From the beginning of commerce, business has always been channeled through ports—whether it was waterways, railroads, highways, airports, or otherwise—and major markets have always grown around these portals. Just look at London, New York, or any other alpha city that originated on a sea port, or the gateway cities such as Chicago, Dallas, and Atlanta, where airports have led to explosive growth (not to mention more than $30 billion of annual economic impact to their respective regions). The fundamental difference today is that these portals are so concentrated, they are on our desk and in our pockets everywhere we go.
We are seeing huge markets develop around these new age ports. The traditional ones have not gone away, in fact, they have gotten bigger and better, and all remain integral to commerce and the delivery systems that provides for such. Retail has become one of the largest industries in the world, a cornerstone of the global economy, and retail commerce is central to the economic and social systems of our communities, with consumer spending representing 70 percent of the country’s GDP.
Retail has always been a dynamic environment tied to many factors, including consumer behavior, culture, wealth, etc., and technology, whether automobiles, refrigerators, televisions, credit cards, or computers, has always had a disruptive impact on the industry and been the catalyst to major transformations. Just think about the changes over the last century, from local traders and merchants selling one category of product, to mailorder merchants selling every essential, to variety stores, to department stores and supermarkets, to malls, to discount stores, outlet malls, power centers, lifestyle centers—you get it. The key to success has always been adapting responsively to the new normal as our markets evolve.
Never has there been a greater impact on the retail market than the internet and mobile phones, and never has there been greater reward for harnessing the value of that impact.
Omni-channel retail sales punctuate this fact, as consumers this past holiday season were more aggressive online than ever before, from Black Friday to Cyber Monday, where online sales climbed by 20 percent. The most significant increase came from mobile, which grew by 50 percent. Almost one-third of purchases were made on a mobile device (phone or tablet) over the holiday season, up significantly from one-fifth a year ago. Overall e-commerce sales grew 12 percent year over year. Now representing 6 percent of total retail sales, vs. 1 percent when we launched The Retail Connection 10 years ago.
Google is still the gatekeeper to online shopping, with more than 40 percent of e-commerce orders originating on its searches. Email marketing accounted for 16 percent of e-commerce orders. Interestingly, social networks generated less than 2 percent of e-commerce sales during the holiday shopping season—essentially the same as last year, while mobile grew from 3.7 million shoppers in 2009 to 25 million in 2013 and is expected to grow past 50 million by the end of next year.
Competition clearly makes us better, sharper, and stronger, just as it is doing with traditional bricks and mortar stores and online retailers. The winner is going to be the consumer, as well as retail chains and retail projects that optimize the integration of their traditional and digital platforms. We are seeing significant changes in the way consumers shop, where they shop, and when they shop. Stores certainly allow for an experience online cannot deliver. However, at the same time, consumers expect a consistent experience across all channels, as more than 80 percent of shoppers’ research products both online and in store before making their purchases.
In today’s omni-channel world, many retailers will need to reestablish the role and function of their stores to differentiate their business and leverage their physical advantages. Retail developers clearly must do the same with shopping centers. The complexion, utility of space and shopping centers as a whole is clearly going to be impacted. Retail is going to continue to change faster than ever, from store design such as pick-up zones and the integration of interactive kiosks to mobile applications that make purchasing quick and more convenient.
In the process, we are going to see portfolios change, as store locations are right-sized, added, eliminated, recycled, and/or repurposed, as retailers become interconnected multichannel businesses. These retail real estate transformations will require structural and operational changes and will take time and innovation to address; however, stores and shopping centers will clearly remain central to the multichannel experience.
By the way, Dallas, a city that has grown from a trade post on the Trinity River to a 188 million-square-foot retail market, which, along with Austin and Houston, is one of the three fastest-growing cities in the country. With its partner Fort Worth, it’s on track to become the third-largest metropolitan area in the country by 2020—game on. Clearly, portals will continue to evolve and create tremendous opportunities in the process; and Dallas-Fort Worth will continue to adapt responsively to these changes. The best retailers and developers recognize how connected everything is, will continue to embrace change, and adapt responsively, as we look forward to retail stores’ and centers’ best years ahead of us.
Steven A. Lieberman is CEO and co-chairman of The Retail Connection. Contact him at [email protected].
