NEW YORK CITY—Is omnichannel the retail of the future? In the view of venture capitalist J. Skyler Fernandes, no—it's retailing now. Speaking to a standing-room-only audience at ICSC's New York Deal Making conference Tuesday, the managing director of Cleveland Avenue cited a recent Harvard Business School study showing that 70% of consumers buy in multiple channels, while just 7% buy only online and the remainder buy only at physical stores. In other words, omnichannel has become the norm.
Even as online and mobile shopping makes further inroads into brick-and-mortar traffic, Fernandes predicted the death of pure-play e-commerce. For one thing, he noted, “Mobile commerce is literally eating e-commerce's lunch.” For another thing, given that a consumer may move across channels between ordering merchandise and taking possession of it, “The line is completely blurring between what is an online sale and an in-store sale.”
Nor is innovation limited to a blending of digital and physical selling. Fernandes noted that there are “lot of disruptive new retail business models,” and posited the “third and fourth dimensions” of retailing: namely, space (using space differently) and time (focusing on experience).
Two retailers that appear to have gotten the memo are American Eagle Outfitters and Eddie Bauer. Fernandes' firm backed the introduction of DRINK, a soft drink bar within American Eagle's flagship store in Times Square, earlier this year. It's a traffic draw, Fernandes told ICSC attendees, in a tourist-heavy neighborhood where many would-be shoppers may not have heard of American Eagle. Meanwhile, at two locations in Bellevue, WA and and Columbus, OH, Eddie Bauer gives shoppers an in-store opportunity to weather-test the company's outerwear by putting them in a room that can be cooled down to 10 degrees Fahrenheit.
The long-term key to retailing growth in the current environment, Fernandes said, is to “become bigger than yourself.” He cited Amazon as the blueprint for this kind of expansion: increase revenues and margins through business development; engage in corporate venture capital; create new business units and make key acquisitions; and innovate by reinvesting cash.
While malls—which in 2017 don't look all that different from the prototype mall that opened in Cleveland 127 years ago—“have yet to figure out how to become bigger than themselves,” Fernandes pointed to a few ways in which they might get there. Manufacturing and selling their own private-label merchandise is one way; two others focus on incorporating residential and dining. He cited Swire Cos.' Brickell City Centre—combining office, dining, hotel and residential components with shopping in the heart of Miami—as a model of the future.
At a previous session focusing on the grocery sector, panelists similarly took an evolutionary but forward-looking approach. The key, panelists agreed, was to strike a balance between in-store and e-commerce while providing a “seamless” experience for shoppers.
Chris Pine, SVP of big box development for GGP, said such a balance entails reaching an inflection point, rather than a hard bright line. “It's not as though tomorrow everything will be online,” he said. Meanwhile, supermarkets are becoming more experiential: Tim Baker, regional VP with grocery giant Albertsons, said his company is the largest franchiser of Starbucks locations. Melina Cordero, Americas head of retail research at CBRTE, moderated the well-attended hour-long panel discussion.
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