On-demand Retail Solutions
A strong IT infrastructure is absolutely critical to supporting retailers’ business strategies. Under the traditional model, most retailers designed, deployed and maintained their own systems. From meeting customers’ increased expectations at the point of sale to multichannel integration to price optimization, however, the complexity of today’s retail operations is such that more and more retailers are taking a different approach and utilizing on-demand, software-as-a-service (SaaS) alternatives to traditional, on-premise systems. Under this model, services are delivered via a network, most often the Web, explained Eric Olafson, CEO, Tomax, a leader in developing Web-based, on-demand retail applications. Chain Store Age spoke with Olafson about the changing environment.
What are the most important trends you are seeing in retail today?
Cross-channel transparency. Retailers want to provide a common, consistent customer experience across all channels. It is what customers expect, from the ability to order online and pick up in the store to an augmented in-store experience with merchandise that is not available in the physical space. Customers don’t care about technical problems. They expect this type of convenience to exist. It’s part of the new normal. But customers’ expectations for a common cross-channel experience currently surpass what retailers can achieve. Most retailers are racing to catch up.
Any advice in this regard?
A real-time transaction infrastructure is key to cross-channel transparency and the “endless aisle’ concept, which is based on real-time visibility to anything, at anytime.
Any other trends?
The other big trend from a retail perspective is the move to a Web-based retail model. This movement to software as a service (SaaS) is a reflection of retailers’ desire to move to an on-demand means of accessing applications from the cloud, or Web, as opposed to owning, managing, installing and maintaining all the applications they now have in-store.
With this approach, retailers can get out from under the cost and responsibility associated with owning and managing all the applications on their own. Instead of buying software, the retailer has a monthly subscription fee. This completely changes the economics of deploying retail applications.
What are the biggest advantages of a Web-based or on-demand IT solution over a traditional one?
The biggest advantage is that it provides the type of real-time environment that is critical to success in today’s marketplace. Other key advantages are significantly lowered deployment/running/maintenance costs, and the ability to support real-time cross-channel integration.
Taking all the retail applications that used to exist in the retail store and moving them to the cloud also simplifies IT management, which can, among other things, dramatically speed up the process of rolling out stores. Also, because the model is simplified, you have an inherent chance of doing things on time and on budget.
How much lower are the costs?
Retailers who implement this type of solution typically see a 30% to 50% reduction in IT life-cycle costs.
Why is real-time visibility so important?
It facilitates a higher level of customer service. If, for example, I know the inventory, pricing and availability of an item in real time, I can convey that information to the customer. It sounds simple, but, currently, it is difficult for a retailer to do with a high degree of accuracy.
One of the most important things retailers have been trying to do recently is to get real-time information from their stores to support analysis of shopping behavior.
Ultimately, you can only solve problems with accurate real-time information.
Tell us about Tomax’s Retail.net solution.
Retail.net is a network-deployed, on-demand enterprise application that takes all the various applications going on in a retail operation and puts them into a central data base — the cloud — which provides a single point of connection to the store. It supports retail operations management in the store, at headquarters, and across all customer channels. It provides retailers with an integrated, real-time view of their customers and operations across channels, while replacing the cost and complexity of traditional retail solutions with a thin, Web-based solution.
Our application is designed to help retailers improve business processes, optimize their resources and simplify their IT infrastructure, improve reliability and reduce IT management costs. The end result is that the retailer has a real-time view of what is going on throughout the operation. Every transaction is continually updated.
Real Estate’s Darling
It isn’t just the grocery-anchored centers that star in today’s retail shopping center format playbill. Sharing the spotlight — and overshadowing the struggling big-box centers — are open-air extensions to enclosed malls, hybrid outdoor centers that feature a mix of power and lifestyle tenants, and town center projects that incorporate a mix of uses from residential and office to hotel and medical.
What gives these formats their edge is the strength of the tenant lineup. And there is no denying the power that supermarkets wield.
“The grocery-anchored center is, simply, the staple of the open-air group,” said Steve Yenser, director of open-air retail for Atlanta-based Jones Lang LaSalle Retail. “It is no surprise that, throughout the downturn and now on the other side, the grocery-anchored center is still the darling of the open-air format.”
Grocery-anchored centers thrive because they fall under the needs-based category, which largely insulated them from the recession. Other product types, Yenser said, are far more reliant on other, less definitive variables.
“Whether lifestyle or mixed-use or power center, the success of one of those products is weighted heavily on where it is located, and on the quality of the underlying real estate,” he said.
All types of open-air centers have fortified the rapidly growing open-air leasing and management arm of Jones Lang LaSalle. The four-year-old division doubled its revenues from 2009 to 2010 and now boasts a portfolio of 80 projects — running the gamut from single-tenant retail buildings to large open-air centers — and approximately 13 million sq. ft.
One of the premier properties in its leasing and management portfolio is The Palms at Town & Country, a redevelopment and expansion of a Miami-area shopping mall that has created a powerful hybrid of big-box retailers, restaurant and entertainment offerings, a supermarket anchor, specialty tenants and a medical and hospitality complex. The now-759,000-sq.-ft. open-air center, located in Kendall, Fla., is anchored by Marshalls, Publix and 24-Hour Fitness. Nordstrom Rack is open, as are Loehmann’s and Loehmann’s Men’s.
As well, “Blue Martini is open, and going gangbusters,” Yenser said, “and Cadillac Ranch and Carmine’s LaTrattoria are under construction.”
Phase one of the Mediterranean-themed redevelopment began opening in 2010, and planning for a second phase is currently underway.
“High-quality, well-located centers such as Town & Country will continue to be dominant,” Yenser said. “It will be based on location, quality of the trade area, and the dynamics of that trade area — and not necessarily just on format.
“Today’s retailers can be players in all kinds of formats.”
Creating relevance: A sure way to attract the right retail players is to shore up an aging, ailing open-air property and make the new iteration relevant to its current and prospective customer base.
That’s precisely what Columbus, Ohio-based Casto did for its Randhurst Village development in Mount Prospect (Chicago), Ill. The company, which partnered with Strategic Property Fund of JP Morgan, took what was the first enclosed mall in the state of Illinois and turned it into a vibrant, innovative, relevant destination.
“The mall had been made obsolete by other properties that had been developed around it,” said Brett Hutchens, president and CEO of Casto’s Southeast operations, based in Sarasota, Fla. “But the center is well located, and the demographics are superb.”
Casto came in with a new idea that incorporates components of a major power center with a lifestyle center and an entertainment venue. Power anchors include The Home Depot, Costco and Jewel-Osco; lifestyle tenants include Borders, Bed Bath & Beyond and AMC Cinema. The center also features Carson Pirie Scott.
“We tore down the interior portion of the mall and replaced it with open-air, Main Street shopping, and have added office over retail as well as hospitality (Hampton Inn and Suites) over retail,” Hutchens said. The project is slated for completion in 2012.
“It is now a relevant product that reflects what the consumers in that area want from a shopping center, in terms of both tenancy and design.”
Meeting consumer needs and creating relevance are, of course, also as essential to the ultimate reception a new-build project receives. Casto’s Park West Village development, in Morrisville, N.C., is bringing a movie theater and a Target to an area that had neither, and it is debuting restaurants and entertainment options that will fill noticeable market voids.
Introducing discount anchors such as Target to communities is a tactic that is serving open-air centers of a variety of formats well.
“A mixed-use, Main Street center, which features a solid mix of tenants, including value-oriented retailers, is gaining traction,” Hutchens said. “Most people across all demographics are value-oriented, and you need to have those tenants in the mix.”
Climate control: Another factor to throw into the mix is the area’s climate. According to Joseph Coradino, president of PREIT Services, LLC, based in Philadelphia, when evaluating an open-air center for eventual success, it is impossible for the area’s weather not to carry weight.
“Clearly the edge goes to enclosed malls in the colder climes,” he said. But enclosed malls have another advantage that also can give them a leg up — and that is the anchoring department stores. “Add that component into a development and you now have a huge point of difference,” he said.
Coradino isn’t suggesting that open-air necessarily takes a back seat to the enclosed mall — there’s plenty of room for both formats, preferably packaged together. PREIT has made a practice of building innovative projects that incorporate the best of both worlds.
Take Voorhees Town Center, for example. PREIT’s nearly 1.5 million-sq.-ft. mixed-use town center project in Voorhees, N.J., melds retail, residential and commercial elements in a town center setting that includes department store anchor tenants Macy’s and Boscov’s, along with specialty retailers, a Main Street boulevard and a city hall building slated to open this spring.
“This particular hybrid format will get the most traction in 2011 and 2012, in my opinion,” Coradino said. “And you’ll see more verticality in mall > environments, the introduction of structured parking and the incorporation of more uses, including outdoor retail components.”
The company’s Plymouth Meeting Mall project is another example of the power that the right format in the right market can deliver. Located in Plymouth Meeting, Pa., the circa 1966 enclosed mall underwent a $100-million redevelopment in 2009 and 2010 that added a Whole Foods anchor and an open-air lifestyle wing that connects to the mall.
“It’s not just the format and the location that will drive the success of these types of projects, but the power of the retail draw,” Coradino said. “Mall owners are continuing to build the power and the strength of their centers. Conversely, these 100,000-sq.-ft. and 150,000-sq.-ft. open-air centers are losing ground to the more powerful enclosed mall/mixed-use developments that incorporate the open-air components.”
Dispelling the Myth
Common thinking has it that social media users prefer online sites to physical stores. But a new survey shows that social media can actually whet consumer appetite for the in-store experience.
Cleveland-based shopping center owner Forest City Enterprises, which has been engaging with shoppers via social media sites since 2008, is active on Facebook, Twitter and its own exclusive social network Shoptopia. In a research study conducted with Alexander Babbage, the developer polled 5,668 of its E-Club and Shoptopia members to uncover their on- and offline shopping habits, and how one impacts the other. Forest City expected to find that social shoppers are heavily committed to the online experience over in-mall shopping. But the results provided a big surprise: Social media users prefer in-mall shopping versus online.
According to the results, an overwhelming majority of the respondents were satisfied to very satisfied with their latest shopping mall excursion. On a scale of one to 10, with one being “very dissatisfied” and 10 being “very satisfied,” 34% ranked their most recent mall shopping trip a 10; 21.6% ranked it a nine, and 22.1% gave the trip an eight. Only a fraction (1.4%) were very dissatisfied with their in-mall experience. On the flip side, only 20.7% were very satisfied with their most recent online purchasing transaction.
“We entered into the study with several pre-conceived ideas about the shopping habits of the people we were engaging with online,” said Jane Lisy, VP marketing commercial management for Forest City. “For example, we believed that people who were engaging with us were more heavily committed to the online shopping experience and suspected that these people preferred the online shopping experience over the in-mall. However, what we discovered was that this group had a very high satisfaction rate with the in-mall shopping experience.”
Two-thirds (67.1%) said they usually find what they are looking for at the mall, compared with 54.7% who usually find success online. Nearly half (49.3%) of shoppers research their purchases online and then head to the mall to make the purchase. Only 16.7% do their research and purchasing online without making a trip to the mall to see the merchandise firsthand.
When asked what motivated them to shop at a mall or a store rather than purchasing online, 63.8% said they like to see and touch the merchandise before buying it. Nearly 62% said they can see more merchandise options when at the mall or a store versus online. And 47.5% said they like to get special deals that are available only at the mall.
In fact, only 0.7% of respondents said they would rather shop online than at the mall.
“The findings lead us to believe that future outreach through social media should be even more focused on communicating the benefits of the in-mall shopping experience,” Lisy said. “We should perhaps be even more focused on using online channels to remind shoppers about what they truly love about the shopping experience.”
What all this suggests is that mall owners and retailers need to up their social networking offerings to engage shoppers, while continuing to deliver the full in-store experience. Because deals are viewed by social media users as a motivator, the research also suggests there is opportunity to grow in-mall sales via online coupons and contests.
“Our findings have allowed us to qualify as well as quantify to a degree the value of our investment in social media,” Lisy said. “Now that we know that social media channels can be an effective way to communicate with an important group of shoppers who are committed to and prefer the in-mall shopping experience, we can make more effective and efficient use of our marketing dollars. A next logical step might be to further explore and measure effectiveness of more targeted messaging by more specific shopping preferences.”