2020 was a miserable year for retail. Dozens of well-known names filed for bankruptcy, and now, countless stores are on the chopping block as retailers attempt to cut costs in the absence of adequate revenue.
That's a problem, not just for those retailers themselves, but for mall operators, who rely on stores to pay rent. In fact, 2020 saw a number of department store bankruptcies and plans for closures. That's troubling, because malls typically rely on these stores to serve as anchor tenants, taking up added space and drawing in customers and smaller tenants alike.
Compounding the issue is the fact that foot traffic was sluggish at stores this past holiday season as more shoppers made their purchases online. While that ultimately contributes to retailers' revenue the same way in-store purchases do, it also helps drive home the point that physical stores aren't necessarily the most profitable way to go.
Still, operating physical stores can work to retailers' advantage. That especially holds true in the weeks following the holiday season.
Retailers should capitalize on returns
It's common practice for shoppers to return goods after the holidays: unwanted presents, poorly sized apparel, or items that ultimately didn't meet expectations. On one hand, that's a negative thing -- it means retailers have to refund customers for their purchases. On the other, it gives physical retailers a definite edge over online retailers, because to facilitate those returns, shoppers have to physically enter stores to make exchanges or get their money back. And that means retailers can use that added foot traffic to their advantage.
For one thing, they can run promotions throughout January, when consumers are most likely to start working their way through their holiday haul and figuring out what stays and what goes. Retailers can also offer incentives for consumers who ordered goods online to return them to stores instead of shipping them back in the form of in-store coupons or other discounts.
Along these lines, now's the time for retailers to start running in-store-only specials. Consumers need a reason to drag themselves out to malls at a time when so many people are hunkering down. And retailers need to get creative so customers coming in to make returns wind up spending money on other things.
Another way for retailers to benefit during the holiday return crunch? Push store credit cards. These credit cards, which are generally easier to qualify for than bank-issued cards and come with unfavorable interest rates for consumers, can be a boon to retailers, generating a sizable portion of their revenue. In 2016, for example, Macy's (NYSE: M) derived 39% of its profits from branded credit cards alone. But for customers to apply for those cards, they need to set foot in a store -- and that may not happen as frequently once the holiday return season wraps up.
The Millionacres bottom line
All told, retailers have a prime opportunity to take advantage of in-store returns in January before consumers start avoiding malls again. And mall operators (and their commercial landlords) had better hope they do just that.