Shopping Center Business is the leading monthly business magazine for the retail real estate industry.
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TECHNOLOGY 150 • SHOPPING CENTER BUSINESS • December 2016 price products instantly in the palm of their hand. Online shopping is not new, but the mobile component has changed the dynamic in fundamental ways by de- mocratizing pricing, but also by reward- ing efficient retailers and punishing inef- ficient operators. Smart phones enabling on-the-spot digital price comparisons, now instantly verify buying opportuni- ties and disqualify bad buys, leaving con- sumers more confident to execute most "commodity" retail transactions based upon the two most important factors con- sumers consider in basic retail purchases: price versus convenience. With unlimited access to a growing constellation of apps and specialized websites, consumers have the power to compare and contrast pric- ing and features like never before. The basic structure of commodity retail — price versus convenience — is not dis- rupted by the influence of technology, but rather, it is supercharged by allowing con- sumers to make faster and better choices about where to get what they need at the right time and at the best price. While not impacting retail nearly as much as advertised, internet shopping options do in fact vastly increase the consumer's op- tions to procure goods within the price versus convenience paradigm. This can lead to, in some cases, better pricing for the consumer willing to wait, but just as often, it leads to the consumer uncovering sources for products unavailable through ordinary brick-and-mortar channels, and the creation of new sales. REALITY: EMPOWERING RETAILERS Of course, technology, while a pow- erful tool used by consumers, is also an equally potent resource for retailers to connect directly with the minds and wal- lets of consumers. Retailers can now track consumer movement in real time and transmit advertising messages directly to targeted consumers through mobile de- vices. Retailers, realizing that consumers are going to access this information one way or another, now reward consumers handsomely in many cases simply for downloading their apps, all in order to acquire a more direct role in the decision making process. These innovations help to shape consumer behavior, but they also make buying easier and smarter and allow consumers to buy goods more efficiently. TECHNOLOGICAL SYNERGY Technology is not only influencing the decisions consumers make, but it is also making it possible for retailers to estab- lish new ways to conduct business (such as using online stock to initiate a physical sale, and vice versa). It is also contributing to the creation of new brick-and-mortar concepts that leverage technology in new ways. Technology and brick-and-mortar retail are far from mutually exclusive, but rather, highly interdependent and complemen- tary. Retailers are getting increasingly sophisticated with their multichannel operations. Consider the apparel sector where nearly 30 percent of apparel sales take place online, yet new discount ap- parel stores seem to be popping up every day. This is possible because the savviest apparel retailers are embracing technolo- gy to enhance the customer experience. This enables these retailers to offer more styles, colors and choices than ever before — all at the right price. And what exactly is the right price? At the nation's largest retail store — the new 1 million-square-foot Nebraska Furniture Mart in Plano, Texas — most displays are equipped with an electronic price mod- ule capable of instantly adjusting product prices based on real time market condi- tions. Here, prices are adjusted perpet- ually as supplier incentives and market pricing data changes. The goal is to sell consumers on the idea that they will al- ways get the best price in the store, if they act while the iron is hot. PERSPECTIVE The better retailers employ technol- ogy, the more likely they will be able to allocate resources and direct smart tech investments. Faced with pressure to drive sales however possible, some retailers are choosing to spend heavily on internet distribution technology while others are spending little or nothing at all. Some, like Walmart with its recently announced $3 billion purchase of Jet.com, are spending billions to access new markets, while oth- ers, like Aldi and TJX Cos., are reaping major market share gains the old fash- ioned way — by buying better, pricing sharper and building more stores. So, who has it right? Only time will tell, but with recent history as our guide, we struggle to find traditional retailers who are actually re- alizing profits in the online portion of their operations. Staples, for example, is the second largest internet retailer in the country behind Amazon, and despite the fact that brick-and-mortar sales account for the majority of its profits, the office supply retailer continues to invest heavily in its online platform — with little or no return on its investment. Amazon reports it loses billions annually on shipping to its best Amazon Prime customers, yet few seem willing to bet that shipping costs, the elephant in the internet distribution room, will inevitably limit the growth of internet sales. The long-held assumptions that new technologies and online sales models will "work out" somehow have been challenged just like the hilarious "volume" theory behind Saturday Night Live's Change Bank. While technology is allur- ing, and many find it appealing to be the first with the "next big thing," retailers are making big bets on how best to drive sales and profitability. No one seems to have a lock on the best way to succeed. In this age of information and misinformation overload, look for more retailers to think twice before betting the farm on any one technology solution while walking the re- tail tightrope. SCB Nick A. Egelanian is president of SiteWorks, a strategic retail real estate consulting firm providing retail and mixed-use development consulting services to retailers, developers, owners and municipalities. Egelanian will be a speaker at SCB's Entertainment Experience Evolution conference in February. Connect with Nick at negelanian@siteworksretail.com. For more information about the upcoming Entertainment Experience Evolution conference in Santa Monica on February 7-8, 2017, please visit www. interfaceconferencegroup.com/ eee2017