Originally Published by Across Magazine
Back in November 2014 McKinsey published a report titled“The Future of the Shopping Mall”. Key topics covered were a focus on experiences and convenience, leveraging technology and multichannel strategies, and tenant mix and formatting. At the time of that report and other similar market data sources became the foundation of a revised strategy for Placewise. We decided that we needed to invest heavily in product to cater for the longer-term expectations of shopping centres becoming true omnichannel offerings.
8 years later Moody's Analytics has now published a comprehensive white paper called “The Mall of the Future”. Key topics covered are Omnichannel strategies, malls as distribution channels for e-commerce, mall format as mixed use and evolving leasing structures. All equally inspiring as the report from 2014. It emphasizes the opportunity for malls to support their tenants’ online sales by leveraging the local reach of the mall in their respective catchment area and using the in-mall inventory as basis for deliveries, pick-ups and returns generated through online sales. One quote from the new white paper we particularly like is “Mall operators will also have to take retailers’ omnichannel strategies in mind. They’ll need to help providing tech infrastructure for omnichannel selling and marketing and support for distribution center-like usage of space for more dynamic logistics.”
Between 2014 and 2022 there have been other reports by globally recognized consultants and analysts like Kearney and Deloitte, and they all point to the same trends and outlook. The belief that the physical store will play a key role in retail for the unforeseeable future. Online retail sales accounted for approximately 14 % of total retail spending inEurope in 2021. Some forecasts suggest that 2050 will be the year where the balance between online and physical retail sales will reach 50/50, others say physical retail will still be the largest component. Either way all reports we have seen say there is an untapped potential at hand, and the future resilience of shopping centres is heavily linked to adding value to the online sales of their retail tenants.
The CEO of Masid Al Futtaim, Alain Bejjani, was quoted in an interview withFast Company in April this year saying that “The success of futuristic malls will primarily depend on how well they meet customer expectations in omnichannel experiences. It will continue to have a physical presence, but it will leverage technology much more”.
If we honestly evaluate the experience of visiting a shopping centre today vs 2014 or the beginning of the millennium it is more or less the same. Yes, vacancies have been replaced by more services and entertainment, and all new developments typically include residential and office alongside retail. But the shopping experience is still not truly omnichannel. Individual retailers have had great omnichannel success, but not because it is founded on interaction with the shopping centre. For the shopping centre to come across as the omnichannel destination it needs to be to maintain relevancy in the future it must be a true omnichannel offering facilitated by the shopping centre and offered as a business proposal to its tenants. It needs to be a coordinated experience across all retailers at the same location. Only then will it make sense as something different and interesting to consumers.
As I have shared before Placewise has recently pioneered some initiatives and product development that enable shopping centres to become true omni channel offerings including product and inventory feeds based on retailer integrations, cross retailer basket and payment, and cross retailer delivery or pick up. All clients involved see this as long-term initiatives that will take several years to deliver significant business value. At the same time, we meet many shopping centre owners that maintain a wait and see approach. When someone else has proven everything, they will jump on board.
The evolution of shopping centres is nothing like the Kodak case where all their business got cannibalized by digital photography, or CDs and DVDs that were then replaced by streaming services. This is about two sales channels supporting the other and where the ultimate experience is the combination of both. So compared to other industries the shopping centre industry is in a privileged position where it is not about being outcompeted, it's about evolving to meet changing consumer expectations. The downside of this privilege is that it lacks a sufficient sense of urgency, there is a lot of “let's wait and see”. And in some cases, the timeline to prove a new business case is far too short. Big player Capitaland inAPAC shut down their curated limited product e-commerce offering after less than a year recently because the transaction volumes were less than expected, and more effort than expected was needed to get retailers on board. Nothing within digital is proven within a year. I remember working in the media industry around the millennium. The number of ideas and digital projects was insane, but most of them took at least 15 years to prove themselves and on some the votes are still out 20 years after. But on average media companies are today very well positioned in the digital landscape because they understood that their longer-term relevancy was dependent on them also becoming digital.
I hope and believe that the shopping centre industry in general will seize the moment and make omnichannel a true strategic priority combined with a sense of urgency. The evolution can't be done by the most innovative shopping centre owners alone for others to replicate later, if so 10 – 20 years of experience and actual evolution will be lost.
Happy evolution!