Has Omnichannel Retailing Made Malls More Relevant?

study from Coresight Research found traffic at U.S. shopping malls has strongly recovered to surpass pre-Covid levels. The research firm believes brands within malls are benefiting from the “halo effect” created by having both online and offline channels, “brand synergy” alongside other mall-based stores, and being able to leverage omnichannel practices.

The “halo effect” refers to when brands get boosted sales by having both physical stores and an online presence. For instance, customer acquisition is supported when a consumer performs research online and then again when they make an educated purchase in a physical store.

For direct-to-consumer brands, having physical stores has become a more cost-effective way to support discovery as online advertising costs have soared, the study found. At the same time, a strong online presence is more important for established brick-and-mortar chains because online plays a bigger role in discovery and sales. Coresight states, “Investing in physical stores that are independently profitable also enables e-commerce brands and retailers to tap the halo effect of driving online traffic without any of the associated costs.”

“Brand synergy” refers to the benefit of having stores within malls in close proximity to “other high-value or sought-after” brands to leverage those brands’ fan bases.

For instance, UNTUCKit, a maker of men’s dress shirts, prefers to have physical locations adjacent to other men’s brands, particularly popular legacy brands like Brooks Brothers or J.Crew, the study noted. Express, the women’s chain, seeks to co-locate near fashion-forward apparel chains such as Aritzia, Banana Republic, H&M, J.Crew, and Uniqlo. Coresight said this enables a retailer to “attract lookalike customers to its existing customers as it positions itself in the same tier as its neighboring tenants.”

Finally, Coresight noted that shopping malls are increasingly being recognized for supporting omnichannel behavior. This includes serving as locations for consumers to drop off online returns, which offers convenience and reduces return processing costs for retailers. Same-day and next-day shipping can also be sped up by accessing in-store inventory at malls. Additionally, online search tools can help shoppers find products they can pick up at nearby mall locations.

Top-tier malls were found in the report to be flourishing, outperforming the average mall in terms of revenues, occupancy rates, and foot traffic. Coresight said that top-tier malls “enjoy a more affluent customer base and are located in desirable areas for retailers to build and maintain their brand image.”

In comparison, occupancy levels at non-top-tier malls remain subpar and below pre-pandemic levels, but foot traffic has also recovered above pre-pandemic levels, with many likewise positioned to tap some of the omnichannel benefits of having physical stores.

Overall, a core message of Coresight’s study was that predictions around shopping malls being “dead” are oversimplified. Coresight wrote, “Dying shopping malls have become cultural symbols in the US, evoking nostalgia among Americans who reminisce about their experiences in these once vibrant centers. However, the reality of the American mall landscape is more nuanced than the popular narrative suggests.”