Retail e-volution

By Kitty McConnell
Photos by Tim Johnson

Retail is an evolve or die business. The city’s oldest and newest retail shopping destinations are staying competitive in an industry defined by fluctuating market forces, consumer whims and rapid technological advances.

See also:
A brief history of Columbus’ shopping centers

Retailers are cashing in on mobile commerce to lure shoppers with smartphone deals. Explore a few popular apps here.

In 1999, Easton Town Center debuted phase-one of what is today a $225-million, open-air shopping development.

Selling on Amazon for as little as $8.42 is a paperback history of Lazarus department stores. Look to Lazarus: The Big Store chronicles the economic and cultural impact of the retailer, founded in downtown Columbus in 1851. Amazon customers who bought the book also bought histories of Gimbels, Rich’s, Marshall Field’s and Jacobson’s—all of the regional giants that dominated the retail industry from the window-shopping days of the early 20th century through the shopping mall boom.

The past three decades have seen those once-mighty department store retailers (and the shopping malls they anchored) succumb to corporate consolidation, recessions and the rise of e-commerce.

The one-room men’s clothing store that Simon Lazarus and sons grew into a major retail anchor of the booming mid-century shopping mall industry was absorbed by Macy’s, a division of parent company Federated (now Macy’s Inc.). Online, former Columbus customers still share their memories of eating in the flagship store’s restaurants, visiting Santa or buying that special something. Not only was the Downtown Lazarus the place to make a purchase, it was a social experience.

Walking into a Macy’s is an entirely different experience today—if you even spend time shopping in the brick-and-mortar store at all.  By the end of 2014, Macy’s expects all of its 840 stores to be fulfilling online orders. These click-and-pickup sales are one of many strategies that traditional retailers are using to stay alive in the digital age.

“Historically, we relied on the department stores to put an ad in the newspaper. We now rely on Express or lululemon or Apple or someone like that to push people into the mall through their digital marketing and their digital efforts,” says Michael Glimcher, chairman and CEO of Glimcher Realty Trust. Glimcher owns and operates Polaris Fashion Place, along with 27 other regional shopping centers across the country.

Brick-and-mortar retail sales have taken a big hit from online vendors, particularly Amazon; but Glimcher rejects the popular notion that the shopping mall is dead. The malls in the Glimcher portfolio are enjoying all-time high sales, rents and occupancy rates, he says.

“These malls are evolving, and what you do with the mall and what you add to it is changing,” says Glimcher. “I suppose if you don’t evolve you would die.”

Retail has always been a volatile business. Local shopping-center developers and retail experts say the e-commerce revolution is simply the next phase of development in a dynamic industry. Only retailers who evolve and innovate have survived the economic forces, technological advances and consumer whims that plague the sector.

From Downtown to suburban ‘town center’

Don Casto, III at Casto's Town and Country Shopping Center

There was a time when shopkeeping was a noon-to-5 weekday occupation. That all changed in 1949 when developer Don Casto, Sr. opened Town and Country Shopping Center on Broad Street east of Downtown Columbus.

One of the nation’s first regional shopping centers, Town and Country represented a “significant risk” for its founder, says grandson Don Casto III, a partner with Casto, the third-generation real estate and development company that owns and operates 46 plaza shopping centers in Central Ohio alone. “It was a testament to his sales ability that he was able to convince retailers to abandon their traditional focus on Downtown and try this new experimental retail location.”

Lazarus, which held a near-monopoly on Columbus retail at the time, “fought all efforts for suburban shopping centers,” including rezoning measures and infrastructure improvements, says Casto. In the post-WWII market boom, retail was fiercely competitive.

Casto Sr. personally persuaded merchants James Cash Penney (founder of the JCPenney Company) and S.S. Kresge (founder of the five-and-dime chain that grew into Sears Holdings Corp., parent company of Kmart and Sears ) to open locations in his new development. Town and Country was home to the first suburban JCPenney store in the nation; Mr. Penney himself attended the opening.

Casto Sr. offered Penney, Kresge and his early tenants commitment-free leases based on a percentage of their Town and Country sales. He further convinced lenders to finance the project based on speculative revenue rather than the assured collateral of set lease premiums. But Casto Sr.’s biggest innovation was convincing his retail tenants to stay open on evenings and Saturdays.

A great believer in the potential of night-time and weekend shopping, Casto Sr. equipped Town and Country with the first illuminated parking lot and large, illuminated store signs.

“People were used to shopping Downtown at Lazarus and Morehouse Fashion. They understood how to park Downtown, they understood how the stores were laid out. Somehow you had to break that cycle of shopping,” says Casto III. His grandfather drew people to Town and Country with over-the-top promotions. Free entertainment—everything from wrestling matches to traveling circuses—attracted droves of shoppers to the new center. 

Today, Casto’s suburban shopping strips are anchored by a mix of big grocery stores, discount and smaller retailers rather than large department chains. The model, exemplified in Lennox Town Center, Graceland and Carriage Place shopping centers, allows Casto to renovate its centers as market trends and retail tenants change. That flexibility is limited to some degree in enclosed shopping malls. Flexibility and tenant diversity also insulates Casto centers from the risk of big box consolidations and bankruptcies.

“It’s much easier to buy on the Internet than it is in a retail brick-and-mortar store...there are fewer stores and smaller stores than there were before,” Casto says. A variety of restaurants, service providers and grocery anchors give shoppers an incentive to leave their laptops in favor of a multi-dimensional buying experience.

Retail titan Les Wexner has done as much to transform modern shopping centers as Casto did in the ’40s. Wexner’s visionary Easton Town Center development was a blow to struggling regional enclosed shopping malls.

“Les’s vision was rooted in the understanding of what was happening to the shopping mall business back in the early- to mid-90s,” says Adam Flatto, president of Manhattan-based Georgetown Co., joint venture partner and co-developer of Easton Town Center.

With thousands of Limited Brands stores in shopping centers across the country by the 1990s, Wexner saw shoppers visiting enclosed malls less frequently and for shorter periods of time. The new regional malls that had excited shoppers in the 1960s and ’70s had become stale. Wexner surmised that consumers had lost a crucial emotional connection with the shopping experience, says Flatto.

“He understands the consumer and the business better than anybody in the country,” says Flatto. “His goal was not just to create something wonderful for Columbus, which he obviously did. It was to demonstrate to the entire retail industry that one can think about a regional shopping destination in a very different manner.”

In 1999, Easton Town Center debuted phase-one of what is today a $225 million, open-air shopping development. Its 180 stores, restaurants, recreational and entertainment options attract over 21 million annual visits from shoppers a year. With an urban, pedestrian-oriented layout, Easton revolutionized shopping mall development. Like Town and Country, Easton was a risky proposition for established retailers when it debuted.

Easton was, at the time of development, located in a greenfield with no direct highway access to a city that wasn’t a major draw for high-end retailers. To top it off, the plans for Easton called for only two anchor department stores rather than the five-plus anchors that are standard in enclosed malls.

“It was very risky, because it was such a departure from the way tenants normally look at equations for deciding whether to go to a place,” says Flatto. “A department store is a critical and important component of fashion retailing, but augmenting it with food (and nightlife) gives customers a reason to come to the project more than they ever would otherwise.”

The variety of tenants paired with a lively line-up of seasonal and special activities have helped Easton prosper even as more and more consumers fill their shopping carts online. Traffic is rising, sales are improving and Easton is 99-percent leased.

“What we’re seeing more on a national basis is a bifurcation between those projects that have achieved that level of connection with their consumers…and all other projects where that’s not achieved. (Those projects are) really suffering from the e-commerce business,” says Flatto. “Without that connection, it’s just a bunch of stores, (and) I can access that same merchandise online.”

Columbus’ once-dominant Northland, Westland and City Center malls were all shuttered in the new millennium in the wake of the successful Easton Town Center and Polaris Fashion Place developments. And the lone survivor of Richard Jacobs’ suburban mall chain, Eastland, is now slated for auction in early June by current owner, Glimcher.

Both of the newer developments feature high-end retailers, some of whom have only one location in central Ohio. “To this day, Easton and Polaris are the two dominant malls. Each of them has a unique character about them,” says Chris Boring, analyst and owner of Boulevard Strategies retail consulting firm.

Polaris Fashion Place has evolved to include a newly developed outdoor shopping plaza attached to the main mall. Opened for business in 2001 by developer Herb Glimcher, Polaris Fashion Place has what Boring describes as a “country-club feel.” Polaris brought new high-end anchor stores to the central Ohio market, including Saks Fifth Avenue, Lord & Taylor and its replacement, Von Maur. The mall continues to evolve, having renovated its main valet entrance in addition to the $50-million-plus outdoor wing.

The high-end shops in the main Polaris development are complemented by surrounding restaurants, salons and a movie theater. “Things that you can’t do at home are incredibly important,” says the original developer’s son, Michael Glimcher. He stresses the importance of continually updating Polaris’s upscale grounds as a complement to its mix of high-end tenants and social offerings. Polaris’ sales top $500 a square foot, making it a top performer in the national retail-property market, he says.

“(Retail development is) art and science. It’s about experience, so we spend a lot of time thinking about experience and programming the experience,” Glimcher says.

The role of the shopping center today, he insists, is to deliver the infrastructure and support that allows a retailer to maximize its competitive edge in what is now an omni-channel marketplace. “We’re bringing people to the door and they’re the content provider. We rely heavily on them.”                 

An Apple store can increase a mall’s total sales by 10 percent, Glimcher told the Dispatch in 2011. Although Casto shopping centers don’t have any Apple stores, Casto says the store is a prime example of an omni-channel retailer that reinforces its strong Internet presence with equally strong brick-and-mortar locations. “They really complement each other and are symbiotic,” says Casto.

Retail’s digital advantage

Michael Glimcher at Glimcher's Polaris Fashion Place

For 103 years, the National Retail Federation industry trade group has hosted a national conference focused on industry trends. This year at Retail’s Big Show, Ginni Rometty, chairman, president and CEO of IBM, joined Terry Lundgren, chairman, president and CEO of Macy’s, for a discussion on retail’s “New Era of Value.”

The focus of their presentation was the role of big data analytics in retail distribution, marketing and operations. Since the advent of computerized POS register systems and UPC barcodes in the 1970s, stores have been able to collect data on shoppers and track merchandise; recent advances in cloud computing and social and mobile analytics programs have enabled retailers to use that data to their advantage.

IBM’s digital solutions allow retailers to capitalize on data in three main ways: to personalize shopping by tracking consumers on retail websites, in stores and on social media; to optimize merchandising through real-time pricing and geographic sales analysis; and to improve operations by crunching consumer demand, traffic, weather and even political data.

Big data’s impact on the retail industry is huge, says Kathy Starkoff, CEO of Orange Star consulting, former CIO of the Ohio State University and chief technology officer for L Brands from 2001-07.

“Tracking data both transactional and behavioral gives retailers really good insight into what products they should be offering, how to show their website and how to make necessary changes,” says Starkoff.

Rather than fearing e-commerce, savvy retailers like the Limited were quick to see opportunity in the Internet. “Traditional methods of store and catalogue (sales) played a role in the success of the Internet,” says Starkoff. “The Internet really opened up avenues that would not have been available to many parts of the population via a store.”

Mobile technology has opened up new avenues for retailers. Stores use apps  to send coupons to shoppers based on real-time data about their location in a store (see online article “Retail apps”). Stops by the mall Starbucks are even faster as consumers use smartphones to pay for their lattes.

Despite the tempting potential digital data presents, retailers must walk a fine line between being informed and being “creepy” when it comes to direct sales and marketing, Starkoff says. “People are beginning to become more conscious about what is known about them and sensitive to offers that are too personal.”

Data security is equally as vexing for retailers as consumer privacy concerns. Credit-card data theft has plagued retailers in recent years. Breaches at Target and Neiman Marcus in 2013 spurred Congress, credit card companies and national security agencies to consider new means of securing consumer transactions.

“The simple story across all retailers is it’s a little bit of a mess right now,” says Sean Adkins, managing director and leader of West Monroe Partners’ operations excellence practice in Columbus. In the quest to stay competitive, retailers can undermine their goals by jumping blindly on the latest trends.

“You can’t be in a mode where it’s strategy du jour,” says Adkins. Smart retailers will have a strong understanding of their consumers and the market as they evolve big data, e-commerce and in-store strategies, he says.

“Maybe I find ways to generate new revenue or make it more convenient for my customer, but the risk on the backside is all you’re doing is eroding your margins and putting more pressure on the business,” he says.

A read-through of the annual reports of the major retailers on the S&P 500 Consumer Discretionary Index indicates a shift to Internet sales for future growth. L Brands, Macy’s and, of course, Amazon aggressively pursue e-commerce as opposed to brick-and-mortar expansion. As the development of distribution and fulfillment centers increases, traditional shopping mall development has all but stopped. Outlet centers, like those in the pipeline in Delaware County, offer another growth outlet for retailers willing to discount their brand offerings.

“We haven’t built a new regional (enclosed) mall in the United States since 2006. Online sales have become a bigger and bigger part of their business,” says Boring. “If I was looking at real estate, I wouldn’t invest in retail; I’d be looking at distribution.”  

Kitty McConnell is assistant editor.