Does the web really need a shopping centre?

Australian retailers have been a long way behind the eight ball when it comes to online retail. But it seems as if 2011 may be the year that many finally jump on the bandwagon. Myer is in the development process of an offshore ecommerce web site. The anti-online retail spokesman himself Gerry Harvey has finally succumbed to a new reality, launching a daily deals site. And just last week, Westfield entered the equation by establishing Australia's largest online shopping centre. Which raised the question… does the web really need a shopping centre?

Why shopping centres exist

Physical shopping centres offer a win-win scenario for both consumers and retailers. For consumers, shopping centres provide a single location in which to conduct all (or at least most) of their shopping needs. The primary benefit is the convenience of a one-stop shop. And even in today's digital society, that benefit holds strong. I frequent my local shopping centre on at least a fortnightly basis. And I'm more likely than most to buy my goods online.

For retailers, the benefit is dead simple – foot traffic. Few other locations can deliver the scale of foot traffic of a shopping centre, aside from a handful of select shopping strips. So it's easy to see why shopping centres have become a core component of our retail infrastructure.

However, do those benefits translate across to the digital environment? Personally, I don't think so.

The Internet = the world's biggest shopping centre

While physical shopping centres offer a certain level of convenience, the web takes it into a whole new stratosphere. The size of a real-life shopping centre, and the retailers it houses, are limited by physical space. The Internet is limitless by nature. Consumers can shop for anything at any time, which makes it the world's biggest shopping centre. Now that's convenience!

Why would consumers need retailers to congregate under a single roof/domain when everything they need is a simple mouse click away?

The consumer offer

Westfield are clearly pushing the convenience angle as the primary benefit for consumers. Spokespeople celebrate the fact that the new online shopping centre enables consumers to 'select products from a variety of stores, but pay for them in a single transaction'. However, this outcome adds only an incremental benefit to the online shopping experience. Remember, online shopping is convenient by nature.

I can't see a benefit as incremental as this being able to sway existing consumer behaviour. The fact is that people primarily turn to the web seeking the best deal/lowest price. Westfield's incremental benefit in convenience will mean little if they don't offer the lowest price (which I doubt they will). Savvy online shoppers seeking convenience are likely to continue using shopping comparison engines to discover the lowest price available. Will anyone really pay more to save themselves a minute in the checkout process? 

I suspect not.

The retailer offer

While the consumer oriented offer seems somewhat weak, there is more substance to the proposition for retailers. In particular, small retailers stand to benefit by becoming involved with the Westfield venture. Westfield's online shopping centre offers a number of key benefits:

1. Businesses that can't afford their own online store now have a medium through which to sell goods online (although you could argue that already exists via Ebay)
2. Westfield will manage all online payments
3. I suspect Westfield will throw the online store in at a very low cost for retailers already occupying a physical presence within one of their centres

However, for larger retailers the benefit is less pronounced. By now, most larger brands have a well-established online presence, tailored to their audience and brand persona. I can't think of too many scenarios where a retailer would prefer to sell via a middle man as opposed to direct to the consumer (Apple being the obvious exception). And many would be downright angry to get into a bidding war with middle men aiming to attract their customer.

So can the online shopping centre concept actually work?

My gut instinct tells me no. The value just doesn't seem to exist at either end of the chain. But I've been wrong before and I'll be wrong again. One thing that can be said with certainty is that the site itself is a marvel. From a design perspective it's clean. The functional capabilities are excellent. And the technical implementation is nothing short of outstanding. The scale and ambition of the project cannot be understated. I can't fathom the technical & logistical challenge of enabling content management across hundreds of brands. So from that perspective, the site is a winner.

But the jury is out on the business model itself…