Can online shopping help save malls?

For years, mall landlords have been looking for ways to curb their losses in the age of online shopping.

Now they’re betting that ecommerce — the very thing that disrupted their businesses to begin with — will help provide that boost.

Retail owners are increasingly looking at micro-fulfillment centers and logistics nodes that can sit right behind stores. The model puts click-and-collect, in-store shopping, and the fulfillment of online and pick-up orders in one place, located close to where people live.

Brookfield Properties, Macerich, and Taubman are opening technology-enabled micro-distribution hubs at five malls. Simon Property Group is also transforming several of its properties. 

“Our clients have been increasingly considering micro-fulfillment as a two-birds- with-one-stone approach: landlords need to fill vacant retail space and retailers need to get goods ordered online shipped to customers,” says Naveen Jaggi, President, Retail Advisory Services, JLL, Americas.

The idea isn’t brand new, especially for grocery stores. But COVID-19 has ignited its broader relevance.

In June, eMarketer forecast ecommerce is poised to grow 18% in 2020, following a 14.9% gain in 2019.  

“Shopping centers are located right where people live,” Jaggi says. “They are likely to become an essential part of the supply chain.”

Now, Meyer says, “repurposing vacant or ‘dark,’ stores and mall space as micro-fulfillment centers will be an important component in re-imagining the U.S. retail footprint.”

Grocery adoption

The grocery industry operates on low profit margins, and micro-fulfillment is helping stores struggling to fill the surge of online orders in a cost-efficient and timely manner.

Whole Foods recently converted some of its stores to fulfillment-only hubs due to increased demand for online grocery delivery, while other stores have portions dedicated to fulfillment. Several other notable grocery brands like Kroger are exploring micro-fulfillment.

Because online grocery orders were a small part of the overall e-commerce pie going into the pandemic, some grocers — along with other traditional retailers — were caught off guard by the sudden popularity in online ordering, Jaggi says.