The retail apocalypse is neither here nor here to stay. For every shop that closed in 2019 in the United States, five opened. We could go on and on about the non-apocalypse or focus on retail’s biggest transformation in the last 80 years, and work hard to make the new chapter of shopping centres extraordinary.
In the midst of this fabulous era of retail reinvention, the big question I ask myself every day is: Is your company adapting to change or creating it?
The traditional shopping centre is separated into two large spaces (common spaces and private spaces) which in turn are subdivided into several spaces.
For years now, the “second space”, i.e. the tenant space, has been working conscientiously and consistently on improving the customer experience, the customer journey and the value proposition. But a new question arises: has the same been true of the “first space”? The first space is the realm of the landlord, of the property, the realm in every building that is not a shop and that represents a veritable ocean of square metres (parking, toilets, rest areas, corridors, etc.). The truth is that properties, in general, have not kept up with the speed of change. And they need more agility.
In recent years, F&B and leisure/entertainment have become the main focus of operators’ attention. Some add to these issues the adoption of new technologies, the search for efficiency, sustainability and, of course, new revenue models.
The truth is that F&B is very high on the list because we already know that customers, for now, can eat on their computer, but they cannot eat online. The questions I ask myself are: Is F&B the lifeline of the malls? Are all implemented F&B models successful? Have operators also invested in the overall visitor experience beyond F&B?
Many retail observers continue to claim (what will move them to do so?) that shopping centres are crumbling at their foundations. However, those of us who, like the team at TOTEM Branding, have been working in and for the retail world for decades believe that the world today offers shopping centres the opportunity to pass a new chapter in their exciting history.
With a dose of creativity, a new mindset, fast and agile innovation and a (real, honest, authentic) focus on the customer, shopping centres can be transformed into “consumer social spaces”, creating and designing new mixed-use offerings to meet the needs of new and future generations of shoppers. This is especially the case for heritage companies, which understand the value of long-term investment and return on investment in their customer relationships (both BtoB and BtoC).
Meanwhile, digital retailing is taking a bigger slice of the retail pie (up to a third by 2030, according to A.T. Kearney). It seems like an exaggerated number to me, but if it helps leading traditional brands to rethink how they organise their shops, we’ll take it.
Very few owners are rethinking their retail mix, and most continue to focus on bringing more food and entertainment options, but not online-born operators that betray offline audiences: examples include Microsoft, Bonobos, AliExpress, Warby Parker, etc.
Leasing teams have been talking to the same traditional brand expansion managers for years and now they have to face a new world of brands with a new understanding of retailing.
Are you ready to face it?
These new and not-so-new digital companies are establishing a physical presence of their own, albeit more cautiously and with a different approach than industry precedent would suggest. And the key word is different.
One of the strongest proof points of this is the continued migration of digitally native brands into physical spaces. In fact, several major digitally native brands have announced plans for at least 850 shops (Casper, Adore Me, Allbirds, etc.).
Fortunately, the industry is starting to stop talking about the physical (offline), digital (online) retail dichotomy, and is starting to refer to it once again as simply, retail.
Success will belong to those operators and tenants willing to break or evolve the patterns and practices of the past and fully embrace a consumer-driven future.
The future is today.
Despite all the noise to the contrary, approximately 90% of retail sales still occur in the physical space.
Shopping remains an anthropological act and most consumers who shop online want to try a product before they buy it.
However, that does not mean that centres and shops should rest on their laurels; what it means is that they must be even more diligent in perfecting their experience, so that shoppers leave the comfort of their couch at home or in their office and move to the mall.
One way to transform is to prioritise people, as most shoppers say that customer-facing employees are a decisive factor in where they shopped and would shop again.
This is not to say that new technologies are not important, especially as consumers become more independent of a specific channel, and especially the new generations.
The malls of the future will be environments where people come together to connect with family and friends, seek unique experiences, reaffirm shared values and engage interactively and immersively with brands.
Transactions will be a by-product of socialisation and engagement. The common focus of tomorrow’s malls will be to create platforms that facilitate sales by recognising, understanding, pampering and connecting people.
Owners are people, tenants are people and customers are people, those who do not understand people do not understand the future of retail.
If current trends tell us anything, it is that the shopping centres of the future will be community spaces that will include residences (coliving and other formats), hotels, offices and workspaces (coworking and other formats), health and beauty services, gyms, food and beverage, events, entertainment, quality services and, yes, retail.
It is no longer enough for shopping centres to be passive places to buy things, customers demand attractive, pleasant, human places to do things. The format still followed by the majority will be relegated to the status of a relic, a building that no longer meets the needs of the public, the consumer or the retailer itself.
Euromonitor forecasts that physical shops will be the place to see, feel, touch and experience the products that require the most consideration, leading physical shops to become increasingly experiential. According to the market research firm, “seeing or trying a product before buying” is already the primary motivation for in-store shopping for 47 percent of connected consumers worldwide today.
F&B plus entertainment.
Centres that have reacted in time are no longer just “shopping” centres. Instead, they evolved into “dining, leisure and entertainment” centres, where shopping is an add-on (and a desirable outcome) but not necessarily the reason to go there in the first place.
A clear example of the commitment to entertainment was seen when Cirque du Soleil announced plans for a “family entertainment” concept inside a Toronto shopping centre. “Creactive (Family Fun Centre) will be a circus-inspired playground with a variety of activities that will allow fans to experience Cirque first-hand, peek behind the curtain and imagine stepping into the performers’ shoes. Not to mention the impact of cobranding with a brand as powerful and admired as Cirque du Soleil.
Not all centres can access this type of entertainment, experiences do not have to be big and expensive. Continuity in the value proposition adds up to more than just one big event every few years. Data also allows to focus on user comfort and help them live memorable experiences using immersive technologies such as virtual and augmented reality.
Elsewhere Westfield unveiled its “Destination 2028” vision, where shopping centres become “hyper-connected micro-cities”. AI-infused catwalks, eye scanners that personalise a consumer’s visit and smart changing rooms will add a layer of “extra-experience” for shoppers. But the real breakthroughs will come in the form of reinvented retail.
The shops will be showcases, displaying the processes behind products and brands (the New Balance shop on 5th Avenue is a clear example). Event areas will host interactive masterpiece activities. Westfield is already well on the way to its vision for the future, with the launch of Westfield Square at Westfield London, a giant outdoor dining, entertainment and leisure precinct, including Europe’s largest Japanese food hall, Ichiba.
Christopher Cuvillier of Unibail-Rodamco-Westfield shared his overview of the local shopping centre: strategic locations, new tenants, consumer data and public transport.
But not everything new and good is happening in the English-speaking world. China’s Alibaba Group has been working on its own version of the mall of tomorrow with its “More Mall” concept. The five-storey centre, which opened at the end of April in Hangzhou, is packed with technological innovations.
In some projects in Central America, the centre is already an essential component of the place where you can live, go to work, shop, eat and go out. It is an approach that eliminates the traditional definition of a shopping centre. Instead of going to a centre, you are already there and retail is all around you.
Eventually, these centres will serve the “ecosystem of your life”.
It is worth remembering that retail brands that are not off and on will be left out.
And it is clear that each centre exists in a completely unique commercial area with different competitive forces. Not all formulas apply in the same way to all malls.
The number of US shopping malls quadrupled between 1970 and 2017 and because most followed the copy paste model, so many are closing because they have failed to create original, differentiating, creative and people-centred propositions.
The horsemen of the retail renaissance.
There are five: customer centricity, data, efficiency, logistics and services.
Logistics: they become important mini-logistics centres. Their ideal locations for pick-up or delivery points for online shoppers will be an important aspect. More than half of the world’s population now lives in cities. By 2050, this figure will rise to 70%. This monumental shift will create significant logistics and supply chain challenges for the consumer goods and retail industries.
Our businesses will not only need to collaborate better with each other, but also work more closely with cities as they modernise their infrastructures.
What about the planet? Today’s consumers are understandably concerned about sustainability.
Services: According to Global Data, shopping centres that offer more services and experiences receive more frequent visits and shoppers spend almost three times as much there. Successful spaces of the future are places that people want to visit. They give people a reason to be there, and if they spend their time somewhere, they generally spend money there too.
This means that the retail of the future will no longer only focus on selling to visitors. Shopping centres can become cultural hubs, with a vocation to serve the community and be truly useful.
With the right mix of services, experiences and retail mix, which serves the community in which they are located, shopping centres can, and surely will, regain their relevance.
Customer Centricity: Retail success ends with a clear and deep understanding of the changing consumer. Today, for the first time in history, the market caters to six generations of shoppers: Silent Generation, Baby Boomers, Gen X, Millenials, Gen Z and Alphas. Consumers: Despite constant consternation about the need for shopping centres and retailers to evolve, consumers were relatively reserved in their desires. While robots and magic mirrors may make great headlines, consumers prefer skilled customer service, personalisation and convenience.
The ICSC reports that 20% of shopping centres in the US generate more than 72% of all shopping centre sales. That means that there are many centres competing in a small segment of the market.
This continues to drive many to fade away and others, the brave ones, to rethink. Certain shopping centres can now find Instagram areas or virtual reality experiences that help draw people in or keep them longer. Pop ups have also become a mainstay that allows customers to discover new brands and retailers continue to offer something new for every visit.
This approach works even better if it can, as I mentioned at the beginning of the note, incorporate the kind of new digital-first brands.
Data: People are not data, they are emotion; but if operators are able to transform big data into Smart data, many positive things can happen. From the back end by making consumption and expenses more efficient and from the front end by personalising experiences and creating a unique experience for each visitor.
The digital world and the startup ecosystem has much to contribute to the industry. So much so that Simon Malls, the largest mall developer in the US, has created a “scalable retail platform” called The Edit, a pop-up space for online retail startups, which are increasingly eager to gain a physical presence for their products. If data is the oil of the 21st century, understanding it and putting it to good use is the gasoline.
Efficiency: Efficiency is a rising added value that is still searching for its place in the retail market. At the moment, its greatest ally, energy efficiency, has become an essential premise for premises, shopping centres and retail parks, where the user’s perception and the manager’s experience are key. Shopping centres are committed to improving environmental management in their processes and facilities and are implementing measures that reduce their ecological footprint, such as, for example, the promotion of natural light and green spaces, the provision of parking spaces for electric cars, the use of renewable energies and the rational use of water and efficient lighting. Sustainability, a sister cousin to efficiency, completes the circle.
Besides F&B, what else? Sport, luxury, wellness….
Wellness: The global health and wellness economy has grown 12.8 percent in the last two years to $4.2 trillion. Wellness is a broad term that is defined differently by different people, but includes mental, physical and emotional health.
For those who are serious about wellness, it’s easy to spend an entire day at the Life Time Center in Boston, which has reinvented itself as a fitness and wellness-focused shopping mall. You can hit the gym, take a class, visit the medical centre, go to the spa, get a beauty treatment, eat the latest health foods and more, all in one place. It’s not about visiting just to shop, it’s about accessing the services you use regularly. That translates into consistent repeat visits on a regular basis.
In retail, we often talk about fitness or health care tenants. While both are important aspects, consumers want to see green spaces in their shopping centres. They are looking at shopping centres as a place to congregate and relax.
Luxury: Luxury is another niche that offers great opportunities.
A sustainable world needs sustainable spaces
As shoppers become increasingly aware of consumer waste, the concept of renting goods is becoming more common. Just over 57% of shoppers are now willing to rent modern, well-made products. That number increases for both Millenials (70%) and Generation Z (72%), as they are the generational groups most concerned about their environmental impact.
Shopping centre professionals should focus on incorporating new and exciting concepts, enhancing their common spaces, incorporating wellness-focused uses and upgrading their technology to create seamless and efficient experiences.
Baby Boomers continue to exert a disproportionate economic influence, but Millenials, Gen Z and Alpha are the “Consumers of the Future”, a multi-generational demand that drives the market, but operate under an asymmetric model of intra-generational wealth transfer.
Generation Z shoppers are big on offline, and BOPIS. BOPIS, known as Buy-Online-Pickup-In-Store.
Young: Young shoppers like to shop in-store. That’s according to a new study by Package Concierge, in which nearly 60% of shoppers surveyed between the ages of 18 and 25 said they visited a mall in the past week, and nearly 90% made an in-store purchase during their visit. Nearly a third of respondents said they want to purchase items within a few hours, usually faster than they can get them through online shopping.
Ethical: Ethical shopping is one of the fastest growing retail sectors. Spending last year on ethical food and drink grew by 9.7% and the ethical market is now worth £81.3 billion in the UK. Almost half of shoppers feel more positive about brands that publish their ethical standards. The internet is helping people discover more ethical choices and, rather than making shopping a guilty pleasure, it helps reinforce our identity.
Technology: Technology is also helping consumers make ethical decisions about past purchases. The option to resell and recycle purchases makes a third (33%) of UK shoppers feel better about spending money.
Technology, as machine learning evolves from pattern recognition to cognitive intelligence, consumers will expect, and demand, highly curated and frictionless shopping experiences, from product recommendations and queued selections for them by their AI assistants when they enter a shop to automation, without staff.
Experts writing in The Future Of Shopping report talk about the impact of the “fourth industrial revolution”, a fusion of physical, digital and biological technologies, on shopping.
We are what we buy. We are what we share.
The things we buy are part of our identity, they are a public expression of our values and what we hold dear. Shopping and consumption in general come with negative associations for the environment and the well-being of employees, but increasingly ethical choices offer consumers the opportunity to buy with a good conscience, to feel that buying things is a way of making the world a better and safer place, a healthier place to live.
Brands have a great opportunity to showcase their ethical and sustainable credentials to help shoppers make choices that accommodate this shift in consumer attitudes.
By 2030, all Boomers will be over 65, and our original Boomers will celebrate their 84th birthdays; meanwhile, the youngest of the millions of Alphas will be only five years old, and 40% of all consumers will be digital natives. How well will retailers integrate their technologies with those of their customers?
Ageing: The global birth rate has been declining for 20 years, and we are living longer. By 2047, people over 60 will outnumber those under 15. This will mean new opportunities for some industries, as more mature consumers tend to have higher disposable incomes.
Overall, just over 70% of Millenials and Gen Z shoppers want shops to remember their preferences as they switch from researching, browsing and shopping online brands and in-store offerings.
Emerging new models and changing consumer preferences will transform our current ideas about a successful tenant mix. Local and artisanal brands will mix with national retailers.
Product portfolios will shift to goods and services less susceptible to disintermediation and automatic replenishment.
Subscription and exchange platforms will expand their physical footprints.
With smart homes, smart shops, smart buildings, smart shoppers and smart employees, the shopping experience of 2030 promises to be a smart experience. But a smart one mixed with high doses of emotionality, outstanding service and great little details.
New consumers have an expressed preference for “doing” over “owning”. As a result, the emergence of investment experience centres will take precedence over purely transactional ones. These will be physical spaces created as unique environments.
The average shopper buys 60% more clothes than 15 years ago, but keeps only half of them.
The customer journey will no longer be just about the end point: the purchase. The ideal journey will provide value before, during and after the purchase, turning a transaction into a relationship.
The big question I ask you after reading this article is: Are you ready for all this?