Unquestionably e-commerce has fundamentally changed the way people shop, the way that retailers operate, and the way property owners position their shopping centers. Online market share continues to increase and most retailers have added a digital component to their business. But despite claims to the contrary, stores never really went out of style. Retail is a cyclical business and much like how fashion tastes change, we are seeing a resurgence in the recognition that brick-and-mortar stores are a critical part of the retail strategy.
There is no stronger evidence of this trend than the fact that more and more digitally native retailers are opening physical locations. A recent JLL study suggests that the top e-commerce retailers will open 850 stores over the next five years. Casper, which only opened its first store earlier this year, is planning to open 200 stores across the U.S. in malls and street-front retail over the next three years. They have also entered into deals with Target Corp. and Nordstrom Inc. to introduce their brand to a larger audience through physical stores. Lingerie retailer Adore Me is planning 300 stores over the next five years in an attempt to expand its market share beyond its digital platform. The trendy sneaker company Allbirds recently opened a 4,800-square-foot flagship in SoHo with plans to roll out more stores next year.
The rate at which these brands are looking to open physical space is a testament to the ongoing importance of stores for retail distribution. As Allbirds cofounder Joey Zwillinger told CNBC, “Given how tactile our product and brand story is, it’s important that we continue to create these opportunities to interact with customers.” Once these brands begin to achieve scale, they realize the only way to truly reach critical mass is by opening physical stores. That being said, they aren’t necessarily using them in the same ways, or with the same expectations. They are being very strategic with the store count, footprint, merchandising and they recognize the massive branding opportunities that a physical touch point with the consumer provides them.
As digitally native brands’ perception of the physical store has shifted, shopping-center owners are altering their offerings to better align with their needs and expectations, as well. We will see a continuation of the trend where brands are born online and graduate to physical stores once they gain initial traction — in essence, online is a powerful incubator for future storefronts. As this trend grows, property owners need to be prepared to meet the needs of online brands when it comes to physical space.
At CBL, we’ve started down this path by piloting a program that provides state-of-the-art consumer analytics, advertising services and technology solutions to enhance the in-store experience for our retail partners. These solutions provide the information and insights that e-tailers typically have at their fingertips.
From an analytics perspective, digitally native retailers are accustomed to being able to map the entire customer journey. By providing traffic analysis, conversions, dwell time, demographics and zone analysis, we can successfully re-create a customer journey for the store that rivals what retailers are used to understanding about their online shoppers. Additionally, we can begin to close the loop on connecting online and in-store channels, determining proper attribution for conversions and creating a more holistic view of the retailer’s sales funnel.
Through this same analytics, we can also begin to layer on insights into retailers’ programmatic advertising strategies, tying digital advertising efforts to brick-and-mortar foot traffic. This allows for highly targeted advertising campaigns that identify consumers by physical locations visited, purchase data, web site history and demographics. What does this mean for the retailer? A better-targeted audience and more efficient use of advertising spend, which leads to better conversion rates across all channels.
These solutions require a technological backbone that can enhance the shopper’s experience and improve the retailer’s ability to deliver on their value proposition. Amenities such as dedicated Wi-Fi, traffic monitoring devices and robust fiber connectivity are the engine that drives the ability to create more meaningful shopping destinations. From the landlord’s standpoint, retrofitting centers and stores with the appropriate technology does carry significant cost and can be time-consuming, but it propels our centers into the digital age and moves them to the forefront of store innovation.
Whether a retailer sprouted online or from a more traditional origin, having the ability to successfully blend channels is universally desired by our retail partners. As a result, we are seeing a strong reception from retailers that are interested in these programs. To that end, several national retail brands that have a presence across our portfolio have partnered with us to test these solutions in our pilot program with the goal of sharing information to better attract and reach their customers.
As shopping center owners, it is in our best interest to help foster the clicks-to-bricks evolution. We are well past the point of defending the validity of physical retail. It has become clear that physical stores play an integral role in the retail ecosystem — but that they need to evolve and incorporate today’s latest technologies. The new generation of digital-first brands and traditional retailers alike both require more information and solutions from their real estate to help them make better and more informed decisions. At the same time, shoppers are more discerning and educated than ever and demand an even better experience. In order to capture greater market and mind-share, our properties need to meet the demands both inside the store walls as well as outside of them.
Stephen Lebovitz is chief executive officer of CBL Properties.