Linking online to physical
Of the roughly 220 Sears, Kmart and Macy’s stores being closed in coming months, not a single location is in Arizona (Sears and Kmart are part of the same company). J.C. Penney hasn’t yet said which of its 130 to 140 stores will be shuttered, but there’s no reason to assume Arizona will be affected in a significant way, if at all. In fact, retailers might think twice before exiting Arizona, given fairly optimistic projections for the state’s growth.
Arizona’s population is expected to increase 21.1 percent between 2015 and 2025, according to the Conference Board, a business-research group. That would place the state second behind only Nevada, with projected growth of 22.9 percent. The Phoenix area could expand a bit faster, around 24 percent, which would result in 5.7 million residents here by 2025, making the region noticeably larger than, say, the San Francisco-Oakland Bay Area at a projected 4.9 million people.
Because retail sales correspond closely with population gains or declines, this bodes well for retailers and shopping centers.
“Nevada and Arizona will lead the nation with 23 and 21 percent growth in spending, respectively (over the decade), compared to 8 percent for the entire United States,” said the Conference Board report.
(Consumer shopping preferences also will change as the population ages, according to the report.
It predicts shoppers generally will spend more on home maintenance, gardening and other hobbies, along with pets, travel, reading, major appliances and new cars — and comparatively less on men’s clothing, used cars, furniture, live-entertainment events and children’s clothing.)
But it’s not just population changes that provide hope for the industry. The simple reality is that a lot of consumers still like to visit stores to touch merchandise, talk to clerks, hunt for surprises and return items.
“When I buy something, I like to take it with me,” said Lori Lott, a Chandler woman in her 50s. “I don’t like to wait three or four days and pay for shipping.”
Lott was visiting Chandler Fashion Center one day recently to return some clothes that didn’t fit. Since she was already at the mall, “I figured I might as well browse,” she said.
Shoppers actually find physical stores appealing, despite all the hype about online commerce, said A.T. Kearney, a management-consulting firm, in a report on multipronged or “omnichannel” retailing. Merchandise returns, an important reason that consumers visit malls, provide opportunities for retailers to generate new sales, the report added.
In fact, discovering or learning about products is the only stage of the retail journey where consumers tend to favor online, according to the report, which elicited responses from more than 2,500 shoppers.
Physical stores fared better in the other stages — trying/testing products, purchasing, delivery/pickup and returns.
“I do a lot of online shopping, but I like to see jewelry and I have to try on clothes,” said Lindsay McKenzie, a 31year-old Mesa woman who on Thursday returned a wrist watch at the Chandler mall with her two young daughters in a stroller.
McKenzie said she finds it fairly easy to shop online for her kids and her husband, but not so much for herself. She likes malls and comes in around once a month.
According to the A.T. Kearney study,Millennials were the age group that least preferred physical stores, while seniors liked stores the most. Baby Boomers and teens also tended to rate stores highly. Acceptance by teens “is a critical fact for retailers and other branders eager to engage customers early in their lives in hopes of building lifelong relationships,” according to A.T. Kearney.
The most successful shopping malls tend to be premier retail centers located in markets that cater to demographically attractive customers, wrote Morningstar stock analyst Edward Mui in a comment on Simon Property Group, a mall operator that owns Arizona Mills in Tempe and Premium Outlets in Chandler and Tucson. “Despite pressure from e-commerce’s effect on a changing retail landscape, we think physical brick-and-mortar stores will continue to have a relevant and critical role.”
In its recent store-closing announcement, J.C. Penney’s CEO Marvin Ellison cited the company’s goal of providing an “omnichannel experience through online-order fulfillment, same-day pick up, exchanges and returns.”
Even with fewer stores, Ellison described J.C. Penney as well-positioned to meet the expectations of digital users. “We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimize the growing operational costs of delivery,” he said.