For years now, critics have used declining footfall as a rod with which to beat up the industry: shopping centres cop hell from the media and analysts alike if pedestrian traffic shows a decline in any one month.
The economy of a shopping centre is dependent on the efficient utilisation of space. In peak times, that means congestion, not distance; centres are configured to maximise footfall, and spaces are leased accordingly. Not to mention the requirements are a negative shock to the shopping experience. People are inherently social, which is part of the reason we like to go to malls; distancing, by name and definition, is anti-social. Add to that the sign-in process and plastic gun-style thermometers pointed at the face, and you have the recipe for a shopping experience that turns people off.
So if this is really to be the ‘new normal’ (apologies for the cliché), then it represents an unintended assault on the economic health of retail property, which is already struggling due to stay-at-home office workers and the collapse of international tourism.
The pandemic has delivered a full-body blow to a shopping centre’s potential to be the community gathering place, the Main Street, the experiential hub, the place where people go not only to buy stuff but also to mingle and socialise with their fellow humans.
If a shopping centre’s footfall is now on a lower trajectory, something has to pick up the slack to restore its economic viability. As a result, some retailers are investing more in creating online rather than real-world experiences.
Digital transformation is accelerating
One solution has been to enhance digital infrastructure to assist the many retailers that want to use their stores as e-commerce distribution points.
Frasers Property, which operates 14 centres in Singapore, has been quick to react to the new circumstances. The company launched an online marketplace in October called Frasers eStore, which offers a delivery service from 200 retailers to 800,000 members of its loyalty program. Frasers COO, Tan Kee Yong, says eStores’ launch “marks the natural next step in our digital transformation journey”.
Frasers had already done a lot of spadework to help tenants leverage digital infrastructure. In early 2019, the company developed a digital food and beverage service that let shoppers pre-order, pay and collect meals. In April 2020, when food and beverage establishments could only offer takeaway or delivery options, Frasers quickly updated the feature to provide more contactless options. As business gradually resumed, it introduced a dine-in feature that allowed customers to order from their tables to reduce their contact points inside restaurants.
The company is also seeing a sharp increase in live-streaming events as merchants look for more ways to reach consumers. It recently concluded its first live-stream shopping event on Facebook, which offered tenants an opportunity to showcase their products online. According to Ms Foo Chai Hong, Frasers Property Retail’s head of central leasing: “Live streaming can be an important tool not only to offer new experiences for our shoppers, but also to encourage creativity in marketing and develop customer relationships.”
The technology play works well for a company such as Frasers Property because most of its retail portfolio is in high-density residential areas. For shopping centres in locations that are more tourist-dependent, an e-commerce platform isn’t anywhere near enough to restore foot traffic to pre-pandemic levels.
Trouble in paradise
To see why, jump to Hua Hin, a resort city not quite three hours’ drive southwest of Bangkok. It’s less rowdy than other, more famous Thai resorts such as Phuket and Pattaya – partly because the country’s royal family has a summer residence there. The relative tranquillity makes it a favourite getaway destination for affluent Thais and an attractive alternative to the big party towns for international tourists.
Hua Hin has two fine malls, Market Village and Blúport, that are both multi-level, one-stop shops patronised by wealthy locals and tourists. Now with the foreign tourists shut out and the economic oxygen sucked out of the city, both Market Village and Blúport are in trouble.
Both centres are poster children for the catastrophe that border closures have brought upon tourism-dependent shopping centres, not just in Thailand but right across Asia. Market Village, even on a good day, is now as quiet as a public library. Now, out the front, where there used to be a queue for taxis, only a few tuk-tuk drivers lounge somnolently in their vehicles, hoping for a fare. Blúport, which opened in 2016, is now only operating on three of its five floors. The upper two levels, which housed the cinema and other entertainment tenants, have been dark since the lockdowns began. According to a mall spokesperson, there are no plans to reopen them.
Governments around the region have put in place stimulus programs to promote domestic tourism. In Thailand, for example, the government instituted a THB22.4 billion (US$750 million) package to subsidise travel and hotel stays for domestic tourists. Although it has resulted in a welcome lift in weekend hotel traffic and restaurant patronage around the country, mall shops have generally seen limited benefit.
Elsewhere in Asia, domestic tourism has been encouraged, but governments have refrained from actively assisting the retail industry. James Hodge, senior director at CBRE Cambodia, says established tourism-dependent markets, such as Siem Reap, have struggled. “While landlords have been actively encouraged to engage with their occupiers to find a constructive solution to the difficulties faced, the industry has largely been left to its own devices to find a route through the economic downturn and societal issues caused by the pandemic,” he says.
Still a chance for the experiential hub
Many shopping centre operators remain committed to the idea of malls as experiential hubs. They are bringing in retailers and concepts they hope will ease the anxieties and hesitations of being around strangers.
In Bangkok, retail company Siam Piwat has recently opened an “eco-lifestyle destination” in Siam Discovery, which houses more than 300 eco-friendly and health-conscious products in an elegant 2000-square-metre space. Owners of other projects in Southeast Asia are mulling similar ecology-themed installations.
Meanwhile, back in Singapore, Frasers Property’s Centrepoint on Orchard Road boasts a brand new Decathlon store that occupies approximately 3200 square metres and has its most extensive collection – 5000 products catering to 60 sports – under one roof. Experiential technology is prominent: for example, the store offers virtual reality (VR) camping tents where shoppers can use VR goggles to immerse themselves in an outdoor environment and test the tents for themselves without having to set one up.
Decathlon Orchard is also piloting solutions where shoppers can obtain personalised 3D measurements of their foot size and gait, allowing them to easily find the perfect pair of shoes for their preferred sporting activity.
Not waiting for a miracle
Retail property developers are, by nature, an optimistic lot. They have to be, otherwise they wouldn’t take on the enormous financial risks of building shopping centres. But even the most confident of them will not be expecting Asian shopping centres to experience a rapid return to pre-pandemic traffic levels. Footfall at Frasers Property’s malls, for example, is at 60 per cent of last year’s level. Although the signs are encouraging, the company is leaning heavily on its digital initiatives to make up for lost traffic.
Shopping centre operators have done a good job keeping occupancy at high levels, with some landlords offering tenants concessions or other support to see them through the crisis. “We’ve also seen a substantive increase in cooperation between retailers and retail landlords with a bigger emphasis from both trying to attract footfall to their location,” Hodge says. The emphasis on cooperation is welcome: there will need to be a lot more of it in the months to come.
At the entrance to Market Village in Hua Hin, Thailand, a security sentry stands by next to a table with a sign-in book and the regulation plastic thermometer. He nods toward the sign-in book. He is very strict about masks and will bark at you if you don’t have one on already. He is also strict about taking your temperature, although the action has become so rote for him that he forgets to look at the reading. Inside, the mall tenancies look almost fully occupied and ready for business, but there is a heavy emphasis on promotions and few shoppers about – except on the home technology level, which is comparatively bustling.
According to the Tourism Authority of Thailand, international tourist arrivals to the country this year are set to be down as much as 85 per cent compared to last year, and next year may not be much better. Unless that prediction turns out to be wrong, malls such as Market Village will truly be on the brink of collapse.