The Mall Bites Back as Stores Offer Experiences Lacking Online

NEW YORK, United States — Remember when e-tailers were going to dethrone the local mall and consign real-world stores to the ash heap of history? Not so fast.

Shoppers are increasingly returning to stores, executives from companies including Yahoo Inc.’s Tumblr and Telefonica SA said at the Digital Life Design conference in Munich this week. While growth in Internet retailing has outpaced store-based sales gains in recent years, the mall is starting to reclaim some ground, data from researcher Euromonitor show.

"People are craving real-life interaction for shopping," said David Hayes, head of creative strategy at blogging site Tumblr, which he says has worked with Gap Inc. and Levi Strauss & Co. to guide customers to events such as music performances and promotional parties in stores. "There's a trend going from URL to 'IRL' — 'in real life.'"

The Internet and smartphones have made the likes of Amazon.com Inc. and Alibaba Group Holding Ltd. seem unstoppable. But some retailers are now finding that physical shops that offer customers a hands-on experience can give them an edge.

In-store revenue growth will accelerate to 4.9 percent in 2019 from 1.6 percent in 2013, while the expansion of e-commerce sales will slow from 21 percent to 12 percent, Euromonitor predicts. Store-based shopping still accounts for more than 90 percent of global retail revenue.

Sears’s Woes 

Under-investing in physical stores can lead to a sales drop that can’t be made up for by growth online, according to a Bain & Co. report last year that cited the decline of Sears Holdings Corp. Retailers must blend digital and physical-store experiences in a so-called “digical” strategy, the report said.

Interweaving online and physical sales efforts is “a booming trend,” said Lynn Vojvodich, chief marketing officer of Salesforce.com Inc., which provides software to retailers for communicating with customers.

Since its founding in 2011, Italian shoemaker Aquazzura has been largely an online brand. But in October, founder Edgardo Osorio opened the company's first store, in Florence. While the outlet does sell shoes on site, salespeople are encouraged to let shoppers try various styles and then place orders over the Internet when they return home.

Online “will always be our focus, but we’ll open more shops because they fit together,” Osorio said at the DLD conference. “The physical experience is important.”

Promotional Events

Even Amazon is moving closer to its customers. The company opened an office last month in Manhattan from which it delivers orders to some close-by addresses within an hour. Amazon said it plans to introduce the service in other cities this year.

Oliver Samwer, whose Berlin-based Rocket Internet AG has backed dozens of Web startups such as clothes retailer Zalando SE, disagrees with the notion that real-world stores can successfully compete with e-tailers.

Picking up a product in a store from an order placed via the Internet “is overrated” and a “defensive move” by traditional retailers, Samwer said on the sidelines at DLD. “There might still be people who try on clothes offline, but I think over time we will see that that is a very small minority.”

Zalando, he acknowledges, operates a handful of physical stores in Germany, where excess inventory is sold at a discount. But Samwer said those stores won’t likely ever represent a major chunk of revenue.

Telefonica Deutschland Holding AG Chief Executive Officer Thorsten Dirks said at the Munich conference that he was surprised to discover that some customers drive dozens of miles to one of his company’s 1,800 stores across Germany to pick up a phone or tablet ordered online rather than wait for delivery.

Still, retail stores must become “points of experience rather than just being points of sales,” Dirks said. “Future stores will have to fulfill all services the same way customers experience them online.”

By Cornelius Rahn, Marie Mawad. Editors: Kenneth Wong, Tom Lavell, David Rocks.