The future of shopping

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“Within ten to fifteen years, the typical US mall, unless it is completely reinvented, will be a historical anachronism—a sixty-year aberration that no longer meets the publics’ needs, the retailers’ needs, or the community’s needs.”  So proclaimed Rick Caruso, founder and CEO of Caruso Affiliated, a retail/commercial real estate development firm, at NRF earlier this year.

Is his concern properly placed?  How bad is it?

Bad.  So bad that there is even a web site called “Dead Malls”.  I counted over 400 listed in the U.S. alone.  In some cases the buildings have been converted into educational or other commercial use, in others the parking lot was saved but the mall demolished to be replaced by a big box store.  Many, many others are simply boarded up, closed off to the public, awaiting disposal.

Ecommerce of course accounts for a portion of the impact to the traditional mall, but even now, in the middle of the second decade of the 21st century,  online shopping represents only 6% of total retail commerce, growing at a rate slightly in excess of 15% a year. 

But the internet’s impact has been far greater than just that 6%, it has changed the entire shopping experience, birthing multichannel marketing and the omnichannel consumer.  I don’t think I can singlehandedly save the mall with the remainder of my 900 words today, but I do want to address in broad terms some potential scenarios.

  • Manufacturers as retailers.  If you make a consumer good, this transition is likely inevitable and has been underway for some time already. While you might like to hold out with your traditional distribution model for as long as you can, the demise of the mall may force your hand.  It won’t be pretty, neither the channel conflict nor your noticeable lack of retailing expertise as you attempt to sell direct to the consumer.  There will be no trading off the retailer's brand anymore– for better or for worse, it’s 100% your brand that matters.
  • Retailing reinvented.  As I did with my defense of Boeing regarding it’s Dreamliner outsourcing strategy, where they outsourced substantial portions of the R&D effort  (I believe that despite the initial complications, this is a concept that was, at base, sound, just poorly implemented, and will resurface again), I likewise defend Ron Johnson’s attempts to turn JC Penney around, which in retrospect was probably a poor target for this sort of a transformation, but once again, I believe a similar approach will resurface more successfully with some stronger retailers, perhaps those not stuck with anchor stores in already failing malls.  Johnson saw the warning signs and attempted to reinvent the department store as a city street / square more in tune with the changing expectations of the consumers’ shopping experience.
  • Reinvented malls.  It is telling that Victor Gruen, the father of the enclosed mall, was appalled at what the mall became – stranded amidst acres and acres of blacktop parking lot, a fortress with an asphalt moat.  His vision then, and that of Rick Caruso today, was/is of a more integrated outdoor shopping experience, perhaps the mall as the high street, the social center of a community that includes housing, schools and libraries, even a medical center.  Such a reinvention likely entails the concomitant reinvention of your distribution strategy, with fewer big box and department-type stores and more specialty or category killers.
  • The triumph of the Big Box.  Then again, maybe the reinvented mall never catches on, and in its place: the one-size-fits-all / carries-all distribution center.  A showroom to test and compare, followed by anytime-online ordering, then back to the big box for pick-up.  Bleak, yes, but for all except the higher-end goods, who needs an “experience” when it usually comes down to price and convenience for the bulk of our consumer purchases.
  • Online, all the time.  Five years ago I would not have made this stark of a prediction, but since then, the smartphone has changed everything.  Five years ago, if you had claimed that online shopping would come to dominate retail commerce I would have raised as my first objection the fact that so many people still lacked the broadband internet capability at home necessary to make the transition.  But now the lack of a PC server or laptop at home is no longer an obstacle – everyone has, or will have, a smart phone, and we’ll soon be wondering, ‘smarter than what’?  Everything will be smart – your sneakers, your sweatshirt, your refrigerator, your car, your community.  What will get reinvented is not the mall or even the shopping experience but the social experience as a whole.  Shopping?  Was that something people once did after they got the horses fed?

Which of these, or which combination, if any, will come to pass?  After my bracket-busting disaster in this year’s March Madness (I picked the ONLY twelfth seed not to win (I had no choice - all three of my kids go there), and NONE of the other twelfth seed upsets that did happen) I am loath to prognosticate further. But one thing that is certain is that no matter which scenario comes to dominate the retail space, change is on the way, and you are going to have to get closer to your customer.  You are going to have to know more about them, their changing buying and channel habits, and the type of shopping experience they prefer.  Customer analytics will come to drive your business strategy in recognition of the fact that it has always been the consumer that ultimately decides whether that business strategy is a success or a failure.

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Leo Sadovy

Marketing Director

Leo Sadovy currently manages the Analytics Thought Leadership Program at SAS, enabling SAS’ thought leaders in being a catalyst for conversation and in sharing a vision and opinions that matter via excellence in storytelling that address our clients’ business issues. Previously at SAS Leo handled marketing for Analytic Business Solutions such as performance management, manufacturing and supply chain. Before joining SAS, he spent seven years as Vice-President of Finance for a North American division of Fujitsu, managing a team focused on commercial operations, alliance partnerships, and strategic planning. During his 13-year tenure at Fujitsu, Leo developed and implemented the ROI model and processes used for all internal investment and commercial decisions. Prior to Fujitsu, Leo was with Digital Equipment Corporation for eight years in financial management and sales. He started his management career in laser optics fabrication for Spectra-Physics and later moved into a finance position at the General Dynamics F-16 fighter plant in Fort Worth, Texas. He has an MBA in Finance, a Bachelor’s in Marketing, with a Masters in Analytics currently in progress. He and his wife Ellen live in North Carolina with their three engineering graduate children, and among his unique life experiences he can count a singing performance at Carnegie Hall.

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