REVENGE OF THE BRICK Echoing the death knell of the 2012 “showrooming” media frenzy, the popular press eulogized brick-and-mortar retail after Black Friday 2015 online sales were up 21 percent year-on-year. 1 Stalwarts like Macy’s have added fuel to the fire, with disappointing earnings calls that flew in the face of aggressive omnichannel investments. 2 The perception that online channel growth will signal renewed relevance to the street has driven many retailers into a downward spiral of e-commerce promotionality. Chasing Unicorns This silver bullet mentality is further reinforced by astronomical valuations awarded to buzzy e-commerce startups. The venture capital community signaled renewed willingness to go all-in on the pureplay business model—even as former “unicorns,” like Fab and Gilt Groupe, mirror the trajectories of their dot-com era predecessors. The same challenges that plagued and others persist two decades later: unsustainable customer acquisition and shipping costs, and a discount-driven environment that erodes already razor-thin margins. Hitting “scale” requires cheap capital to fund growth, in the absence of profitability. Rhetoric The major cities where national media outlets are headquartered have also experienced a flood of last-mile providers. Markets including New York City have been home to pilots for Prime Now, Postmates, Instacart and others, creating top- of-mind awareness around innovators in the e-commerce space. The resultant, disproportionate press coverage belies the rampant pace of investment in less- sexy, brick-and-mortar retail—including major mall openings in the same markets (Brookfield Place, Hudson Yards and The Mall at the World Trade Center, in the case of NYC). Defying rhetoric, high-end malls continue to experience growth in sales per square foot. 3

Death of Pureplay Retail: Cities in Which Last Mile Services Have Deployed July 2015

Source: L2 Intelligence Report: Death of Pureplay Retail, January 2016.

Death of Pureplay Retail: Top Markets for Retail Development Based on Retail Square Feet Under Construction Q4 2014 ■ Cities in Which Last Mile Services Have Deployed


New York




Los Angeles


Miami-Dade County

1. “ U.S. Retail Black Friday Report 2015 ,” IBM Watson, 2015. 2. “ Macy’s shares slump as revenue falls short of estimates ,” CNBC, November 11, 2015. 3. “ Against all odds, malls are thriving again ,” Fortune, March 30, 2015.

Source: “Doubling Down on the Rebirth of the American Shopping Mall,” CNBC, June 7, 2015.


January 12, 2016

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