What changes can we expect in shopping malls and retail shops in the near future?
Article by Dimitri Balakirev, Malls.Com.Giant online marketplace Alibaba start building its first brick-and-mortar shopping center, Amazon acquired supermarket chain Whole Food, and the world’s largest retailer Walmart bought online-shop Bonobos. What changes will happen in the traditional stores around us?
Various innovations affect people’s life much more than it may seem. As life changes, social spaces change too. Some of the most extreme shifts came to the retail industry. In just five or ten years, stores, restaurants, and shopping malls should look completely different.
A large number of publications in recent years touch upon the theme of the apocalypse in retail, in the US and they note that it gets closer to European markets. The leading mass-media is saying that e-commerce is killing traditional retail as pictures and videos of Dead Malls have flooded the Internet. If you examine the data in more detail way, then the rumours about the death of retail are greatly exaggerated. According to the pessimistic forecast by Credit Suisse, in the next five years, about 250 of the 1,100 largest shopping centers in the United States will be repurposed. That is an extremely negative and shocking forecast for the industry. The total number of shopping centers in the country is about 40 000, including small and regional facilities. Renovation or demolition of a fifth of this will be a severe blow. For the economy of the country, the labor market, and the financial sector, this may be the beginning of a new global crisis. On the other hand, this update is necessary: it will benefit the retail market and consumers. Shopping malls in America were actively built more than 50 years ago, old and illiquid facilities have long ago been demolished, rebuilt, or radically renovated.
On this information background, the largest malls in the country are still thriving and actively developing, expanding the area, updating the shopping galleries, and using the most modern methods of communication with visitors.
The European market has shown moderate growth in recent years: there are not many new shopping centers but the quality of the facilities has become very high, including the latest architectural, design, and technical solutions. Shopping centers in Asia continue to demonstrate steady increase rates and the construction of new facilities continues.
E-commerce developmentThe share of electronic commerce in different countries and for different product groups ranges between 7 and 15%. So, talking about e-commerce as a killer retailer is also premature. At the same time, against the background of overall retail stagnation, the growth of electronic commerce in 2017 will be 8-12%, according to the National Retail Federation.
The high growth rates of e-commerce will continue and, according to some forecasts, its share will amount to 40% of the retail market by 2025. Now, there is an active phase of transition for consumers from traditional retail to online, which provides rapid e-commerce growth. It is a very painful hit to stores and shopping centers, a significant part of retail space will become unnecessary and will have to be reoriented. But, most modern shopping centers already become part of the so-called mixed-use facilities: the complexes include offices, hotels, business centers, concert halls, and residences. On the scale of a large object, the role of retail becomes more important: the quality and speed of customer service have key priority.
The major trend worldwide in customer service of leading companies, whether Walmart, Gap, H&M, or Amazon in connection with Whole foods, is Omnichannel; order online and pickup in the store; use pickup points; order from the shop and deliver to the customer’s home. We have already begun to get used to such services as the norm. It is a modern omnichannel. It blurs the line between online and offline. In a few years, it will be impossible to divide Internet-retail and traditional retail.
The retailers need efficient logistics schemes for the implementation of omnichannel services – logistic hub and warehouses. There are already a few examples of logistics centers creating bases in shopping centers, inside large hypermarkets, which leads to a change in the role of the store. Point of sale, delivery of goods, warehouse, part of the logistics chain: these are standard functionalities for any retail enterprise, the importance of which has only grown. And, the most convenient location for the store or point of delivery, the pickup point, is usually in the shopping center, with an accessible entrance and large parking. If the shopping malls can become an organic part of the logistics schemes of retailers, it will be good for the business and consumer.
The Uberization of transport and logisticsParking next to the stores and giant parking lots in shopping centers are often completely inconvenient for Uber drivers and car-sharing car customers, which are already firmly entered into our lives. It is impossible to leave a short-term rental car in a private parking lot: it will be a violation of the law. Or, try to find your Uber-driver in a giant parking lot, since they certainly will not be able to stop and wait for you right in front of the exit of the shopping mall. Most likely, the stop will be banned both on the high-speed highway and the ramp to the shopping center. The drivers of services, such as Uber, and their passengers are faced with inconveniences very often. Many shopping centers have made selected parking zones for official taxis but they are closed to Uber drivers.
That is why Westfield, one of the world's largest owners of shopping centers, has signed a partnership agreement with Uber so that the shopping malls will create convenient parking areas, "Lounges", for taxis and Uber customers. It is only the first step, pilot projects have already been developed for the delivery of customers to shopping centers and stores by Uber drivers and, tomorrow, visitors will be delivered by self-driving cars.
In the future, shoppers will be transferred to the shopping center and back, after a successful shopping. Perhaps, even free of charge for participants of loyalty programs of malls and brands. Their shopping bags will go home separately, during the same day. The purchase delivery system is already offered by large shopping centers and hypermarkets chains, such as Macy's and Nordstrom.
New impressions and entertainmentRestaurants have also had to suffer from the rise of online trade and delivery services. Who would like to go somewhere when the food of any cuisine of the world will be brought home in thirty minutes? But, on the other hand, restaurateurs successfully enhanced their business-services with takeaway food and delivery. Now, the cafes and restaurants are always scurrying by couriers: this is real omnichannel retail.
Meanwhile, many customers still prefer the restaurant atmosphere over a home dinner: giving work to bartenders, waiters, and filling the halls of their favourite eateries. Consumers can choose a variety of dishes thanks to a huge range of online delivery: they became more demanding and sophisticated. Now, restaurants sell not just food but also the mood, atmosphere, and impressions.
The new customer does not need to go anywhere to make a purchase – for this, there is the Internet. However, people are ready to leave the house for the communication, entertainment, and impressions. New restaurant concepts, amusement parks, sports clubs – this will be the trend for the next years.
The largest networks of fitness clubs have been entered in shopping centers and have become anchor tenants already but now is a time for smaller formats; yoga studios, pilates, functional training, dance, and fighting clubs. Smaller spaces put forward new requirements for the transformation of retail areas; to change quickly, to be able to connect any connection (electricity, water, and communications). Where the ice rink used to work for years, today, a concert can be held and, tomorrow, a yoga studio will open and a boxing ring will be installed next week. And, if you have made a permanent all-the-year-round farmer market on the site of the ice rink, you are behind the wishes of your customers. Now, the usual shopping center should be handle a lot of new features, learn to entertain, and surprise visitors. Only then will it be successful and avoid demolition or being rebuilt into an office or another building.
Location, location and... the brandIt does not matter where things are bought from for the modern consumer. There are a lot of options to make an order; online stores, social networks, classifieds, catalogs, messengers, and retail stores. Many current customers can look at online advertising or a post on Instagram and make an order without going into detail. For the buyer, it does not matter whether a large retail business delivers what they want to where they are. It is important to get your purchase quickly and without any problems. Now, it is used by a large number of scammers, selling various fakes in social networks, but this trade is operating and its volume is growing. Growth problems will be resolved, Facebook, Google, Amazon, and other global players will accurately re-establish orders in online media.
Among a huge number of different sales channels, the only ones that will survive are those that provide a successful customer experience. Where the client receives the order faster, cheaper, with the best service, and positive emotions – there, they will continue buying. It can be a preferred online store, a physical store, or the nearest shopping center. A good retailer knows their customer, their preferences, income, contacts, maybe even a home address, and a car brand. For some reason, the closest shopping mall does not sell online the favourite brands of its visitor.
Very soon, shopping centers will offer online products of the brands that are represented inside them. Commercial prerequisites for this were created long ago when the largest tenants of shopping centers moved from a fixed rental rate to a percentage of turnover. A shopping center that receives a percentage of the retailer's turnover is financially interested in significant sales of goods. Therefore, successful shopping centers with strong brands and loyal customers will create their online storefronts, marketplaces, and will serve their visitors on the Internet. This is the experience of Westfield in Australia, Galeries Lafayette, and El Corte Inglés in Europe, which all built their thriving online stores.
The traditional shopping center will become a full-fledged participant in e-commerce. Further development also possible: the centers will create physical galleries and showrooms with the recommended offers from the selected brands. The shopping malls will help the brands to sell more online and offline, become a full-fledged participant in the retail market, and will play a much more important role than the usual square meters of real estate.
The favourite proverb of real estate professional, "Location, Location, Location", is gradually becoming less significant and the seller's brand and the buyer's positive experience come first. So, very soon the owners of square meters should begin to focus on the key parameters of the Successful Customer Experience and start working with their visitors outside the detailed structures called shopping malls.
Malls.Com team invite you to exchange views on the future of retail, shopping centers, stores, new technologies, and innovations. If you are interested in this topics, have questions and want to share your views, please write to [email protected].