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The Evolution of Anchored Malls and Digital Retailers

Photo Courtesy of marina_larina.

Traditional ‘Anchors Away’

The demise of department store chains such as Sears and Lord & Taylor has prompted mall owners to take another look at what retailers they want as anchors. In some cases, former anchor space isn't be filled by retailers at all but is being transformed for new uses. Apartments are being built in such space sometimes, or office or research and development facilities are being be created there instead. For example, HBC, owner of the Hudson’s Bay and Saks Fifth Avenue retail chains, is turning three former Lord & Taylor stores in the Boston area into state-of-the-art space for life science, a commercial real estate sector that has seen strong demand in that tech cluster.

"We're putting more variety in the anchors," Mueller said.

During a presentation at ICSC's conference, one speaker raised a provocative question: Is the idea of a traditional mall anchor tenant obsolete?

"Anchors aweigh or anchors away?" Nina Kampler, president of Retail Advisory Group, asked show attendees. She questioned whether malls even need a so-called anchor anymore.

"If the traditional department store anchor is not the anchor, who is the anchor and do we need an anchor?" Kampler said. "And is Apple, with perhaps the most productive per-square-footage in any center ... where you have no outside egress and you have to walk through the mall to get to that door ... is that not our new anchor?"

Her point was supported by recent events at American Dream, the megamall in East Rutherford, New Jersey. An Apple store bowed at that property in early December, and hundreds of people lined up to get a first look at the new store. A video shows Apple employees giving high-fives to shoppers and cheering as they came in.

Digital Retailers Get Physical

Somewhat ironically, digitally native retailers, those that began as solely online businesses, have evolved into a booming tenant category for malls. Firms such as e-commerce juggernaut Amazon, Warby Parker, UNTUCKit, Allbirds and singer-entrepreneur Rihanna’s lingerie company, Savage X Fenty, have opened brick-and-mortar locations in malls where they are often in the company of traditional tenants such as Macy's.

Online retailers have found that having what amounts to a billboard at a mall, an actual store, is a smart way to develop a relationship with consumers and drive sales.

Eyewear purveyor Warby Parker is a digitally native retailer opening brick-and-mortar locations. This store is at The Mall at Short Hills in New Jersey. (Linda Moss/CoStar)

"There's this idea of empowered physical retail that I think we're seeing," Ethan Chernofsky, vice president of marketing at traffic analytics firm, said during an ICSC panel. "It's more brands recognizing that there's more value than just the products they sell. It's the eyeballs you gain. It's the ability to try something on. The CEO of Allbirds said [there's] 150% larger basket [purchase] size online when someone visits a store first. And that's a crazy statistic."

Simon Property Group, the nation's largest mall owner, has acknowledged how important digital companies are as potential tenants. Simon recently struck a deal to allow businesses being shepherded by Leap, a startup that helps online brands launch physical spaces, to open locations at some of its mall properties.

"It is our hope that by working together we will continue to both incubate brands through the Leap platform as well as help them expand throughout our portfolio where they can reach hundreds of millions of their target consumers annually," Zachary Beloff, Simon's vice president of leasing, said in a statement when the deal was announced in November.



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