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05/24/2021

If you own a mall, you also own a warehouse

In a satellite photo, it's tough to tell a mall like this one from a distribution center, argue the authors.

Malls have always existed to bring together a multitude of inventories in support of commerce. They’re in convenient locations, sitting on major roads and highways and maintain parking lots, loading docks, and back-of-house storage as vital parts of their blueprint.

Yet while the mall’s purpose has remained unchanged since conception, the rest of the world has evolved at a mind-numbing speed. Sure, the mall made changes over time—pivoting from “mall” to “lifestyle destination” by bringing in restaurants, entertainment, and even office and living spaces in recent years to change up its tenant mix. Still, the mall has not kept up with the pace of change. Gone are the days of shoppers mindlessly meandering through the mall for hours trying to figure out what it is they want. Those hours are now spent browsing online at home. Mall shoppers these days visit with much more intent.

David Blumenfeld
David Blumenfeld

If you’re a mall owner, it’s a given that you are concerned about how to effectively monetize your space. And retail tenants are equally concerned about how to justify the cost of a storefront in your property. With customers turning to online shopping more and in-person shopping less, there is an obvious answer you can only see from overhead. Take a satellite view of a mall and an Amazon warehouse and they look pretty similar. If a mall is a collection of inventories contained in four walls, well...warehouses are the same.

If you own a mall, you also own a warehouse.

Mall owners who are thinking about providing warehouse and logistics services will need to make fundamental shifts in how they interact with tenants. They’ll need to reevaluate and purchase the tools and technologies they implement on their properties. But, as we’ve seen in practice with clients of our consultancy, the payoff is tremendous. It’s a win for the retailers, a win for shoppers, and most certainly a win for landlords. Expanding the definition of a mall expands the revenue streams, the customer base, and the overall value of the property.

Take a satellite view of a mall and an Amazon warehouse and they look pretty similar. If a mall is a collection of inventories contained in four walls, well...warehouses are the same.

The same reasons that make a mall a viable option for any property (i.e. location, location, location) are the same reasons why it would be viable for a warehouse today. We aren’t talking about massive warehouse facilities in the middle of nowhere (clearly.) We’re talking about the facilities that are necessary for the shopper of today, who expects items to arrive next-day, or even the same day. In fact, more than 90% of consumers see two- to three-day delivery as the baseline.

That requires local “warehouses”—better known as micro-DCs or last-mile-fulfillment centers. Being close to major roads and highways was appealing to mall owners because it made it easy for customers to get to them. Being close to them as a “warehouse” owner means it’s easy for couriers to take product from your mall to customers’ homes.

We’ve all seen couriers crowding the corridors of malls at all hours of the day. They play a critical role in the retail ecosystem, but there is a better way to partner with them. Once you embrace the “mall as a fulfillment hub” mind-set, you can centralize activities like packing, pick-up, and drop-off of packages cross-retailer and bring those activities to the back-of-house. This clears the corridors for shoppers and makes the process more seamless—in turn lowering the unit economics and making it even more cost-effective for couriers.

At first, mall owners will protest. We’ve heard it all from our clients: “That’s not my role,” or “This will require a lot of initial capital.” But we will tell you what we tell all of them. This is an opportunity for you to be seen by your tenants as an even greater leader and partner. Mall owners are already in the position of bringing retailers together. Why not take it a step further and also be seen as their innovative supporter?

Kyle Spencer
Kyle Spencer

Eight in 10 retailers are already planning on making moderate to major investments in their supply chain in 2021, why not support them in that cause? Instead of multiple couriers popping in and out of each retail store several times a day, couriers can arrive at a single location within the mall, gather packages from multiple retailers, and then deliver packages along the same route much more cost-effectively. More efficient delivery means happier customers for retailers, who are also happier as they can leverage in-store inventory for any-channel sales. And let’s not forget, it’s a win for the mall owners, too, who’ve helped their partners and stayed true to their purpose of facilitating commerce.

Retailers have already started embracing the trend toward better understanding their in-store inventory to meet Buy Online Pickup In Store (BOPIS) and ship-from-store models that are continuing to gain traction. Now is the time for property owners to not just support the trend, but help lead the charge.

Westfield Labs veterans David Blumenfeld and Kyle Spencer founded NextRivet in Silicon Valley in 2019 to help clients execute digital initiatives in physical environments.

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