Tuesday, January 15, 2013

How can downtown remain competitive in the face of online shopping?

It should come as no surprise that we continue to see the rapid growth of on-line shopping. Virtual and mobile sales now account for 10% of all sales, and experts suggest that number will grow to 20% before long. So how do downtown and neighborhood commercial districts compete? Rest assured, the retail industry is not taking the threat of on-line shopping lightly. There are a few things that we can learn from how the retail industry is responding to the changing nature of consumer shopping habits...

Multichannel retailing – not just for the big guys
Many retailers reported a lackluster holiday season, but Macy’s was not among them [“Macy’s shows it can make big bucks online”, Crain’s New York, 1/13]. Admittedly, Macy’s is closing downtown department stores in under performing markets. On the flip side, the storied department store has figured out a way to turn the threat of online shopping into an opportunity. This year alone the department store has seen a 52% increase in online sales.

Being able to search and buy on-line – even when in the store – effectively allows Macy's to offer more inventory with less space, and move overflow items out of some stores and into shoppers hands before the need to discount. While the future of the downtown department store remains unknown, the ability to turn on-line shopping into an opportunity to grow market share is still a critical play in the downtown revitalization playbook.

For downtown merchants, here are a few options for selling on-line:
  • Create a "downtown" website. Some downtown organizations are helping small businesses by creating destination shopping websites. When retailers combine forces, they can build an on-line identity that plays on people’s desires to buy local. In Oakland, California, the City of Oakland has spearheaded a “Shop Oakland” website that focuses on listing local businesses and highlights their on-line offerings.
  • Creating new venues for on-line sales...it's not just about a website. The term F-Commerce is not yet widely known, but will be soon. Some small businesses are gaining traction selling via Facebook using services like Payvment that provide support for Facebook transactions.
  • Use existing, well known channels for selling. Etsy is another way to build an on-line presence, especially for specialty retailers. 

Offer an Experience, Not Just a Place to Shop
A ropes course at the Palisades Mall in
New City, NY keeps
kids busy while parents shop. 
On-line shopping has also changed the way shopping centers and districts think about their overall tenant mix and offerings. Many shopping centers now try to offer an experience that cannot be rivaled by the comfort of one’s home. On a recent trip to Palisades Mall, a super-regional mall outside of New York City, I noted a new ropes course in the middle of the atrium. Shopping is clearly not the only thing that drives visitors to this mall. According to a recent WSJ article, this trend is growing. Mall owners are adding more “restaurants, upscale movie theatres, supermarkets and other tenants that offer goods and experiences that can’t be found on-line.” Downtowns can and should be thinking about doing the same. 

Make it Convenient
Malls are not stopping at creating experiences either. In an attempt to capture the shopper on the other end of the spectrum, some malls are “reconfiguring more stores to have direct access to parking lots, so shoppers can dash in and out for quick service rather than having to traverse the entire shopping center.”  

So what does all of this mean for the downtown shopping district? First, it means that we have to recognize the need to compete for shoppers on two fronts – first by offering an unrivaled experience that compels visitors to leaves the confines of their home, and second by ensuring that the shopping experience is convenient and easy. That means convincing shoppers that visiting your district will save them time if they only needs the basics, but should they decide to stay, there is an experience to be had. Urban commercial districts are taking the leap, many are ramping up their entertainment offerings in creative ways - encouraging ambient entertainment offerings like musicians, magicians, artists, etc. as well as impulse entertainment offerings, like Jane's Carousel in the Dumbo neighborhood of Brooklyn. 

Spruce up to Remain Competitive
With so little new inventory and construction underway, some of the most well located shopping centers are taking the opportunity to overhaul and reposition their existing asset. "After decades of retail construction...much of the country is overbuilt, and online shopping has crimped many retailers' store-opening plans. In an attempt to keep shoppers coming...mall owners and retailers are shifting to renovations. ["Malls Get Facelift to Pull in Shoppers", WSJ, 12/18].  If competitive shopping districts are upgrading, you need to make sure that you remain competitive by keeping your district clean, neat and well managed.

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