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When malls were the disruptors of retail

BY CSA STAFF

To work in retail is to accept the inevitability of déjà vu. But what returns is often never quite the same, as can be seen in the current struggle by many shopping malls to generate enough traffic to remain viable. Let me take you back to the days of my initiation to retail in New Orleans (site of next week’s National Retail Tenants Association conference), when malls began rising in former fields and woodlands and store owners in all regions struggled to manage the change.

Before malls, North American consumers were serviced by small shops and, most important for our story, by thriving regional department stores. My family owned and ran one of them, Krauss Company, on Canal Street in New Orleans. Founded in 1903, it soon filled an entire city block — five stories (about 300,000 sq. ft.) connected to a warehouse by a four-story bridge riding low above Iberville Street. It sold clothing, shoes, books, appliances, bicycles and — its specialty — bolts of cloth for the many women of the Crescent City who still made their own clothes.

For most of the last century, department stores like Krauss were signature destinations in American cities, as important to the local economy and local atmosphere as major hotels and office buildings. Then came the malls, which took retail into the new American suburbs, not as individual chains but as grand, enclosed market squares containing multiple retail brands.

In 1969, when my father, Ludwig Behr, took over Krauss as chief merchant, the big question on the minds of department store operators was whether, where, and how to expand into the new malls. Expansion required capital investment and would risk cannibalizing sales at the flagship. The other two major department stores on Canal Street — Maison Blanche and D. H. Holmes — had already accepted the challenge and had grown into small but robust regional chains. Krauss had three affiliated stores in small Louisiana towns, but none carried the Krauss brand, all were much smaller and, most important, they also had no presence in suburban markets.

Krauss drew up plans for placing anchor stores in two suburban malls. The first was to be a three-story, 50,000-sq.-ft. full-service operation. Quickly enough, the lease was waiting to be signed in New York. It never happened. After my father died unexpectedly at the age of forty-eight (in 1970), enthusiasm waned for the project. Expansion plans were soon abandoned in their entirety. Krauss remained a beloved single-store monument in downtown New Orleans.

One by one, the great regional department stores were bought up or closed. In the 1980s, both Holmes and Maison Blanche were made into hotels. Of the big three, Krauss was the last to go, in 1997. Eleven years later, it was turned into a residential condominium. The bridge survives, connecting the condos to a hotel made from the old warehouse.

And now, déjà vu: Those great malls that had helped so upset the tradition of regional department store retailing are not, themselves, able to stand as sea walls, holding back the tide of retail history. Even as management at Krauss was debating expansion into malls, a computer terminal was brought into my high school for the first time, on an experimental basis. It was a bit smaller than a Volkswagen Beetle and nothing but a curiosity except to a handful of boys who could not get dates and who walked around with programmers’ punch cards in their breast pockets. Jump forward to now, and descendants of the microchips in that ungainly box are powering the online retail revolution. They have done it by changing how direct response marketing reaches customers and delivers product.

If history tells us one thing, it is that seeking ways to deal with expected new developments is essential but it is not enough. The winners will continue to be those who have the capability, flexibility and sometimes the simple good luck to handle change that is unforeseen. The only thing that is certain about change is that it will come.


Alan Behr is a senior partner at the New York office of Phillips Nizer LLP, where he chairs the firm's fashion practice.

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A.Bermant says:
Sep-28-2017 07:55 pm

When Malls were the Disruptors of Retail
Thank you, Alan Behr, for your article. My father, David W. Bermant, was one of those agents of change back in the late 1940's early 50's through 70's that created the anchored strip center and shopping mall. One of his first projects was in Buffalo, NY where he convinced McCurdy's and Sears to open up suburban stores to anchor the retailers in the shopping center. My father then went on to build and own 22 shopping centers through the northeast and midwest - city's and town's that were "only a one day" trip by airplane at the time. He was very successful even though his interest flagged as Mel and Herb Simon and Sam Zell and others began building more and more. The good news was the development of the strip center and shopping mall was clearly a disrupter providing customers with product closer to home. The downside was that the development of shopping centers decimated urban centers causing decay and urban flight. Finally after 50 some-odd years, we're swinging back around to where urban shopping is the fun thing to do again while at the same time we can get our necessities either on-line or in our local suburban neighborhoods. Some malls will die and/or become new urban enters. But one thing is certain as you noted, change will come. For more information about my father, you can visit www.cermakplaza.com or www.davidbermantfoundation.org. Andrew S. Bermant National Shopping Centers, LLC

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ECOMMERCE

Discount giant now lets customers use food stamps to pay for online orders

BY Deena M. Amato-McCoy

Walmart customers that receive government assistance can now shop for food online.

The discount giant is allowing customers enrolled in the Supplemental Nutrition Assistance Program (SNAP) — the formal term for food stamps — to place online orders. However, the program does come with one loophole.

Federal guidelines require SNAP members to pay for their food in person. To adhere to this requirement — and still enable customers to take advantage of its online ordering and pickup service — the discounter allows shoppers to use their food stamps to pay for their transaction when they retrieve their order at their store’s Online Grocery Pickup location.

Currently, the service is being tested in one store in the Houston area and four location around Boise, Idaho. Walmart plans to expand to “more markets through the holiday season and beyond,” Mike Turner, Walmart’s VP of e-commerce operations, said in the company’s blog.

“Everyone deserves this kind of satisfaction,” he said. “Convenience shouldn’t be dictated by the way you pay.”

This is the newest program that benefits customers using electronic benefits transfer, or EBT, to pay for their food purchases. In August, Albertsons joined a two-year pilot program that enables SNAP participants to shop online and have their groceries delivered. The service is available in Albertsons' Maryland, Oregon and Washington State divisions.

Meanwhile, in June, Walmart’s online rival Amazon announced that individuals participating in EBT government assistance programs can sign up for a Prime membership at the discounted rate of $5.99 per month. The regular annual membership for Prime is $99 per year, or $10.99 a month for those who prefer to pay monthly.

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MARKETING/SOCIAL MEDIA

Price is not the biggest driver for the first native digital generation

BY Marianne Wilson

Social media plays a huge role — bigger than pricing — when it comes to influencing the purchase decisions of Generation Z.

That's according to initial findings from IRI's ongoing study into the shopping attitudes and behaviors of Gen Z (individuals aged 21), which has the distinction of being the first native digital generation. It found that Gen Z is two to three times more likely to be influenced by social media than sale or discount pricing when making purchasing decisions, making them the only generation to be more driven by social media than price.

"It is clear that Gen Z will be different from Millennials and the generations before them on many levels — on top of being the most culturally diverse shopper population to date, Gen Zers are already forming unique purchase motivators and preferences,” said Robert I. Tomei, president of consumer and shopper marketing and core content services for IRI. “It will be critical for manufacturers and retailers to have a deeper understanding of these young shoppers as they gain influence and purchasing power, and leverage the power of personalization to reach them."

Initial survey findings from IRI of those aged 14-21 include:

Brick-and-mortar holds its own against online. Gen Z sees both brick-and-mortar and online retailers being equally able to deliver the brands they want — a large product selection, low pricing and enjoyable shopping experiences.

Ease of the shopping process has substantial influence. Gen Z is more likely than any other generation to choose a retailer based on how easy it is to find what they want, including Millennials.

It’s not just a price game for Gen Z. The ability to find what they’re looking for in the store is as important in driving retailer choices as low prices.

IRI’s survey also found that as the first native digital generation, Gen Z expects to find savings at the touch of a button. More than 25% of Gen Z members already engage with retailer apps for discounts and promotions, compared with 33% of Millennials. These findings confirm the digital, social-centric shopper experience Gen Z will seek out, whether shopping online or in-store.

“Our work with Gen Z to date suggests that they reject inauthenticity and being ‘marketed to,’ but they are not against marketing and advertising altogether,” said Lynne Gillis, principal of survey and segmentation for IRI. “What makes Gen Z different is they see and embrace the opportunity to be influencers, whether it’s among their own circle of friends or a broader audience. This has tremendous implications for how brands and retailers engage them in the marketing and advertising process.”

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