Preparing for a Figital technology presentation last month at the Latin America International Council of Shopping Centers Conference in Santiago, a thought came to mind.
Urban Outfitters, for more than a decade a fast growing retail chain, cornered by declining brick n mortar sales, has resorted to repurposing its stores to incorporate a Pizza chain from Chicago. Seeking Experience? Seeking to maintain store footage at a reasonable cost? A differentiating or a defensive strategy? Only time will know.
As traditional retail chains face ever increasing competition from E-commerce (25%+ penetration in durables + clothing in US by 2016 according to BI), malls need to quickly reinvent themselves. Although mall visits are not declining yet, sales per square foot continue to erode at a steady pace. Fashion and durables retailers continue to close stores at an average of 5% during the past 5 years in the U.S.
Some mall operators have chosen the path to focus more in experience & entertainment, finding the hard way it is not an easy job. It requires to dramatically change the organizational culture from retailer to entertainment driven, to become more sensible to taste nuisances, and even so, it does not guarantee the return or productivity of replacing brick n mortar retailers.
As the most successful players move towards iconic, experience driven and traffic magnet locations, shedding less popular, traditional retail ones, what is left for the rest? Is there another way beyond repurposing or closing?
A New Model Emerges
We think there is: Figital mall is the mall of the future. It starts by acknowledging that shopping is a key human behavior, and hardly will be done away with. But also, by taking into account that busy interconnected urban life requires a new value proposition from mall operators. A value proposition based on tenants whose stores will serve multiple purposes in the new complex Figital consumer decision journey: traditional retail sellout, Showrooming, and last mile distribution center.
And therefore a new business model will need to emerge, one that we believe gives malls an enviable scale to participate more decisively in the retail experience and transaction. A model where -enabled by technology- the Figital Mall can really be at the heart of the connection between shoppers and retailers, and not just be a realtor, demand creator or entertainment administrator.