As consumers flock online to shop, retailers are hatching plans to decamp from the mall and test a freestanding model in order to better meet customers’ evolving needs.
While the future of shopping malls hangs in the balance due to their outdated format and COVID restrictions, an increasing number of brands see off-mall locations as a panacea for improving the consumer journey and integrating ecommerce in a seamless way.
In this Roundtable discussion, Level5 Strategy’s Principal Laura Richard, Director Rob Gizzie and Senior Consultant Andrei Flueraru, explore what’s next for big-box retailers, budding brands and consumers in the new retail landscape that may be here to stay.
A number of retailers are opening stores in off-mall locations. What are the pros and cons of this strategy?
According to our speakers, the pros include boosting visibility, providing a customized customer experience and obtaining more cost-effective commercial leases. The con is the shoppers’ inability to browse multiple stores for similar items during a one-stop shopping trip.
Laura: There aren’t any cons, unless the retailer is weak in its ability to pull customers into stores by itself. With an off-mall location, retailers gain greater visibility, are better equipped to control the customer experience and can deliver an end-to-end customer journey. They also gain control over their operating hours. There aren’t many incentives for them to move back to the mall – unless the mall is providing services for all retailers such as curbside pickup and creating a direct relationship with customers to help retailers gain access to new audiences.
“With an off-mall location, retailers gain greater visibility, are better equipped to control the customer experience and can deliver an end-to-end customer journey.”
Off-mall locations are growing in popularity because consumers are increasingly planning for one-stop shopping trips. A lot of shoppers no longer seek a multi-store experience in one destination – they’ve done their homework and know what they’re looking for. If they do visit the store, these shoppers go for education purposes or to try something new.
Rob: The con is the inability to browse. There’s still a convenience trade off in the mall for consumers who want to browse multiple stores that offer similar items. If a shopper is looking to buy an article of clothing – and they’re not comfortable making that purchase online – the mall is likely to provide them with several stores they could visit. In an off-mall location, there aren’t yet as many retail options so shoppers have to drive to a few different places, which is more inconvenient.
Andrei: There are some financial benefits for brands to leave the malls because of high rents. Retailers can invest the funds that they save from this move in improved marketing at off-mall locations to attract customers. They can spend their marketing budget on amplifying their own brand and customer experience, rather than funneling it through the mall for generic marketing.
“There are some financial benefits for brands to leave the malls because of high rents. Retailers can invest the funds that they save from this move in improved marketing at off-mall locations to attract customers. They can spend their marketing budget on amplifying their own brand and customer experience, rather than funneling it through the mall for generic marketing.”
Downtown residents don’t have convenient access to big-box stores such as Canadian Tire, IKEA and Home Depot. What should these retailers do to attract shoppers living in the city core?
Our consultants agree that retail giants need to develop more convenient ways for downtown residents to access their products, whether through showroom concepts or novel education initiatives.
Laura: For buying big-box products (other than ecommerce), there may be room for smaller-format stores that act as showroom concepts while the delivery is carried out in the back-end. This type of model might work well in urban environments, but big-box stores would have to further develop their distribution centre model to support it.
Rob: When big box stores reduce their foot print, which is what they typically have to do in a dense urban setting, it becomes a challenge. In theory, they could open more experiential stores that are supported by ecommerce and offer only a subset of products. Big retailers have launched pilots of this type but they haven’t driven the kind of growth that they hoped for. This is why we’re not seeing more of these stores. At present, the best place for downtown residents in need of products sold by big-box retailers continues to be the mall.
Andrei: This is a customer pain point for downtown residents who want to renovate their condominium or just buy tools. One way for big-box retailers to reach downtown residents is to turn their PenguinPickUp locations into showrooms that feature education programs on various products. The con is that this initiative would work for customers seeking expertise on a specific product or a product category, not a wide assortment of products. Otherwise, they’ll shop online.
“For buying big-box products (other than ecommerce), there may be room for smaller-format stores that act as showroom concepts while the delivery is carried out in the back-end.”
What about the new retailers, smaller brands and entrepreneurs just emerging on the retail scene? Do they need the mall ecosystem in order to survive, or can they set up their own shops?
Smaller and growing retailers need to go where the crowds are, whether that’s a big-box store, bustling urban centre or website generating lots of traffic. Newcomers should consider growing their online awareness before setting up a brick and mortar store. Once they set it up, the space should be used for displaying products that customers can feel, touch and see up close.
Laura: Fledgling brands need to go where there’s critical mass, physically and online. They have to be in a location close to the big-box retailers that attract shoppers so they can benefit from their visibility. Where applicable, they could set up a store within a store to piggy back on the foot traffic. This could take the format of a pop-up store, but with more permanency.
Rob: If their revenue model permits, they could go to high-traffic urban centres. A more likely scenario for brands these days is to build their ecommerce presence first, and then go into bricks and mortar retail. Once they’ve established their online recognition, people will be more willing to seek them out. Online awareness can also enable these brands to distribute to other retailers. Historically, it would have been the opposite.
Retailers also need to reevaluate the purpose of their bricks and mortar foot print and rethink the assortment of products in their stores. They should focus on the products that shoppers can touch and feel and see the quality, design and styling up close. As the role of the bricks and mortar is changing, retailers are also reevaluating the purpose of their store’s staff. They may not need cashiers in the future, but they’ll probably need staff to whom shoppers can turn to for advice and know-how.
Andrei: They can definitely set up their own online shops. The reason they can enter ecommerce first is the result of the changing shopping patterns driven by younger generations. They shop in a much different way than the previous generations. Gen Z and the Millennials are more willing to support local shops and put money towards ma and pa stores than bigger brands. Plus, these two cohorts grew up online, so they’re so much more at ease making purchases without seeing the products in 3D.
“Retailers also need to reevaluate the purpose of their bricks and mortar foot print and rethink the assortment of products in their stores. They should focus on the products that shoppers can touch and feel and see the quality, design and styling up close.”
While off-mall locations may help established retailers improve visibility, deliver a personalized customer experience and achieve cost-saving leases, budding brands should grow their online identity before expanding into brick and mortar.
But as the traditional mall concept goes the way of the typewriter, retail giants will be increasingly pressured to find more effective ways of serving downtown residents – whether through showroom concepts or new education initiatives.