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Published: Feb 16 2015

Relax, Retailers: Centers Still Top as Shopping Destinations

With the rise of e-commerce, the shopping landscape has inevitably evolved to better meet the expectations of today’s consumer.

However, a study shows that it is far from time for shopkeepers to lock up. Rather, commercial properties are thriving more than ever.

The International Council of Shopping Centers (ICSC) conducted a study on the health of the shopping center industry to uncover a symbiotic relationship with its e-commerce counterpart. Its conclusion is based on four main findings.

Favorable demographic trends.

Retail supply has remained constrained since the last recession ended 5 years ago as demand has steadily risen, resulting in a healthy shopping climate. Shopping center vacancies have dropped and rents are rising; retailers plan to open more than 40,000 stores over the next 12 months and more than 72,000 stores over the next 24 months. Among these future brick-and-mortar stores will be formerly online-only retailers such as Athleta, Bonobos, Boston Proper and Warby Parker.

“The opportunity online is synergistic with our retail strategy and creating beautiful, profitable freestanding stores just complement our Web business in several ways,” said Neil Blumenthal, co-founder of Warby Parker.

Landlords are also successfully broadening the appeal of their shopping centers with a creative tenant mix that can be tailored to meet the needs of increasingly important demographic groups, such as baby boomers and millennials.

Omni-channel supports foot traffic and higher sales.

The study revealed that consumers who shop both online and in-person spend an average of up to 3.5 times more than a single-channel shopper.

In the report, Macy’s CFO Karen Hoguet said that shoppers tend to shop more online when they also have a store to visit in their neighborhood. “So, if we were to close this store, we not only lose the store sales, we also often lose [online sales]…” Hoguet said.

Having both an online website and brick-and-mortar gives the retailer different ways to interact with its shoppers. According to the study, a well-executed omni-channel strategy includes giving the shopper the option to buy products online and pick them up in-store as well as buy products in-store for home delivery.

Improved center productivity and appeal.

As the U.S. experiences continued population growth, a natural new demand for goods and services is created. The new shopping center supply grew at its slowest pace in 40 years in 2013, and the industry is wisening up to customer demands by creating destinations that are complete with merchandise, food and entertainment options.

Mark Toro, a partner at North American Properties, expounds on this within the report: “Back in the day when shopping centers were being built in every suburb, all you had to do was line up the retailers and provide convenient and easy access, and people would come shop. We have turned that on its head now: Instead of providing the most convenient, quickest way to shop, we are providing guests with a place to be, which extends dwell times.”

Spending mainly in-store.

While people may be spending less time in stores, in the end, 94% of total retail spending is still done in physical stores. Known as “webrooming,” the Internet has enabled shoppers to research and price compare products and brands online to save time and money when they ultimately make their purchase in-store.

What is known for certain is that customers want a physical space that allows them to interact with the merchandise and service professionals and gives them a ‘third place’ away from home or the office to have a social experience, dine or be entertained,” said Michael Kercheval, ICSC President & CEO.

View the ICSC’s full report.

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