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NEW RESEARCH: The future of retail combines bricks and clicks

‘Customers want a new kind of showroom that offers shopping, entertainment and socializing,’ says Concordia professor Tingyu Zhou
May 16, 2017
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By Joanne Latimer and Cléa Desjardins

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It doesn’t look good for the shopping mall as we know it. Some analysts predict that one third of them will close in the United States over the coming years. At the same time, online sales and e-commerce are seeing exponential growth.

So, with technology making it more convenient to shop remotely, will we still need retail real estate?

Yes, according to Tingyu Zhou, assistant professor of finance with Concordia’s John Molson School of Business. In a study recently published in the Journal of Business & Economic Statistics, she argues for the continued need for retail space, but not the traditional model.

Tingyu Zhou Tingyu Zhou

“Customers want a new type of experiential showroom — a location that combines shopping, entertainment and socializing,” she says. 

“It has to offer something unique, whether that means products you can’t buy online or an in-person service.”

Zhou’s study focuses on agglomeration of retail real estate in the US. By examining the location patterns of new department stores like Neiman Marcus and Walmart within metropolitan areas, her work predicts the risks of store openings and closures.


Too much retail space per capita

“Despite store closures, retail real estate remains so important: 70 per cent of American GDP is from consumption and 40 per cent of consumption is done in retail stores and shopping centres,” Zhou says.

Her study’s numbers reveal significant over-building, leading to store closures and bankruptcies. Simply put, there is too much retail space in the US.

“In the US, there is 46 square feet of retail space per capita, compared to about nine square feet in the UK, which has the most retail space per capita in Europe,” Zhou explains.

“Other factors include local government competition to attract retailers, such as abundant supply of land zoned for retail.”

And yet, despite the imperilled future of retail and shopping plazas, big box stores still hang on.

“They survive because the corporations either change the business strategy or they get new financing strategies to restructure loans and debt. Some have actually been improving by offering a more diverse shopping experience to the customer.”


‘An enhanced buying experience is key’

She points to Apple as an example of a business making smart use of their retail space.

“People like to try the new iPhone and talk to the experts, knowing they can buy online later. That’s the added value of the in-store option. For large stores of this type, an enhanced buying experience is key.”

Zhou’s research reveals some novel anchor store ideas, including an art gallery and ice skating rink in the Galleria Dallas, Texas. There’s also a community college campus inside the New River Valley Mall in Christiansburg, Virginia. It attracts 1,500 students every week.

As to which combination leads to the most sales? Zhou’s continued research will investigate precisely that.


Find out more about the John Molson School of Business by downloading the brand new, fully digital publication, JMSB Mag

 



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