Exclusive Q&A With ICSC CEO Tom McGee: We're Not Afraid Of E-Commerce

Coming off one of the biggest retail shows of the year, ICSC is closing out 2015 with a lot of lingering questions—including historically low Thanksgiving weekend sales (as e-commerce literally broke the Internet). Bisnow sat down with ICSC CEO Tom McGee who—despite popular consensus—insists that brick-and-mortar is not only thriving, but will benefit from the rise of e-commerce. 

Bisnow: This holiday shopping season, specifically Thanksgiving weekend, reports said e-commerce soared while sales were down in malls. Is the industry worried about e-commerce going into 2016?

Tom McGee: I'm not sure that I agree that sales were down. At all. Some statistics out there have suggested that but we haven't seen anything reliable suggesting that was the case.

The numbers used in the press were extrapolated from very small samples. What we found is very strong sales in the physical shopping space, in the retail real estate space. 

It's important to recognize—and I know that it's an easy headline that online sales are increasing at a rapid rate—but just remember that online sales are a very small percentage of the total amount of sales in the country.

But 92% of all sales are done in a physical retail location. The absolute dollar amount [between e-commerce and brick-and-mortar] is significant. Physical retail sales increased a little less than 3.5% this year. We expect 600 million Americans to visit shopping centers over the course of the holiday season and we expect an exceptionally strong holiday season. 

I really don't think there's any type of story about risk for the industry. I do think there's a more interesting story, which is convergence. It's not bricks vs. clicks, but bricks and clicks. I think many shoppers use the Internet as research prior to coming into a physical store.

Really, one-third of the folks that bought things online on Black Friday ended up picking those up in a store. And six out of 10 of those ended up buying something more when they were in the store.

So I think the real story is one of convergence and opportunity in the physical retail space. Not a threat. At all. Our members are reporting very strong sales and we really believe our 3.5% [2015] estimation is going to come to fruition, if not better than that.

Bisnow: One of the things we hear about a lot is that physical retailers have to enhance the in-store shopping experience to ensure that people keep walking through the doors. What are your thoughts on that?

Tom: I think that is true, and I think that has happened. We need for it to continue to happen. I really think technology has been integrated into everybody's lives. Not just in shopping, but every facet of life. So I think we need to accept that for what it is.

What that has really done is that it has increased the expectation on the industry to be innovative. Experiential things, restaurants, theaters within shopping centers. I think the industry has done a very good job of adapting. And it needs to continue to adapt.

The facts are what's powerful in all this: 94% occupancy rate suggests a very healthy industry. In any natural industry, you're going to have transition in and out—and that's pretty close to full occupancy. 

There have always been competitors. Online is just one. There were catalog sales 20 years ago. So I don't think this is new. I do think it puts a premium on pace of change and the need to constantly enhance the shopping experience and do things that are more innovative.

Bisnow: What are some of these innovations, specifically? 

Fundamentally, in physical retail, innovation comes in what happens within the walls of the shopping center itself. That means a lot more restaurants, a lot more entertainment, a lot more service providers in your shopping center. 

And regional malls are an important part of the industry. Physical retail space is a hugely important part of the community in every part of the world.