Retailers Trim Bricks-And-Mortar, But Not Giving Up On Physical Retail
By Anna Rose Welch, Editorial & Community Director, Advancing RNA
Stores get creative with technology and reduce square footage to save money, keep brick-and-mortar shopping relevant
The past few weeks have been filled with news of store closings and cutbacks: JCPenney made its announcement that it will be shaving off 33 locations this year. Even Macy’s, despite its successful holiday season, announced plans to close several locations. Sears announced last week it will be closing its downtown Chicago flagship store this spring because of customer’s increasing interest in online shopping. As Sear’s CEO Edward Lempert says, “We very often need less space to serve our members better and we may need fewer locations as well.” According to some experts, Lempert’s sentiment is going to be a common truth among retailers over the next few years as stores embrace e-commerce and consumers’ shifting preferences, CNBC says.
In fact, CNBC’s Krystina Gustafson says to expect a “tsunami” of store closings over the next couple of years. As more people neglect shopping malls for the comfort of their own homes, Michael Burden from Excess Space Retail Services expects overall retail square footage to decrease by one-third to one-half within the next 5 to10 years. Considering the fact that stores saw nearly a 15 percent decline in 2013 holiday foot traffic, companies could look at a reduction of their square footage as a positive thing. They could redirect their expenses from these locations to other important initiatives. As Belus Capital Advisors analyst Brian Sozzi says, “Stores are making a long-term bet on technology. It simply doesn’t make strategic sense to enter a new 15-year lease as consumers are likely to continue curtailing physical visits to the mall.”
Indeed, at the recent NRF convention, Rick Caruso gave a keynote speech on the lifespan of the indoor mall saying, “I’ve come to the conclusion that within 10 to 15 years, the typical U.S. mall, unless completely reinvented, will be seen as a historical anachronism, a 60-year or so aberration that no longer meets the public’s, the consumers’ or the retailer’s needs.” Though Caruso is less likely to attribute this decline to peoples’ interests in online shopping. Rather, it has to do with the fact that people only come to malls with a specific goal. They purchase what they came for and leave immediately after, he told the Los Angeles Times. For the mall to survive, Caruso sees them becoming more of a “multi-use project” that blends nature, residential spaces, and retail. Outlet centers, outdoor malls, and stand-alone stores have become more favorable over the indoor mall environment. Other experts say there are opportunities to equip stores with innovative technology, like Intel’s “Memory Mirror” that enables shoppers to view, compare, and share pictures of different outfits they’ve tried on with friends. In doing so, customers craving a digital shopping experience will continue to have one in stores, keeping the brick-and-mortar space relevant.
However, even as stores equip themselves with the latest technology to draw people in, they will most likely not need to occupy as big a retail space because of customers’ online shopping habits and increasing preferences for city living. Physical stores will begin trimming down on inventory in favor of stocking fulfillment centers for online customers. Last week, Nordstrom announced its plans to open its third fulfillment center in Elizabethtown, PA, which will handle orders placed online, via the mobile app, and catalog for those on the East Coast. As Jamie Nordstrom, president of Nordstom Direct says, “E-commerce is the fastest-growing area of our business and this is another example of how we’re investing in people and capabilities to help us support this growth and responding to our customers’ changing definition of service.” Target launched its TargetExpress prototype in the wake of more people choosing densely-packed city living over suburban environments. Not only will it be necessary to cater to those choosing their tablet, smartphone, or computer screen to complete their shopping, but stores will also most likely need to come up with some innovative ways to reach a wider group of people in a much smaller space.
Read: “Is The Relevance Of A Store A Relevant Concern?”
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