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ALA MOANA CENTER, Honolulu, HI

Morey: We’ve spent a lot of time and effort looking at the space Andy Dunn’s model from the start was not to open physical
and what we have found is fascinating. For example, 90% of all stores. Then he opened a few boutique stores in New York,
retail sales still happen in the physical store. That means 10% Chicago, and other cities to see what the consumer reaction
of sales are happening somewhere else. When we look back to was, and so far they’ve been successful to the extent that he
when catalogue sales were at their peak they represented 10% raised funds earlier this year solely meant for opening stores in
of all retail sales. When we look at the data we see there’s been malls. They’re doing it because the volume is there, the sales
a shift in channel; but there really hasn’t been a significant shift are there, and the stores are proving themselves. So now, for
yet on the physical store side. a lot of pure-play online retailers and traditional brick-and-
Today, if we dive deeper on mortar retailers, there is a mad dash to provide a multi-channel
the 10% of retail sales that are experience to customers to capitalize on this multiplier effect.
not in the physical store, we
find that 1% is catalogue and Saah: To your point, I read in Forbes that Keith Herbert, Senior
9% is online. Of that 9% that’s Vice President of Gap North America said, “Footsteps are up
online, a little more than half is this year” and noted that a new feature that allows shoppers
from brick and mortar retailers. to order online while in a store has helped. This supports
We know that two-thirds of your evidence about the relationship between online and
all online sales touch the brick in-store sales.
and mortar store at some point,
whether I’m in the store before Morey: That’s exactly it. We like to think in terms of value creation
the sale, touching it and trying versus value capture. When you look at these fundamental
it, or I go to the store for a return shifts, we [mall owners] need to better understand the
or exchange. shopper’s path to purchase and figure out how we can
That leads us to what is called support the retailers to help create a seamless omni-channel
the multiplier effect—the fact experience. Even though the term is over-used, the mall
that when companies open a owners are focused on enhancing the customer experience
retail store, their online sales and providing consumer focused services so we can keep
increase and when they close malls as a productive part of the retail space.
one, their online sales decrease.
So there is a mad rush among
these traditional brick and
mortar retailers to provide a more seamless omni-channel, or
cross-channel experience because of this multiplier effect.

Saah: So the popular notion that the physical store is going
away is a myth—or at least not supported by the data.

Morey: For those who understand the interaction between
the virtual and physical retail space and capitalize on it, and
enhance the overall customer experience, the physical store is
as important as ever.

Saah: This is surprising. We remember Borders going out of
business a few years ago, and the 200 stores that Sears has
recently closed, and in general think of online sales being the
future.

Morey: Like any generalization, not all things are equal. Some
categories of retailers have really struggled at making brick-
and-mortar stores work. But if we look at pure-play retailers like
Bonobos, Birchbox, and Warby Parker, we know when those
retailers open retail stores, they obviously make money in the
stores; but we also know online sales in the same trade area
increase three to five times. Conversely, the CFO of Macy’s
recently said when Macy’s closes stores; they also see sales
decrease by a multiple in the same trade area as the store.
This multiplier effect of physical stores on online sales is real,
measurable and proven. Take for example Bonobos. CEO

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