Can the Internet Save Retailing?

By Jordan K. Speer — August 13, 2009

Lately, I've been reading quite a bit about retailers' use of  "cotenancy clauses"  in their leases to receive store rent reductions.

I have to admit that, until recently, I had never heard of a cotenancy clause, and that's probably because, until recently, there was not widespread opportunity to put them to use.

Unfortunately, the downtrodden economy has sent droves of retailers to examine the fine print in their leases and to take advantage of these clauses that are triggered when anchor tenants leave malls, when the mall hits a certain number of store vacancies, or when other predetermined violations occur.

At that point, the clauses provide for retail tenants to demand cuts in rent, or even to abandon their leases penalty-free.

This scenario is playing out across the country, where bankruptcies and downsizing combined with an overabundance of new retail space are leading to store closures that leave gaping vacancies in shopping centers and enclosed malls, allowing retailers that remain to pursue rent relief through use of the clause.

Assuredly, this is helpful for the retailers achieving the rent reductions, and may even represent a necessary rationalization in the marketplace, but in the overall scheme of things, it's a reflection of the dire state of retailing.

Thinking about all of this empty retail space and wondering how the real-estate scenario in this country will play out put me in mind of my most recent shopping experience, at Zappos.com. (My Born shoes arrived the next day. I love them. I couldn't have asked for an easier or more pleasant shopping experience.)

Based on the multitude of reports of double- and triple-digit percentage increases in online sales, it's clear that the Internet is one of the few very bright spots in retailing. This isn't lost on retail executives, who are increasingly shifting resources and budget to this channel.

In a recent Q&A published on Forbes.com, for example, Anthea Stratigos, the chief executive of Outsell Inc., a media research and advisory outfit, says that the results of her company's most recent annual marketing study predict that $65 billion will be siphoned away from traditional advertising channels in 2009 and spent instead on companies' own web sites and Internet marketing. Companies are working to develop page content, web analytics, search engine optimization and site design, she says, adding that most of them have invested in social networking platforms to create direct dialogues with their consumers.

This month I'll again be attending the E-tail East show in Baltimore to learn about many of the latest and greatest technology platforms that assist in developing all of these capabilities, and more.

Unlike in a traditional brick-and-mortar store, it is much easier to track and record the movement and activities of your online customers, and from those to learn their individual tastes and preferences. If retailers compile and analyze this information in a meaningful way, they have the opportunity to service each customer online with as much personalized attention as he or she might receive in a mall store.

As web technology grows increasingly sophisticated, it is continuing to change the way customers interact with the world, and also offering retailers new and incredible opportunities to understand the intimate details of their customers' lives, and to market to them on an individual basis - rent free. But you first have to make your online store a place where consumers like to be.

What it comes down to is this: If you're not tricked out on the Internet superhighway, you might as well hit the road.

Jordan K. Speer is editor in chief of Apparel.
She can be reached at jspeer@apparelmag.com.

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