners adapt to a rapidly changing online world and leverage their real estate assets spread across the country to compete? Invest significantly in Digital Operations!

Not just by building Digital Teams that figure out creative strategies and applications to enhance the offline/in-mall experience, but to Teams that can create a proficient and competitive online/e-commerce experience. They should even explore, cloud computing, digital streaming (more on this in another post) and artificial intelligence, much like the Big Four technology companies Amazon, Google, Apple and Facebook.

Shopping Malls are certainly uniquely positioned to come out the winners in the retail environment of the future if consumers can shop seamlessly across online and offline channels of which shopping malls have in spades. Shopping center GM’s, Marketing Director’s and Asset Teams know the mall business inside and out, and most of them have been honing their skills in the industry for decades. Focusing on building teams that understand the online space is a crucial pivot for shopping mall owners wanting to survive, especially in the wake of COVID-19, significant drops in already declining traffic and continued retail bankruptcies. 

If shopping malls reconfigured their service courts to allow for retailers to operate as mini-fulfilment centers for a mall’s e-commerce platform as well as the retailer’s, there would be many benefits including savings on shipping, improved delivery speed and allowing retailers to fulfil orders even when their fulfilment center is out of stock. To accomplish this, malls could overhaul their Customer Service offering to include bringing online orders outside and loaded into cars and coordinating same-day delivery for customers within the primary trade area. It will not only create an additional revenue stream for the mall and its respective retailers but allow the mall Customer Service staff to form a personal bond with its customers.

All in all, shopping malls are still the destination of choice to get the perfect mix of offline experiences in the form of movie theaters, restaurants, gyms, and retail stores all in one place. But the industry’s survival lies in changing customer behavior by providing seamless integration across a digital and physical shopping environment thereby creating omnichannel synergies, that will develop into a deeper loyalty with the customers, increased spend both with in-store and drive-up business (which will also increase in-mall traffic), and the mall’s overall NOI goals.