consumer spending

In a recent Think Tank bylined column in WWD, Stephen Lebovitz, president and chief executive officer of CBL Properties, countered a notion in the market that the closure of anchor stores — especially during the first quarter — means that malls are dead. Not at all, Lebovitz asserted. The closing of an anchor store is simply part of an industrywide practice of “retail pruning.”

Lebovitz cited data from the PNC Real Estate and ICSC Research that shows about 50 percent of announced stores closures that occur annually are in the first quarter. Still, the ceo acknowledged the role of malls is changing, which is driven by shifting consumer behavior.

Here, Lebovitz further explores the topic and shares his perspective on why physical stores are at the core of the shopping experience as well as how e-commerce and the “experience economy” are changing the business of retailing.

WWD: In your recent bylined column for WWD, you said the “discovery” portion of the shopping journey now starts online. Would you agree that the “surprise” and the “delight” of the experience should occur in a physical store? If yes, how can retailers execute this?

Stephen Lebovitz: That’s a great question and an important distinction. The physical store has been and will continue to be the core of the shopping experience. Online retailers such as Amazon, Bonobos and Warby Parker are opening scores of stores, which validates this fact. The Internet is an incredible tool, but it is very static in terms of the shopping journey. It offers little in terms of surprise or delight, as you say, and is more of a resource for a customer to make an informed decision, whenever and however they choose to buy. People shop online — but conversion rates are low and return rates are high.

Stephen Lebovitz

Stephen Lebovitz 

WWD: And what about mobile devices?

S.L.: Mobile has become the primary driver of online use — more than 80 percent of our web site traffic comes from smartphones. We are looking at ways to capitalize on that trend in terms of offering customers more information when they are at our centers, furthering the integration of online and physical shopping. The sheer volume of people who go online for price comparison, product reviews, inventory checks, etc., are what make it a viable business model. Nine times out of 10, the consumer is researching a purchase online and then buying it in store. It is imperative that both landlords and retailers provide the “wow” factor for the customer when they arrive to the store.

Customers, more than ever before, are arriving to the store with a more formulated idea of what they want to buy and where they want to buy it, but we still need to provide an unparalleled experience and give them the opportunity to discover other retailers. If we can provide that experience, we will usually be rewarded with impulse purchases.

WWD: What role do restaurants and entertainment now play in a mall? How has it evolved? And who is doing it well?

S.L.: Dining and entertainment have always played a vital role at shopping centers and malls – but it certainly has grown and evolved. In our centers for example, the share of dining and entertainment tenants has grown exponentially. The mall food court is a prime example of the evolutionary aspect of this dynamic. Food courts used to be pit stops, for lack of a better term, where consumers could quickly refuel and get back to shopping. Part of this was by design, but a larger part was a reflection on the American culture at the time these food courts were designed.

WWD: But the role of dining has changed, no?

S.L.: Today, consumers are far more discerning when it comes to food and dining is not just viewed as a necessary task, but its own form of entertainment. People are now coming to our centers with the initial purpose to enjoy a meal or a food experience with friends and family — and shopping naturally follows.

Obviously, I am partial to what we are accomplishing, especially with our anchor redevelopment program, when it comes to creating great dining and entertainment uses at our properties — but many of our peers are also doing a great job. I think the food hall operators have done a tremendous job as well with creating unique dining experiences that second as entertainment venues. Eataly was one of the original concepts, but they are still one of the best as well — and are opening in malls.

WWD: Several analysts have conducted surveys that show a strong preference of Generation Z for shopping in malls. Do you think retailers can do a better job of conducting generational marketing to attract these consumers? Why or why not?

S.L.: I think retailers have done a good job recognizing the importance of the Gen Z customer and what their $44 billion in purchasing power means for our industry. We are always looking for ways to improve marketing to different consumer demographics and what we are still working through is this is not a generation that responds to traditional marketing tactics. They are very experience driven — this is a group that uses Snapchat in retail stores about as much as they use text messaging, according to a Euclid study. That’s a far different dynamic than what most retailers are used to, so there is a learning curve involved here.

At the end of the day, I truly believe that all consumers, regardless of demographic group, share some common fundamentals: They crave unique experiences, exciting venues, personal interaction and outstanding customer service. If we can continue to deliver on those fronts we will attract consumers, regardless of age.

WWD: New store concepts continue to surprise shoppers and the industry. But most are smaller-sized specialty stores. Do you foresee a larger, bigger box retailer emerging on the scene with a new concept? Why or why not?

S.L.: In the specialty store area, there has certainly been a trend toward smaller footprint stores over the past five years. We are still in the early stages of solving the last mile equation and that will ultimately dictate average store size going forward. As an example, will retailers need to keep larger inventories on hand to fulfill deliver or click-and-collect orders? If so, store sizes are likely to increase. When it comes to new concepts though, I think most will be on the smaller size as retailers will look to test market viability before committing to larger formats or more stores in a trade area.

That said, two areas that could see continued emergence of larger formats are fast fashion and the home furnishings and improvement categories. The latter is for relatively obvious reasons as their merchandise is what drives that need for space. TJX recently announced a new home furnishings store that will build off the success of their Home Goods Concept. Primark is a great example in the fast-fashion category. They have successfully introduced larger format stores for their U.S. expansion. They offer such low prices and don’t sell online as the delivery fees would eradicate their slim margins.

This is a trend in fashion that I see continuing as consumers are remaining steadfast in their penchant for value and flexibility when it comes to their wardrobes.

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