Message to Malls: Less Donald Trump, More Sam Walton | RetailNext
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Message to Malls: Less Donald Trump, More Sam Walton

Bryan Wargo
Bryan Wargo
Head of Worldwide Sales

In a retail climate where “zombie malls” have become not only real but somewhat prevalent, the message to malls is it’s time to change, becoming much less Donald Trump and much more Sam Walton.

Today’s retail industry is challenged with store closings and bankrupt brands, and all across the rugged retail landscape, retailers of every ilk are struggling just to keep their heads above water. The environment has been relatively indiscriminate too, as young, upstart businesses like Wet Seal, Nasty Gal and True Religion have struggled alongside old stalwarts like Sears, Payless and Macy’s.

Not immune to the pressures of this retail reality is, of course, mall operators. Nearly every day I sit down with mall executives and talk about the challenges they face, which, quite frankly all roll into one common trait:  Less and less retailers are talking about opening stores.

My response to them usually takes them off stride a little. You see, less and less retailers talking to malls about opening stores is a good thing. My message to malls:  You need to be less Donald Trump and more Sam Walton.

 

Let me explain.

For the most part, mall operators, particularly those in the United States, have primarily been leasing agents, hunting down brands to sign rather standard 10-year lease agreements. For years – generations, even – they’ve viewed the mall business as a landlord, and thought in terms of lease-driven strategies, collecting rent checks and milking one very productive cash cow.

Times have changed, and some lesser tier malls probably need to go away. As for the rest of the malls, some of whom are enormously successful even today, they need to change their approach away from being a landlord and more toward being a Sam Walton-like merchant.

Sam Walton, the founder of Wal-Mart (NYSE:  WMT), has been called many things over the years, but a common description, from friend and foe alike, is that of the “ultimate merchant.” Walton created a retailing empire – Wal-Mart’s current market capitalization is over $226 billion – by following the simplest of retailing premises:  offer the product assortment shoppers are most interested in, and strategically place product throughout the store to maximize exposure, engagement and sales.

Now, here’s the need for a mind shift. Think of malls as essentially huge Wal-Marts, but instead of selling products, they’re “selling,” to shoppers, a curated selection of retailing brands for shoppers to in turn patronize.

Thinking as a merchant, malls purposefully assort their spaces with the right brands, in the right locations, empowering a play between brands and their adjacency, and delivering a cohesive synergy. Doing so provides a reason for people – shoppers – to be there, and in the omnichannel world we live, work and shop in, getting people to the mall is at once both biggest challenge and biggest opportunity.

Simon Property Group CEO David Simon told analysts just last week that while stores have their work cut out for them, malls have plenty to do as well. “I’m hopeful that they’re (stores) going to reinvest in their stores, improve their inventory mix and service their customer better,” Simon said. “And, by the way, we’ve (malls) got to have the same pressure on us to do that. So, it’s a two-way street. We are up for the challenge.”

Shopper traffic to malls is, for the most part, surprisingly pretty flat, and even up for Tier A malls. The retail challenge in malls is that shopper missions are now so much more targeted than they were in the past. Long gone are the days of a shopper going to the mall and browsing through upwards of 20 stores in a single visit, replaced now by shopping missions entailing a store or two and then a quick exit.

So, what’s a mall to do to think more like a merchant and build out a store portfolio – the products, if you will – that entices greater shopper engagement?

First things, first:  before a mall can revamp its retailer selection process to pick the right tenants who create synergy within the malls and attract shoppers, it must first get better data and analytics about … shoppers!

Historically, malls don’t know much about shoppers who visit. Mall apps and loyalty programs have been relatively ineffective, and lag well behind those of the retailing brands themselves. In fact, with their control of the POS system, retailers have all the data – well, that of buyers at least.

Increasingly, malls are beginning to gather shopper information, validating traffic counts, determining which stores are visited, and most importantly, understanding shoppers’ demographic profiles. And, as valuable as that information is to the mall, it’s every bit as valuable to the retail tenants.

Tenants want to know – need to know – data about mall shoppers. For everyday shopping, special events and functions, they want to know not only what percentage of overall mall traffic represented their target markets, but what percentage of that target actually visited their store, how that percentage compared with other brands in their segment and, ultimately, conversion – did anyone actually buy something?

For example, if a special event at the mall drew 5,000 guest lift, a brand like H&M is much more interested in the number of additional guests who were women aged 15-25 than the total number of additional guests. After all, what would be the benefit for H&M if the entirety of the lift was men, aged 40-plus? Then, if it was determined 350 of those additional guests visited the H&M store, how valuable to H&M would be a comparison to the lifted experienced by Zara and Uniqlo?

As mall operators transition from landlord to merchant, the relationships with retailers shifts more toward true partnerships, with a two-way sharing of information and shopper insights. Both parties have very vested interests in the success of one another.

One of RetailNext’s customers, b8ta, is an example of this new merchant way of thinking. b8ta is about shopper experience and discovery, and its business model isn’t built on revenues from sales. Malls are really b8ta stores on steroids.

Merchant malls are coming. Disney Springs in Orlando is a good example, with short three-year releases, performance expectations and an almost Draconian focus on conversion and sales. There will continue to be a retail shakeout over the short-term, and malls simply can no longer afford underperforming stores among its assortment.

Join the #retail, #inspiringretail and #SmartStore conversations on Twitter @bryan_w1 & @RetailNext, as well as at www.facebook.com/retailnext.

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