Bricks Are Back in Retail, Gap Chief Shows

E-commerce isn't about to go away, but the old-line retailers aren't quaking in their boots anymore.
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Be not afraid of the Internet, fellow bricks-and-mortar retailers! It comes bearing gifts, after all.

That was the gist of the speech in Las Vegas by

Gap

(GPS) - Get Report

CEO Millard "Mickey" Drexler. The address, the highlight of the Tuesday session of the

International Council of Shopping Centers

convention, marked a rare public appearance for Drexler, who seems to be making a concerted effort to act as the face of Gap following recent sales-growth disappointments.

And Drexler's attention to the Internet shows that the stock swoon of the pure-play e-tailers notwithstanding, brick-and-mortar companies don't think the Web is going to disappear as a marketing and commerce tool any time soon.

"A lot of us have been afraid of the Web, myself included," said Drexler. No longer. Demonstrating its confidence in the medium, Gap quietly rolled out e-commerce at its

Old Navy

site on May 4, following the 1997 launch of e-commerce at

Gap.com

and last year's debut of

Banana Republic

e-commerce. Contrary to early beliefs about cannibalization, selling khakis online actually drives traffic to stores, said Drexler.

Gapping Down
Gap shares taking a beating

Source: BigCharts

The audience of shopping center developers, leasing agents and retailers packed into a ballroom at the Las Vegas Hilton was probably more inclined to take Drexler's optimistic view this year than last. Last May, the pure plays seemed poised to give mall stores a run for their collective moolah.

eToys

(ETYS)

was trading at 57.

Amazon.com

(AMZN) - Get Report

was at 59.

Fogdog

(FOGD)

was at 13. Now, those stocks trade at 6, 44 and about 3, respectively. Why, a year ago,

Toysmart.com

was still in business!

Boo

hadn't even launched yet, let alone burned through all its money and entered liquidation!

What a difference one holiday season and a

Nasdaq

rout make. Holiday '99 will be forever known as the one when the mall stores struck back. Since then, it's been bricks and clicks all the way -- especially as the market has woken up to the fact that retailers are profitable, while e-tailers are generally not -- and may never be. Retailers now seem to be the ones in the catbird seat.

"Everything has come full circle," said conference attendee Maggie Gilliam, principal at

Gilliam & Co.

, an independent research and advisory firm specializing in retail. "A year ago, the shopping centers were worried that the Internet was going to take away rental income from them. Now, stores like the Gap have found that their Internet sales haven't cut into their store growth."

Speakers at the conference also were quick to cite a recently released

Jupiter Communications

study showing that consumers increasingly research purchases on the Web and then spend money in the stores.

Fashionmall.com

(FASH)

CEO Benjamin Narasin cited Jupiter figures showing that for every dollar spent online, $8 in sales are created in physical stores.

Too

(TOO) - Get Report

CFO Kent Kleeberger discussed the strategy adopted by the popular girls retailer: E-commerce is secondary to using the Internet to communicate with its customers.

Sure, there still were a few grumbles heard at the conference about the fact that Internet retailers don't have to collect sales tax. The ICSC left a sample letter complaining about same on conferees' chairs, which they can copy and mail to their congressional reps.

But generally, though, the mood was upbeat (and it had nothing to do with the weather -- Las Vegas hit a record high of 108 degrees on Tuesday). For shopping centers, which are seeing retail rents climb, business is phenomenal, despite the

Fed's

recent moves. Bricks are striking back. And Mickey Drexler flew in just to speak to them! It doesn't get much better than that.