03:13 pm
30 June 2016

Insights into the Future of Retail

Insights into the Future of Retail

Last year, PLACES Crystal Ball featured Nick Egelanian’s expert take on the future of retail and real estate from the perspective of an industry insider. This year, he answers questions on omni-channel marketing, the fate of the department anchor and the future of new mall construction in America. Nick Egelanian is president and founder of SiteWorks, a retail real estate services provider.

Many malls are functioning as community centers across the country. Is this a trend with staying power and how does the “community event schedule” impact retail?

NE: I do not believe this will change much in the future. While the primary purpose of malls is to offer well merchandised shopping options, malls have long served many other purposes, from providing avenues for “mall walking” to functioning as informal community gathering places. Programming community events there serves the dual purpose of facilitating the public’s interest while also driving foot traffic and sales in these centers. However, as the mall format, along with the function and purpose of general merchandise department stores, continues to decline, other specialty retail venues, including open air lifestyle centers and mixed-use centers, will play an increasingly important role as social gathering places.

Retail experts say that centers are increasingly turning to “omnichannel” approaches to drive traffic to centers. Do you think technology has been an effective driver and how will it evolve into the future for these conventional malls?

NE: The use of technology in retail centers really mimics the role of technology in society as a whole. For example, I recently boarded an airplane using an electronic boarding pass sent to me by pdf on my phone. Later that same day, I was touring a shopping center and saw a woman present a coupon in the same way at Michael’s and then watched a gentleman purchase a latte using an electronic image at Starbucks.

Still, shopping center owners should be careful to not overshoot what people want from technology in their centers. A couple strolling through Kierland Commons in North Scottsdale may find that the imposition of too much technology inadvertently interferes with the refuge they may be seeking there from the fast pace of day-to-day life.

In this issue of PLACES, we note that in-demand mall anchors have changed over from conventional department stores to specialty grocery stores and other less intuitive types of tenants. Do you think the trend away from conventional department store anchors is here to stay, even in suburban locations?

NE: Conventional department stores like J.C. Penney, Macy’s and Sears have been declining in purpose for the last three decades, as most of what they originally sold is now offered in more convenient and cost-effective formats ranging from low-cost WalMart stores to big box retailers and warehouses. This trend will continue and likely eliminate up to two thirds of the remaining general merchandise department stores over the next two decades.

Will we see new ground-up mall projects taking shape in the next several years? If so, what can you tell us about design and tenant mix for these centers?

NE: I share the view of many retail and development executives that there should be no new malls built in the United States anchored by only general merchandise department stores. Having said that, however, as many conventional malls cease operations in the coming decades, the need for well conceptualized specialty retail venues will increase, substituting food, entertainment, and attractions for department stores and enhancing the overall experience by offering great places. One of the great challenges of our urban planners and the shopping center industry in general is to distinguish the simple time and cost-effective formats that consumers want in everyday commodity retail shopping venues (like grocery and power centers) from the more complex specialty retail venues that are replacing malls as the places where consumers spend their discretionary time and income.