May 17, 2007
Federated Buys Stake in Web Mall Concept
By Tom Ryan
Federated Department Stores plans to convert a former Lord & Taylor store in Delaware into a showcase for catalog and online retailers that traditionally have not had storefronts.
Called The Epicenter Collection, the concept will offer 180,000 to 200,000 square feet of retail mall space to non-bricks-and-mortar retailers. In exchange for the lease, Federated will acquire a stake in the venture and sit on the developer’s board of directors.
“At this point, we’re looking at a test in one store to see how it works,” Jim Sluzewski, spokesman for Federated, told the Cincinnati Enquirer. “This is a new concept. It’s interesting and innovative.”
The former department store in Newark, Delaware, will be converted to the new format during the next year and open for customers by fall 2008.
The Gordon Group of Greenwich, Conn., which will develop the Epicenter Collection through its Convergent Retail division, has created high-end entertainment retail before, including The Pier at Caesars in Atlantic City, the Beverly Center in Los Angeles, the San Francisco Center, and Bridgemarket in New York City.
“In a multi-channel world, consumers expect merchants to have retail stores,” said Antony Lee, chief executive of Convergent Retail, told the Cincinnati Enquirer. “Epicenter provides online merchants and brands with a way to open successful stores.”
Epicenter Collection expects up to 60 e-tailers, catalog companies or brands to congregate under the roof of the former department store with each merchant operating a distinct location. No tenants have been announced.
In addition to traditional point-of-sale stations, Epicenter will use mobile point-of-sale devices to mimic the online and catalog buying process. Using Epicenter’s proprietary hand-held, self-checkout device SpreeGo, consumers will be able to shop Epicenter merchants with the same point-and-click functionality they have on the web. Shoppers will be able to order products for free home delivery or purchase items to take home.
Mr. Lee told Multichannel Merchant that the typical cost to open a store within Epicenter Collection will range between $50-$75 a square foot, and is about a third the cost of traditional retail space within a mall. Up to 100 Epicenter Collection sites may be built if the pilot project is successful, backers said.
The Epicenter Collection effort comes as mall operators and their anchor department stores look for ways to rebuff challenges from smaller lifestyle centers. In part because of those centers, mall customer counts have fallen by 30 percent in the past five years, Britt Beemer, chairman and founder of America’s Research Group, told the Cincinnati Enquirer.
“In some markets, it’s as high as 38 percent,” Mr. Beemer said. “The more lifestyle centers that open, the more that rips the fabric away from the mall, particularly with people who are under the age of 35.”
The plan to marry online and catalog retailers with bricks-and-mortar stores may also reflect challenges store landlords like Federated are having finding tenants for former department store buildings.
“That may be the reality of it all,” Mr. Beemer said. “Somebody had to come up with a unique concept to fill that space.”
Discussion Questions: What do you think are the opportunities and the challenges in The Epicenter Collection web/retail concept? Do you think such a concept can revive mall traffic? Also, what do you make of Federated’s investment?
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Hello……..On-Line and Catalog retailers exist & are successful because their customers want to buy without hassle of normal mall shopping and the products are delivered to door. This is their strength. The only customers going to Delaware will be the local market. I cannot see any advantages for this type of retailer other than a little additional local exposure. They should stick to their winning formulas.
We’ve been following Epicenter for a while now and are glad to see that Federated is proudly proclaiming its association with the venture. What jumped out at me early-on is the fact that wholesalers and online companies that before did not have a “bricks” presence will suddenly be on the retail scene. This will greatly accelerate the already-roaring wholesaler-as-retailer trend (Liz, VF, etc.) while making it more accessible for smaller players. I see this changing not only the retail landscape but also acquisition targets. Small to mid-sized brands are all the rage now that the biggies have been picked over. Now they’ll have “retailer” to add to their value proposition. We’ve predicted that in the not-too-distant future, “retailer” and “vendor” will be replaced by “brand manager” and “real estate broker.” I’m sticking to my story!
There is a certain irony, I think, that a space which was once occupied by L&T, America’s oldest dept store, will now be occupied by (one of) its newest concept stores(s).
Will it work ? I don’t know: it sounds like an expanded version of the “As Seen on TV” stores, albeit with better merchandise. And I think the fact that Federated took on a rather limited stake in the venture suggests they have learned a lesson from the Fingerhut fiasco.
This is somewhat of a bricks-and-mortar version of Skymall.
The most attractive aspects of this experiment would be the space at 1/3 of the cost, the shared advertising and promotional expenses and the potential of finding a profitable way to acquire new customers that would not otherwise be reached.
It will take a lot of focus for web-only merchants to translate their vision into the store environment and for the whole concept to be pulled together under a cohesive umbrella in way that makes sense to the consumer. If this works for the local test market, it’ll still be a challenge to scale-up nationwide.
I think this is worth trying, and probably not with the expectation that Version 1.0 will be the final concept.
If I wanted to buy in-store I would go to Wal-Mart, Sears or some other store. I like buying from the comfort of my house, not having to waste time & gas.
I don’t know why you would go backwards.
The future is in online buying.
While consumers overall have a lot higher comfort level with buying online than they have in the past, I think there’s a legitimacy angle to having a store presence that online pure-plays can benefit from. Setting up a web page and shopping cart takes very little compared to setting up a store, so there’s something a little bit more permanent–less fly-by-night–to a retailer that has both, even if the store side is on a small scale.
Amazon is the king of providing online channel infrastructure. Perhaps the Epicenter concept will become the ultimate in “bricks and mortar” outsourcing for online retailers. I’ve tracked Epicenter for 2 years now–the real estate part of the story is absolutely solid. The tech angle–the convergence between online and offline–is interesting. We’ll see if consumers buy it.
A few more issues we might want to think about:
— Which online brands are signing up for Federated’s stores?
— What, if any, merchandising and marketing support Federated is offering the brands who sign up?
— What marketing and promotional support the brands might be getting from the malls?
The online brands who are going to go for this are likely to be successful businesses with established brands in their own markets, who can draw foot traffic from mall goers who know the brands from their online lives.
But these companies are merchandising neophytes. It would be my hope that Federated would give them a big helping hand (or a voucher for the services of some of you folks on the panel) to get up to speed and, if nothing else, persuade them that, yes, they do need some full-time folks who understand this stuff and that senior management needs to trust the merchandisers.
Now, it seems to me that if this concept flies for Federated, it’s going to generate a lot of revenue with a good deal less overhead than if it were running department stores in the same space. And it will be able to leverage the equity of the better-known brands.
So I think Federated ought to be prepared to spend about the same amount of money promoting the web mall as it would a department store in the same space. If it were me, I’d keep all the traditional media in the mix, including the big, full-page newspaper ads that promote one merchandise group at a time, but I’d probably sacrifice some frequency there to do more online.
I’d do the same public relations campaigns as if it were a department store, too–community involvement, special events, the whole deal.
Finally, I’d ask the malls to promote the concept in its marketing–its events, its handouts and especially its maps and signage. In particular, I’d like to see the malls include a detailed map by merchant instead of just labeling the whole area the Federated WebMall, or whatever they’re going to call this thing.
(And I’m thinking it should NOT be called the WebMall. Anyone remember those godawful web-mall things from the nineties where people were mostly selling from blue-underlined text links?)
As stated, the 35ish and younger consumer is most attracted to this “‘outside-the-box’ thinking”, by Federated. Better service and limited time needed to purchase will be keys to these retailers, and satisfied shoppers!
As most retailers are real estate owners, this may be another way to utilize property better; as well as siphon younger shoppers’ sales from malls. One key is bringing in the right retailers, like Guess, Victoria’s Secret, A&F, etc.; and the trendy ones too.
Finally, for Federated Stores, what a great way to view what is hot in retailing and possibly test market a similar concept. Hmmmmmmmmmmmmm
I think Liz has hit the nail on the head. If the concept is going to succeed, it’s got to focus on the two things online shoppers can’t get from their computers: the hands-on demo and the Grab It Now!
So in clothing, that would mean taking the risk out of trying new trends by making sure the physical store had stock in every size, and adding a call to Try This On! to the pages featuring those new trends.
Same with technology and housewares: the page for a new item says Try It Out! and the store runs theatrical demos or has the gadgets out (plugged in and working, please) for customers to play with themselves.
Of course, if the page sells well enough on its own, the customer decides s/he just has to have one of those things RIGHT NOW, and the store is only too happy to oblige.
If I’ve read it right, we’ve pretty much agreed in this space that a lot of shopping happens across the three channels–online, catalogs and in-store–think Talbots, Coldwater Creek, Circuit City, Amazon/Borders (but maybe not anymore?) and, of course, Apple.
So if they can deliver the immediacy they promise when their product pages say Try This On! the online merchants who sign up for Federated’s stores should develop some nice incremental sales.
The original concept of a “department” store was the clustering of the shops on Main Street into one convenient location. It worked really well for about 150 years. Now the same thing could happen by clustering the cyberspace retailers into one location. Will it work? Why not? The people who shop the malls are the same ones who go home to surf and buy on the Internet. Whatever comes around, goes around.
There is insufficient information in the article to truly assess the viability of the concept. Having said that, the facts concerning online shopping behavior are stunning. Online conversion rates in the single digits are simply a symptom of the “research online, buy it in-store” behavior. Multi-channel retailers clearly have the advantage over pureplay in this regard, however, it should be noted that pureplay conversion rates are often double those of multi-channel etailers (hmmm).
Catalogs have been found to reinforce and create synergy with web sales. Websites have been found to create synergy with brick and mortar stores. If Epicenter offers an economically viable format for pureplay etailers to create a second channel–go for it.
Caution: the systems, skills, knowledge and processes of running a brick and mortar operation are vastly different from those you’ve developed running an online operation. While aspects of retail are still retail, the nuts and bolts of delivering it require different people, processes and often, different technology.
OK, I read the article and didn’t understand what this concept is. Then I had another big cup of coffee, reread it, and still don’t understand what the concept is. (I hope they are doing a better job of explaining it to potential tenants.) Who is the target market? Will there be a few actual sample items in these e-stores to touch and feel and then you still order online from the storefront? Or, is the idea that the mini-store is actually “stocked” with goods and a salesperson/self-checkout so you can take a package home with you that day? Is it a place you can return stuff you already bought online? Or a place you can physically pick up what you bought online? Yes, it may fill some empty retail space but what are the benefits to the customer? What are the benefits to the e-retailer?
“In a multi-channel world, consumers expect merchants to have retail stores.” That sentence says it all. I expect this concept to be quite successful. Here are the amazing facts:
— 67% of consumers state a preference to make purchases in physical stores.
— 87% of consumers shop online before buying offline, and credit the Internet with improving their in-store shopping experience.
These are outlets for the best, most desirable, most profitable consumers: multi-channel shoppers. They have more money to spend, they shop more frequently, they spend more (both online and off), they are more open to cross-selling and upselling.
Along with order online/pickup in-store (and buy online, return to store), I expect this will be a growing trend.
I give this effort an A for creativity but an F for expected success rate. It may work for a few selected products but overall it seems to go against the online concept and therefore doesn’t make sense. You are introducing costs back into the system that shopping online has removed. The only things it may make sense for would be any products that people are hesitant to order online until they have seen or touched it. I don’t have anything particular in mind but that is the only thing I can see that would benefit from this approach.
I can see why Federated wanted to do this project. Online sales of clothing outstripped consumer electronics for the first time this year. Ok, fair enough.
But most women who are shopping online are doing so after 5PM during their “me-time.” This type of behavior will not drive traffic into the mall, or restore the 30-38% loss of shoppers. Why would a shopper fight traffic and go to the store, when she can buy these items from her work or home computer (or soon–from her TV)?
The answer lies in other benefits offered. The concept of convergence works if there is another element experientially: entertainment, socialization, or unique product selection. At a minimum, when a woman goes to a clothier, she wants to try the item on.
Perhaps one or more of these elements will be offered. But if not, then the concept is technology for technology’s sake and not driven by consumer demand.
This is certainly an interesting “out of the box” idea. Will it work? The cost–since they already have the building–is minimal, so why not try it? I think the concept of getting companies to give Federated a piece of the venture is a stretch.
Most online retailers are just that for a reason. Federated may be able to grab some of the aggressive, rapidly growing ones who want to give the brick and mortar concept a try.
The store is the lab – this is a great way to learn. Mark points out what may be one of the more interesting reasons for a store. Online merchants can also learn from one of the masters of merchandising. Retail is not a charity business but I think this experiment will be a great incubator for ideas.
For a while, the Mills Corporation allowed brands to lease empty clean store spaces in their malls by the week and by the month. Mills even supplied a point of sale computer system and temporary store staff. That way, brands could test retail concepts in a live environment with real customers, merchandise, and pricing, without any long term commitment or build-out investment. The Federated/Epicenter test is similar, since the brands involved can pilot a new channel without a major investment. If the rent/traffic ratio is appropriate, Epicenter should be a winner.
On a flight this morning, I was flipping through a catalog called “Uncommon Goods” that only sells direct and via web. While looking at it, I was musing that I wish that their unique products were available in-store, as most items are ideal for gifts but I never think of ordering from them until it’s too late to make a needed date. Or, I simply forget about their cool products until a new catalog comes and I’m reminded of them.
Having just returned from the Digital Signage Expo, the key theme around all things retail was innovation. Along with this was the acceptance that innovation comes with no manual and no one knows what’s really going to work until we get the heck out there and try new concepts, test them for consumer response and refine accordingly. This idea can indeed work but the right strategy for how will need to be uncovered in-field…which is the entire point of this venture.
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Hello……..On-Line and Catalog retailers exist & are successful because their customers want to buy without hassle of normal mall shopping and the products are delivered to door. This is their strength. The only customers going to Delaware will be the local market. I cannot see any advantages for this type of retailer other than a little additional local exposure. They should stick to their winning formulas.
We’ve been following Epicenter for a while now and are glad to see that Federated is proudly proclaiming its association with the venture. What jumped out at me early-on is the fact that wholesalers and online companies that before did not have a “bricks” presence will suddenly be on the retail scene. This will greatly accelerate the already-roaring wholesaler-as-retailer trend (Liz, VF, etc.) while making it more accessible for smaller players. I see this changing not only the retail landscape but also acquisition targets. Small to mid-sized brands are all the rage now that the biggies have been picked over. Now they’ll have “retailer” to add to their value proposition. We’ve predicted that in the not-too-distant future, “retailer” and “vendor” will be replaced by “brand manager” and “real estate broker.” I’m sticking to my story!
There is a certain irony, I think, that a space which was once occupied by L&T, America’s oldest dept store, will now be occupied by (one of) its newest concept stores(s).
Will it work ? I don’t know: it sounds like an expanded version of the “As Seen on TV” stores, albeit with better merchandise. And I think the fact that Federated took on a rather limited stake in the venture suggests they have learned a lesson from the Fingerhut fiasco.
This is somewhat of a bricks-and-mortar version of Skymall.
The most attractive aspects of this experiment would be the space at 1/3 of the cost, the shared advertising and promotional expenses and the potential of finding a profitable way to acquire new customers that would not otherwise be reached.
It will take a lot of focus for web-only merchants to translate their vision into the store environment and for the whole concept to be pulled together under a cohesive umbrella in way that makes sense to the consumer. If this works for the local test market, it’ll still be a challenge to scale-up nationwide.
I think this is worth trying, and probably not with the expectation that Version 1.0 will be the final concept.
If I wanted to buy in-store I would go to Wal-Mart, Sears or some other store. I like buying from the comfort of my house, not having to waste time & gas.
I don’t know why you would go backwards.
The future is in online buying.
While consumers overall have a lot higher comfort level with buying online than they have in the past, I think there’s a legitimacy angle to having a store presence that online pure-plays can benefit from. Setting up a web page and shopping cart takes very little compared to setting up a store, so there’s something a little bit more permanent–less fly-by-night–to a retailer that has both, even if the store side is on a small scale.
Amazon is the king of providing online channel infrastructure. Perhaps the Epicenter concept will become the ultimate in “bricks and mortar” outsourcing for online retailers. I’ve tracked Epicenter for 2 years now–the real estate part of the story is absolutely solid. The tech angle–the convergence between online and offline–is interesting. We’ll see if consumers buy it.
A few more issues we might want to think about:
— Which online brands are signing up for Federated’s stores?
— What, if any, merchandising and marketing support Federated is offering the brands who sign up?
— What marketing and promotional support the brands might be getting from the malls?
The online brands who are going to go for this are likely to be successful businesses with established brands in their own markets, who can draw foot traffic from mall goers who know the brands from their online lives.
But these companies are merchandising neophytes. It would be my hope that Federated would give them a big helping hand (or a voucher for the services of some of you folks on the panel) to get up to speed and, if nothing else, persuade them that, yes, they do need some full-time folks who understand this stuff and that senior management needs to trust the merchandisers.
Now, it seems to me that if this concept flies for Federated, it’s going to generate a lot of revenue with a good deal less overhead than if it were running department stores in the same space. And it will be able to leverage the equity of the better-known brands.
So I think Federated ought to be prepared to spend about the same amount of money promoting the web mall as it would a department store in the same space. If it were me, I’d keep all the traditional media in the mix, including the big, full-page newspaper ads that promote one merchandise group at a time, but I’d probably sacrifice some frequency there to do more online.
I’d do the same public relations campaigns as if it were a department store, too–community involvement, special events, the whole deal.
Finally, I’d ask the malls to promote the concept in its marketing–its events, its handouts and especially its maps and signage. In particular, I’d like to see the malls include a detailed map by merchant instead of just labeling the whole area the Federated WebMall, or whatever they’re going to call this thing.
(And I’m thinking it should NOT be called the WebMall. Anyone remember those godawful web-mall things from the nineties where people were mostly selling from blue-underlined text links?)
As stated, the 35ish and younger consumer is most attracted to this “‘outside-the-box’ thinking”, by Federated. Better service and limited time needed to purchase will be keys to these retailers, and satisfied shoppers!
As most retailers are real estate owners, this may be another way to utilize property better; as well as siphon younger shoppers’ sales from malls. One key is bringing in the right retailers, like Guess, Victoria’s Secret, A&F, etc.; and the trendy ones too.
Finally, for Federated Stores, what a great way to view what is hot in retailing and possibly test market a similar concept. Hmmmmmmmmmmmmm
I think Liz has hit the nail on the head. If the concept is going to succeed, it’s got to focus on the two things online shoppers can’t get from their computers: the hands-on demo and the Grab It Now!
So in clothing, that would mean taking the risk out of trying new trends by making sure the physical store had stock in every size, and adding a call to Try This On! to the pages featuring those new trends.
Same with technology and housewares: the page for a new item says Try It Out! and the store runs theatrical demos or has the gadgets out (plugged in and working, please) for customers to play with themselves.
Of course, if the page sells well enough on its own, the customer decides s/he just has to have one of those things RIGHT NOW, and the store is only too happy to oblige.
If I’ve read it right, we’ve pretty much agreed in this space that a lot of shopping happens across the three channels–online, catalogs and in-store–think Talbots, Coldwater Creek, Circuit City, Amazon/Borders (but maybe not anymore?) and, of course, Apple.
So if they can deliver the immediacy they promise when their product pages say Try This On! the online merchants who sign up for Federated’s stores should develop some nice incremental sales.
The original concept of a “department” store was the clustering of the shops on Main Street into one convenient location. It worked really well for about 150 years. Now the same thing could happen by clustering the cyberspace retailers into one location. Will it work? Why not? The people who shop the malls are the same ones who go home to surf and buy on the Internet. Whatever comes around, goes around.
There is insufficient information in the article to truly assess the viability of the concept. Having said that, the facts concerning online shopping behavior are stunning. Online conversion rates in the single digits are simply a symptom of the “research online, buy it in-store” behavior. Multi-channel retailers clearly have the advantage over pureplay in this regard, however, it should be noted that pureplay conversion rates are often double those of multi-channel etailers (hmmm).
Catalogs have been found to reinforce and create synergy with web sales. Websites have been found to create synergy with brick and mortar stores. If Epicenter offers an economically viable format for pureplay etailers to create a second channel–go for it.
Caution: the systems, skills, knowledge and processes of running a brick and mortar operation are vastly different from those you’ve developed running an online operation. While aspects of retail are still retail, the nuts and bolts of delivering it require different people, processes and often, different technology.
OK, I read the article and didn’t understand what this concept is. Then I had another big cup of coffee, reread it, and still don’t understand what the concept is. (I hope they are doing a better job of explaining it to potential tenants.) Who is the target market? Will there be a few actual sample items in these e-stores to touch and feel and then you still order online from the storefront? Or, is the idea that the mini-store is actually “stocked” with goods and a salesperson/self-checkout so you can take a package home with you that day? Is it a place you can return stuff you already bought online? Or a place you can physically pick up what you bought online? Yes, it may fill some empty retail space but what are the benefits to the customer? What are the benefits to the e-retailer?
“In a multi-channel world, consumers expect merchants to have retail stores.” That sentence says it all. I expect this concept to be quite successful. Here are the amazing facts:
— 67% of consumers state a preference to make purchases in physical stores.
— 87% of consumers shop online before buying offline, and credit the Internet with improving their in-store shopping experience.
These are outlets for the best, most desirable, most profitable consumers: multi-channel shoppers. They have more money to spend, they shop more frequently, they spend more (both online and off), they are more open to cross-selling and upselling.
Along with order online/pickup in-store (and buy online, return to store), I expect this will be a growing trend.
I give this effort an A for creativity but an F for expected success rate. It may work for a few selected products but overall it seems to go against the online concept and therefore doesn’t make sense. You are introducing costs back into the system that shopping online has removed. The only things it may make sense for would be any products that people are hesitant to order online until they have seen or touched it. I don’t have anything particular in mind but that is the only thing I can see that would benefit from this approach.
I can see why Federated wanted to do this project. Online sales of clothing outstripped consumer electronics for the first time this year. Ok, fair enough.
But most women who are shopping online are doing so after 5PM during their “me-time.” This type of behavior will not drive traffic into the mall, or restore the 30-38% loss of shoppers. Why would a shopper fight traffic and go to the store, when she can buy these items from her work or home computer (or soon–from her TV)?
The answer lies in other benefits offered. The concept of convergence works if there is another element experientially: entertainment, socialization, or unique product selection. At a minimum, when a woman goes to a clothier, she wants to try the item on.
Perhaps one or more of these elements will be offered. But if not, then the concept is technology for technology’s sake and not driven by consumer demand.
This is certainly an interesting “out of the box” idea. Will it work? The cost–since they already have the building–is minimal, so why not try it? I think the concept of getting companies to give Federated a piece of the venture is a stretch.
Most online retailers are just that for a reason. Federated may be able to grab some of the aggressive, rapidly growing ones who want to give the brick and mortar concept a try.
The store is the lab – this is a great way to learn. Mark points out what may be one of the more interesting reasons for a store. Online merchants can also learn from one of the masters of merchandising. Retail is not a charity business but I think this experiment will be a great incubator for ideas.
For a while, the Mills Corporation allowed brands to lease empty clean store spaces in their malls by the week and by the month. Mills even supplied a point of sale computer system and temporary store staff. That way, brands could test retail concepts in a live environment with real customers, merchandise, and pricing, without any long term commitment or build-out investment. The Federated/Epicenter test is similar, since the brands involved can pilot a new channel without a major investment. If the rent/traffic ratio is appropriate, Epicenter should be a winner.
On a flight this morning, I was flipping through a catalog called “Uncommon Goods” that only sells direct and via web. While looking at it, I was musing that I wish that their unique products were available in-store, as most items are ideal for gifts but I never think of ordering from them until it’s too late to make a needed date. Or, I simply forget about their cool products until a new catalog comes and I’m reminded of them.
Having just returned from the Digital Signage Expo, the key theme around all things retail was innovation. Along with this was the acceptance that innovation comes with no manual and no one knows what’s really going to work until we get the heck out there and try new concepts, test them for consumer response and refine accordingly. This idea can indeed work but the right strategy for how will need to be uncovered in-field…which is the entire point of this venture.