The Great American Shopping Mall, a truly unique 20th century phenomenon, emerged for the first time in the late 1960s and exploded across the United States over the next three decades. Tracking alongside the interstate highway system and embedded in newly formed and growing suburban communities, the Great American Shopping Center hollowed out downtown retailing districts in hundreds of U.S. cities. Local and regional department stores staked out anchor positions in all of those malls, (mostly enclosed but some open-air in warmer climes) and a specialty store industry emerged, which populated mall concourses between those anchor tenants.
First Mover’s Advantages
The first mall built in a community was typically wildly successful, which of course then attracted competition. The second and third malls built feasted on the success born of customers happily taking advantage of a convenient marketplace, new and flexible employment opportunities and the creation of a local community center. By the time a fourth or fifth mall was built, development opportunities became less bountiful. That didn’t stop the developer industry, which pretty much operated under the rallying cry, “If we build it, they will come.” Despite full cognition that productivity was in decline, mall development continued unabated. Then 20 years ago, ecommerce, arrived as a more convenient, and in many respects, more attractive alternative, and all mall bets started to come off the table.
Let’s face it – the retail industry still shoots from the hip far more than it is willing to admit.
The Store Is No Longer in Charge
Within the last decade, many customers, no longer handcuffed to their local malls, stopped coming -increasingly shunning their local mall- anchored department store, which was no longer well maintained, poorly staffed and poorly stocked. Instead, they began to adopt ecommerce with increasing enthusiasm. Ironically, when internet-driven retailing first emerged, many senior retail executives held the view that few customers would ever seek to buy anything more than a book or DVD from a website.
Covid-19: A 21st Century Scourge
And then came Covid-19. In this current crisis customers, who had already embraced ecommerce, went all in, assiduously avoiding shopping in brick-and-mortar stores. Customers who were tentatively engaged in ecommerce went all in as well. And customers who had not yet embraced the internet as a marketplace, but had the wherewithal to shop remotely, have piled in as well. Ecommerce has been doing to the mall what the mall did to downtown retail – hollowing it out. The pandemic has dramatically accelerated this 21st century retail apocalypse, which was well under way before 2020. The pandemic is likely to stay with us right through 2021 and fundamental changes, already taking place throughout the retail industry over the past decade, seen by some as merely disruptive, now become truly apocalyptic.
Darwin in 2021
The super-regional “A” malls (there are 200 to 300 of these throughout the U.S.) will continue to draw customers who choose to shop in a brick-and-mortar setting. But the same cannot be said for the 1100 or so “B” and “C” malls that were already in various forms of distress before Covid. The departure of department stores from these malls has created a mass exodus of apparel and accessory specialty tenants in its wake. The traditional department store, having overplayed its hand by allowing its assortments to become increasingly undifferentiated, its stores to be poorly staffed and its stores, in many cases, to become downright shabby in appearance, is now in the final throes of decline.
Survival of the Fittest
Retailing in the 21st century belongs to Amazon and an increasingly large number of attractive pureplay and omnichannel ecommerce retailers. Retailing in the 21st century also belongs to the sub-discount dollar stores who increasingly blanket the map with tens of thousands of stores. Retailing in the 21st century belongs to discounters like Walmart and Target who have successfully created omnichannel access for their customers, while at the same time improving their assortments and stores’ presentation. And retailing in the 21st century belongs to the big box specialists like Home Depot and Lowes who have successfully subsumed much of their local and regional competition. Additionally, retailing in the 21st century belongs to the warehouse stores, typified by Costco, that do business the old-fashioned way – limited but masterfully crafted assortments, offered at great value in an old- fashioned but never out of style setting of great customer service. Yes, at the top of the food chain, the luxury sector will prevail, but its players will all have to fully embrace ecommerce rather than treat the internet as a déclassé expression that is beneath them.
There Are No Free Rides
Unfortunately, pureplay ecommerce and omnichannel retailing are not panaceas. Retailers’ assortments must be highly relevant. Pricing must be appropriately competitive. Delivery must be free or acceptably priced in the eyes of customers. Logistics costs and end-to-end return processing costs plus margin reductions must be managed differently than they are dealt with today. At the end of the day, fact-based decision making, which most proclaim as sacrosanct but fail to act upon, must become a management imperative. Let’s face it – the industry still shoots from the hip far more than it is willing to admit.
We Humans Remain Hard-Coded Devotees of Retail
I think it is a certainty that consumers, post-pandemic, if they are financially able, will continue to seek newness, fashion and excitement in how and where they shop. Many have suggested that apparel and accessories are ripe for a resurgence. That might just be wishful thinking. Tech, increasingly expensive and all encompassing, will continue to reign ascendant in the minds, hearts, and wallets of consumers for some time to come.
Brands, Brands, Brands
Brands, who used to have real equity, but which have reverted to mere “label slapping,” are dead. Brands that will be successful in the future need to stand for customers’ desires and preferences now more than at any time in the past. Just as customers are not going to shun shopping for things that they want over things that they need, their bias in favor of brands is not going to lessen. But the brands they support must be relevant to customers. They must also deliver, more so than ever before, congruency with regard to utility, fit, fashion, value, presentation and access, all expected by an increasingly discerning customer.
The Future Hinges on Real Leadership
The future of retail will belong to real enterprises, led by real leaders wielding real strategies that appeal to customers and that are built upon real and sustainable behaviors. Opening doors and websites which merely offer “stuff” based upon hunches and allegiance to past practices that may no longer be relevant is a recipe for disaster. Assuming that “Somehow things will all work out, as it may have in the past,” is a fool’s errand in the 21st century. Crafting real strategies requires real skills, whether developed from expertise within or in concert with efforts of real experts from without. “Not Invented Here,” always an unfortunate internal attribute, is particularly dangerous in business today. Real strategies spring from analysis of real data and require constant validation from critically important examination of real performance.
The retail industry’s success is not in doubt. It never has been. But the retail apocalypse that is upon us now, that many viewed as simple disruption, will forever change the landscape of the business before us.