To survive as a brick-and-mortar retailer today? Value pricing and experiences are key

by Dan Rafter

If a bankruptcy judge agrees, Payless Shoes will close 800 stores across the United States this year. Michael Korrs, a maker of luxury handbags, will close more than 100 stores. Children’s clothing store Gymboree looks poised to file for bankruptcy protection soon.

So far, 2017 has been a bad year for brick-and-mortar retailers. Don’t expect the news to improve, either. Credit Suisse is predicting that 20 to 25 percent of U.S. malls will close during the next five years.

The reason for the struggles is well-known by now: An growing number of consumers prefer to shop at Amazon or other online retailers. Brick-and-mortar retailers, especially old-school ones such as Sears and Macy’s, have never found a way to compete with the ease of online shopping.

But there is hope for brick-and-mortar retailers, said Brenton Schrader, vice president of retail leasing and marketing with Chicago-based real estate firm HSA Commercial. Retailers who want to survive today have to offer customers something they can’t find online, whether that means especially valuable deals on merchandise, top-notch customer service or in-store experiences.

“The retailers that are doing well today are doing something particularly well,” Schrader said. “They are doing something that has helped them to avoid the trend that has hit many of the full-price, mall-based retailers.”


Schrader points to The Mayfair Collection, a 62-acre mixed-use retail, restaurant and residential development that HSA Commercial developed in Wauwatosa, Wisconsin. One of the retailers thriving here is Nordstrom Rack.

Schrader said that this retailer is doing well because it offers a selection of high-quality products that rotates on a regular basis. It also offers deep discounts on its merchandise.

“It offers the deep discounts that you don’t find online,” Schrader said. “Customers are seeking out that value experience. They can’t find that type of product at that sort of pricing online.”

Other national retailers such as Old Navy and T.J. Maxx continue to perform well because they, too, offer value pricing that attracts customers seeking deals, Schrader said.

This sort of value pricing is especially important today for apparel retailers, Schrader said. Millennial shoppers tend to spend less of their discretionary income on apparel. Schrader said they would rather spend their money on eating out, entertainment or travel, Schrader said.

When these younger buyers do need to purchase clothing, they’ll often choose retailers that offer lower prices.

“Some try to characterize Millennials as not being consumer-oriented,” Schrader said. “But that is not the case at all. These same consumers will go out to dinner and spend $100 to $200.”

Expertise, experiences

Then there is Total Wine, which operates a location out of HSA Commercial’s Calhoun Crossing development in Brookfield, Wisconsin. This company survives by providing a higher level of customer service and expertise, Schrader said.

Again, the knowledge that the staffers at Total Wine provide is something that customers can’t replicate online.

“If you’re looking for that perfect bottle of wine, the staffers at Total Wine can provide you with everything you need to know,” Schrader said. “That store has such a knowledgeable staff. It makes customers want to come into the store and seek out that expertise. You can’t find that online. You wouldn’t be able to get that personalized customer service and guidance.”

Schrader said that retailers and landlords both have a responsibility to find new ways to drive traffic to shopping centers. This is why so many retailers today have embraced in-store events, whether that is cooking demonstrations or exercise classes.

Schrader said that the Mayfair Collection holds regular movie nights and yoga classes.

“The goal is to encourage customers to come back to the center and to create unique experiences,” Schrader said. “You want to get customers to the center and keep them coming back time and time again.”

Some retailers use these in-store events to encourage future online purchases. This is the omnichannel approach: Retailers rely on their brick-and-mortar stores to showcase their brand and products. Shoppers visit these stores to try out the products. Then, when they get home, they log onto the retailer’s website to buy their merchandise.

The key for this approach is not nabbing sales at these brick-and-mortar locations but getting consumers to come to them.

“The smart retailers are already engaging in more of an omnichannel approach with brick-and-mortar and Internet retail,” Schrader said. “Both are equally useful and should work together.”

This entry was posted in Chicago Commercial Real Estate, Illinois, Illinois real estate, Milwaukee commercial real estate, retail, Wisconsin commercial real estate and tagged , , , , , , , , . Bookmark the permalink.

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