Death of the Shopping Mall? Consumer Goods Manufacturers Adapt
Who will sell consumer product five years from now? And where? The decline of shopping malls, the rise of online shopping and changing consumer habits require consumer goods manufacturers to rethink their approach to moving goods. Getting a spot in a mall anchor’s floor may no longer be the best way to sell products. Sensing demand and meeting consumers where they want to shop is the smarter move.
“Within 10 to 15 years, the typical US mall, unless it is completely reinvented, will be a historical anachronism—a 60-year aberration that no longer meets the publics’ needs, the retailers’ needs, or the community’s needs.” A comment from Jeff Bezos? Hardly. Those words came from Rick Caruso, founder and CEO of Caruso Affiliated, a retail/commercial real estate development firm, at the 2014 National Retail Federation Expo and Conference.
If a substantial percentage of consumer products are sold through retail stores at malls, it’s safe to say manufacturers have already investigated alternate channels. And while this issue seems more strategic than technical, your organization’s ability to use data, sense demand and respond quickly to marketplace changes is critical for moving forward in this rapidly changing landscape.
This is not just a shift to e-commerce. While the internet accounts for a portion of the impact to the traditional mall, it doesn’t tell the whole story. Even now, online shopping represents only 6 percent of total retail commerce, growing slightly more than 15 percent annually.
But the internet’s impact has been far greater than just that 6 percent. It has changed the entire shopping experience, birthing multichannel marketing and the omnichannel consumer. To compete in the future, CPG manufacturers need to consider several operational areas and the ways data and analytics play key roles in their success:
Manufacturers as retailers. If you make a branded consumer good (think Nike and Apple), this transition is likely inevitable and has been underway for some time already. While you might like to hold out with your traditional distribution model for as long as you can, the demise of the mall may force your hand. Channel conflicts and a lack of retailing expertise will make it more difficult for manufacturers to attempt to sell directly to the consumer. No more trading off the retailer's brand. For better or for worse, the manufacturer’s brand is all that matters now. Using existing data can help identify efficient ways to advertise, manage social media, optimize pricing, understand consumer behavior and determine omnichannel strategies.
Reinvented malls. Victor Gruen, father of the enclosed mall, was appalled when malls became stranded amid acres of parking lot, a fortress with an asphalt moat. His vision is shared by Rick Caruso today: they both envision the mall as the social center of a community that includes housing, schools, libraries and hospitals. Such a reinvention entails the sychronized reinvention of consumer goods manufacturers’ distribution strategies. What will people expect at these centers versus what they experience in a Big Box store or online? Assortment planning, mostly a retailer concern until now, will become a CPG concern as those organizations begin to understand what sells at which sites.
Placating the Big Box. Big Box stores already have changed the nature of the CPG world because of limited stock in inventory, shortened lead times and quick turnovers. Manufacturing organizations need to adopt skills like demand sensing and size and pack optimization. The future could potentially offer a showroom to test and compare, followed by anytime, online ordering, then back to the Big Box for pick-up. Adapting consumer products to this convenience-oriented, low “experience” setting is critical.
Online, all the time. Five years ago, online shopping could not dominate retail commerce because the broadband internet capability wasn’t there. The smartphone has changed that. Soon everything will be smart – sneakers, refrigerators, cars, entire communities. Need a new pair of running shoes? A reinvented shopping experience could mean shoppers will swipe a smartphone over the existing pair to automatically order new ones. Let the smart refrigerator place an order with the grocery store (imagine the stress of marketing a new product in that scenario). Like a certain style of sweatshirt in a very specific color? Custom design it on site and have it shipped. The way shopping happens today will seem like something people did after they fed horses and put away the wagon.
Leo Sadovy is responsible for marketing in the manufacturing industry at SAS.
“Within 10 to 15 years, the typical US mall, unless it is completely reinvented, will be a historical anachronism—a 60-year aberration that no longer meets the publics’ needs, the retailers’ needs, or the community’s needs.” A comment from Jeff Bezos? Hardly. Those words came from Rick Caruso, founder and CEO of Caruso Affiliated, a retail/commercial real estate development firm, at the 2014 National Retail Federation Expo and Conference.
If a substantial percentage of consumer products are sold through retail stores at malls, it’s safe to say manufacturers have already investigated alternate channels. And while this issue seems more strategic than technical, your organization’s ability to use data, sense demand and respond quickly to marketplace changes is critical for moving forward in this rapidly changing landscape.
This is not just a shift to e-commerce. While the internet accounts for a portion of the impact to the traditional mall, it doesn’t tell the whole story. Even now, online shopping represents only 6 percent of total retail commerce, growing slightly more than 15 percent annually.
But the internet’s impact has been far greater than just that 6 percent. It has changed the entire shopping experience, birthing multichannel marketing and the omnichannel consumer. To compete in the future, CPG manufacturers need to consider several operational areas and the ways data and analytics play key roles in their success:
Manufacturers as retailers. If you make a branded consumer good (think Nike and Apple), this transition is likely inevitable and has been underway for some time already. While you might like to hold out with your traditional distribution model for as long as you can, the demise of the mall may force your hand. Channel conflicts and a lack of retailing expertise will make it more difficult for manufacturers to attempt to sell directly to the consumer. No more trading off the retailer's brand. For better or for worse, the manufacturer’s brand is all that matters now. Using existing data can help identify efficient ways to advertise, manage social media, optimize pricing, understand consumer behavior and determine omnichannel strategies.
Reinvented malls. Victor Gruen, father of the enclosed mall, was appalled when malls became stranded amid acres of parking lot, a fortress with an asphalt moat. His vision is shared by Rick Caruso today: they both envision the mall as the social center of a community that includes housing, schools, libraries and hospitals. Such a reinvention entails the sychronized reinvention of consumer goods manufacturers’ distribution strategies. What will people expect at these centers versus what they experience in a Big Box store or online? Assortment planning, mostly a retailer concern until now, will become a CPG concern as those organizations begin to understand what sells at which sites.
Placating the Big Box. Big Box stores already have changed the nature of the CPG world because of limited stock in inventory, shortened lead times and quick turnovers. Manufacturing organizations need to adopt skills like demand sensing and size and pack optimization. The future could potentially offer a showroom to test and compare, followed by anytime, online ordering, then back to the Big Box for pick-up. Adapting consumer products to this convenience-oriented, low “experience” setting is critical.
Online, all the time. Five years ago, online shopping could not dominate retail commerce because the broadband internet capability wasn’t there. The smartphone has changed that. Soon everything will be smart – sneakers, refrigerators, cars, entire communities. Need a new pair of running shoes? A reinvented shopping experience could mean shoppers will swipe a smartphone over the existing pair to automatically order new ones. Let the smart refrigerator place an order with the grocery store (imagine the stress of marketing a new product in that scenario). Like a certain style of sweatshirt in a very specific color? Custom design it on site and have it shipped. The way shopping happens today will seem like something people did after they fed horses and put away the wagon.
Leo Sadovy is responsible for marketing in the manufacturing industry at SAS.