Lou Conforti sees no reason why a shopping mall can’t contain both traditional brick-and-mortar stores and last-mile fulfillment operations for online purchases.
Conforti is chief executive officer and director of Washington Prime Group, Inc., a real estate investment trust that invests in shopping centers. WPG is promoting dual use of its properties, in support of both old-line and online retailing.
E-commerce has been called the death of malls as we know them. Malls, we’re told, are an endangered species, and there’s plenty of evidence to back that statement up, in the form of huge losses and even bankruptcies of the national department-store chains that serve as “anchor” stores for big shopping complexes. Meanwhile, online activity is surging.
Some industry analysts have suggested that malls might be repurposed entirely as “dark stores,” or warehouses dedicated exclusively to processing and shipping online orders. WPG is pursuing a middle path.
Under the brand Fulventory, WPG is offering space within its malls for last-mile fulfillment, buy-online-and-pickup-in-store (BOPIS), and inventory clearance. In the firm’s words, the new service “captures the nexus between physical space and e-commerce, and advances the symbiotic relationship which exists between the two.”
It's far from a new idea. Virtually since the dawn of e-commerce, traditional retailers have been scrambling for ways to support online sales directly from their stores, rather than funneling shipments through big distribution centers that are often located far from buyers’ doors. Some retail spaces are even setting up micro-fulfillment centers within their stores, while others are picking online orders from the same shelves accessible to the in-store shopper.
In all cases, however, the idea is still in its early stages. Introduced early this year, Fulventory began as a beta test of the concept of dual-purpose malls, Conforti says. It was WPG’s response to being saddled with large amounts of empty real estate caused by the desertion of traditional retailers, especially department stores.
Among the firm’s initial efforts is repurposing of a former Sears, Roebuck & Co. location at a mall in Morgantown, West Virginia. The new occupant is WVU Medicine, the affiliated medical system of West Virginia University. The provider “saw the value of proximity to transportation networks,” says Conforti.
He considers the idea as something of a no-brainer. “It has always befuddled me that landlords and tenants don’t acknowledge this symbiotic relationship between [traditional retail and e-commerce],” he says. “Our business has been beset with binary paths.”
The plan takes “unproductive” corridors within malls and devotes them to e-commerce fulfillment. Conforti says retailers are quickly learning that such operations can function as hub-and-spoke networks for local fulfillment. Regional distribution centers, by contrast, are hampered by their distance from most consumers — a serious drawback at a time when online shoppers are coming to expect one-, two- or even same-day delivery of their orders.
WPG says it has concluded “four to five” leases with existing tenants in various locations for fulfillment operations. Meanwhile, Conforti says, the Morgantown Mall is going strong, having recently seen the grand opening of a Dunham’s Sports store and continued operations of Ollie’s Bargain Outlet.
“We’re just beginning,” Conforti says. “We wanted to go slow, to make certain that the physical space and e-commerce dynamic is the right interaction.”
It will take time, he explains, to strike the optimal balance between physical sales and last-mile fulfillment for each tenant at a given location. “Demographic constituencies are going to figure out what that is,” he says, adding that WPG is also promoting varied activities within its malls such as outdoor entertainment, green space, athletic events and craft brewing.
To a certain extent, Conforti believes the decline of traditional retailers and shopping centers was inevitable. “Ninety-nine-point-nine percent of retail space was overbuilt,” he declares, adding that “we got rid of the dreck — we took down non-core [space] from 28% to 6.5%, and our peers didn’t.”
Some retailers might not welcome the presence of fulfillment or clearance operations within the same shopping center, out of fear that those tenants would cut into traditional sales. But Conforti stresses that Fulventory space will be located “within a distinct corridor of our assets, far enough away from your full-price store, albeit one heck of a lot closer than that warehouse near the airport where there’s no chance whatsoever to upsell an additional item.”
Tenants will also be able to use that segregated space for inventory clearance, “as it provides a discrete sales location, hence maintaining separation between full price and discounted merchandise,” Conforti adds.
For the moment, each space set aside for e-commerce fulfillment will be dedicated to a single tenant. But Conforti sees no reason why the concept can’t be extended to a multi-user operation
He views the dual-use strategy as vindication for the American shopping center, albeit by requiring a redefinition of that space. “We should embrace that kind of fluidity with respect to our assets,” he says.
Timely, incisive articles delivered directly to your inbox.