6277208708_7e6607d601_z

How tourism is driving retail: BloomReach Relevance Report

Forget about the great pyramids, the Golden Gate Bridge, the Statue of Liberty, the Eiffel Tower and the Roman Coliseum. The sight that tourists really want to see these days is, well, the mall.

No kidding. Now that we’re in high vacation season, the BRRR thought we’d break out of our usual format and take a look at a trend that is both significant and intriguing: retail as tourism.

tourism

Consider this the BloomReach Relevance Report: Summer Reading Edition.

OK, the retail tourism trend is hardly brand, spanking new. Who hasn’t stopped at the gift shop at the Lincoln Memorial or returned home from Disneyland with bags full of mouse ears and stuffed replicas of Pluto and Goofy that cost more than admission to the park?

But the idea of hitting the mall while hitting a faraway town is gaining significant traction. How do we know? We read the local newspaper. Just the other day there was a story about a major reincarnation of the Livermore Premium Outlets, reportedly the largest mall in California.

The shopping center, which is now the San Francisco Premium Outlets, despite being in Livermore and an hour-plus drive from San Francisco, lives off of tourism. It struck us, in fact, as the perfect example of the impact tourism has on retail and vice versa.

Screen Shot 2015-07-10 at 3.50.09 PM

 

The San Jose Mercury News reported that the mall, which is expanding to 700,000 square feet and about 180 stores, draws more than 7 million visitors a year, many of them from Asia. The newspaper says that on weekends, shoppers from as many as 50 countries can be found at the Simon Property Group-owned outlets. Tour operators advertising in Asia tout the mall as one of the Bay Area’s hot spots. Hence the name change. Would you rather fly halfway around the world to visit something called San Francisco or something called Livermore? (We love you Livermore, really.)

And as good as tourism is for retail, retail can be good for tourism — and for places like Livermore, which can benefit from free-spending visitors. The Mercury News quoted the city’s economic development manager on the upside for the suburb:

“It brings a lot of visitors to Livermore who wouldn’t normally come here,” Catherine Ralston told the newspaper. “The hope is that they’ll do some shopping and then come back to experience the wine country and the downtown.”

The Livermore-based mall is hardly the only retail operation to figure out that tourists are gold.

“It’s this whole notion of hospitality,” says Carl Boutet, a retail expert with Canada’s Mega Group. “Retail is becoming hospitality driven, so entertainment and hospitality are crossing retail.”

As consumers increasingly move their shopping online, physical stores must offer more than just shopping to keep customers coming through their doors, Boutet says. And so, new malls are being built with high-end restaurants, spas, megaplexes and health clubs, as the Wharton School blog pointed out recently.

“Anything new that’s being built, is really being built along that line,” Boutet says. “It’s not going to be just shelves for shelves’ sake.”

While the exact impact of tourism on U.S. retail is hard to determine, there is plenty of evidence that it’s significant. A Seattle Times story about Nordstrom’s remodeling plans quoted a Chicago retail consultant saying that 40 percent of the spending on the city’s swanky Magnificent Mile comes from tourists. And Macy’s, with 850 outlets, explained its lackluster first quarter by citing the part played by lower tourist spending in cities where its flagship stores are located.

17480550084_63274a7b04_o

And consider some numbers from a 2014 New York Times story about a facelift for Macy’s flagship store on Herald Square in New York:

  • It draws 20 million shoppers a year
  • Of its annual shoppers, 6 million are tourists, including several million from overseas.
  • The store accounts for $1 billion in sales.
  • If tourists spend roughly the same as other shoppers — and chances are they spend more — they account for 30 percent of sales, or about $300 million a year.

It’s the very reason that stores like Macy’s and Nordstrom are making or have made upgrades to their marquee stores, the stores to which tourists are likely to flock. For its part, Nordstrom is in the midst of remodeling its flagship stores in Seattle, San Francisco and Chicago, the Seattle Times reports.

The Seattle store, for instance, includes a tapas bar serving $10 craft cocktails, the Seattle Times reports, including one called Mai Tai Chi made with 10 cane rum.

If one of those guys doesn’t have you feeling like you’re on vacation, please return to the Space Needle — immediately.

Photo of Herald Square Macy’s by Mike Cassidy. Photo of newspapers by Jon S. published under Creative Commons license. 

Mike Cassidy is BloomReach’s storyteller. Contact him at mike.cassidy@bloomreach.com; follow him on Twitter at @mikecassidy.