Where to for the shopping centre industry?
The New York-based International Council of Shopping Centers (in the interests of full disclosure, my former employer) has done a pretty decent job of that with its newly released report, The Future Of The Shopping Center Industry. The report is the output of a year-long project by ICSC’s Board of Trustees, called “Envision 2020”.
The ideas in the report are grouped under eight key statements, which I’ve summarised below. These can apply to all shopping centres.
1. Bricks and mortar and online retail
Shopping centres are becoming tightly integrated with e-commerce through the implementation of technology that enables consumers to, “move seamlessly between the physical and digital worlds of retailing as they research products and make purchases”. The report notes also that integration of physical and virtual space is being facilitated by e-commerce retailers opening physical stores.
2. Intimacy with the consumer
From what I could gather after several readings, “Intimacy with the consumer” is an interesting way of saying that mobile technologies are being used to help shopping centres and retailers interact with shoppers. These interactions include mobile marketing and customer tracking. Okay, we get that. The big –and as yet unanswered – question, of course, is “How intimate does the customer want us to get?”
3. Shopping centres into communities
The function of shopping centres in our society is broadening. They are evolving from single-function shopping venues into, “shopping, dining and entertainment centres” that are engaged and integrated with their local communities.
4. Engaging millennials
Significant resources will be devoted to designing a shopping centre experience that is appealing to, and meets the needs of, millennials. For example, millennials emphasise experiences over the acquisition of material goods. One of their favourite experiences is noshing, so it’s logical that an increasing percentage of shopping centre space be allocated to food and dining experiences.
5. Incorporating distribution
The shopping centre of the future will be a distribution hub. It will be a traditional sales channel, a click-and-collect venue, a distribution point for online purchases, and a place at which shoppers can return merchandise.
This kind of thing is not exactly futuristic of course – it’s already happening. Many retailers are now fulfilling e-commerce orders from stores. And in the US, some of the largest shopping centre operators have signed up with a crowd-sourced delivery service provided by a company called Deliv, Inc., which ferries packages from shopping centre tenants to customers’ homes on the same day as purchase. Think Uber, but for packages instead of people. Delivery costs are typically less than those charged by conventional shipping companies.
6. Developer-retailer collaboration
The report predicts that shopping centre operators and retailers will become much more active data sharers in order to provide a superior customer experience. This seems like a logical conclusion given that both are making such large technology investments and both have essentially the same objectives – to drive traffic, create a positive shopping experience and make sales.
7. A new blended rental model
New formulae will be developed for determining rent based not simply on store sales made in the traditional manner, but on sales made by the retailer as a result of having the store. In other words, landlords need to find ways of capturing the full value of the store within the omnichannel network.
In other words, if a sale is made online and picked up at the store, landlords want to be sure of getting value for that sale. Likewise, if an online sale is made while the customer is in the store.
8. A retail-friendly investment outlook
This posits, simply, that lenders will increasingly support newer shopping centre formats, for example those that include non-traditional uses such as residential.
Further question marks
All in all, the ICSC report makes a robust attempt to round up all of the most important current drivers of shopping centre evolution and predict where there this will lead the industry over the next five years.
It contains a lot of examples and case studies that show how the industry is on the front foot in adapting to, and thriving in, the new reality, where customers have extreme empowerment through technology, and where their budgets are emphasising experiences over the accumulation of merchandise.
The report raises as many questions as it answers though. Will customer privacy issues ultimately sabotage effective mobile marketing?
Can you really accurately estimate the full value of a store within the omnichannel framework? And if by doing so it means that rents increase, how will retailers respond?
Is food and dining being overestimated as a magic bullet, leading to an overbuilding and shakeout of the category?
The next five years leading to 2020 will be very interesting ones for the industry. If shopping centre operators can go some way toward accomplishing the key ideas in this report, then they will have done very well for themselves.
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