In response to growing e-commerce competition, shopping malls are offering much more than just rows of retail outlets.
Faced with shifting markets and increasing competition from e-commerce, shopping mall operators are adopting new technologies and business models to change how malls look, how we interact with them and the role they play in our lives.
Future malls may more resemble high-tech town squares, amusement parks or entertainment complexes than today’s aggregations of retailers.
It’s easy to see why mall operators worry about the impact of e-commerce on traditional retail. Research firm Forrester reports that e-commerce accounts for 13 per cent of spending in the most advanced e-commerce market, South Korea. Penetration in other Asian markets varies dramatically – China is at an estimated 7 per cent, India at 1 per cent – but all are growing quickly.
“Malls may be better served by embracing the idea that customers want an experience that extends beyond retail.” John Riccio, PwC
With China on track to become the world’s largest e-commerce market, mall operators are looking for ideas on how to counter the growing e-commerce threat.
The Australian giant Westfield has set up its own online mall backed by numerous offline tenants, while also creating a Labs division to explore new technologies and opportunities.
A McKinsey & Company 2014 report, The Future of the Shopping Mall, suggests that since malls cannot match e-commerce’s convenience and range, their best option is to evolve beyond a commoditised shopping experience. The report’s co-author, Fernanda Hoefel, says simply that “if they want to compete with the convenience of e-commerce, they have to offer something more than e-commerce”.
Partner and digital services leader at PwC, John Riccio, says malls may be better served by embracing the idea that customers want an experience that extends beyond retail. He sees a future where malls provide entertainment first and shopping second.
He says shopping centres are already “filling an entertainment void, and we are seeing a shift towards a lot more entertainment around movies, restaurants, bars and nightclubs”.
The Xanadu mall near Madrid in Spain features a ski slope, go-karts, balloon rides, bowling and billiards; Minnesota’s Mall of America includes an aquarium, a theme park and dinosaur museum; Bangladesh’s seven-floor Jamuna Future Park in Dhaka includes a children’s theme park, bowling alley and what will soon be Dhaka’s second ice skating rink.
Unsurprisingly, mobile technology plays a role in this vision of the future. Mobile devices already let consumers access loyalty programs and social media. Mall operators would like to identify individuals, learn about their preferences and then provide them with offers of experiences that are tailored to them.
McKinsey reports that technologies such as face recognition, location-based mobile ads and beacons are already being successfully used to establish targeted contact with repeat customers
Riccio believes people still need the sights and sounds of the mall, as well as the feel of the goods. What they may not need is the actual buying. “We are starting to see the fact that shopping centres are not necessarily seen as a place to shop,” he notes.
Wanna buy a mall?
At global real estate firm CBRE, head of retailer representation for Asia Joel Stephen says the market for malls has been generally slower this year, though it’s far from doom and gloom. He says the more mature markets of Australia and Japan have performed well.
In China, where mall development has surged with rising Chinese incomes, Stephen says an astonishing amount of floor space is appearing: about 8.4 million square metres of space in 2015 and a projected 12.5 million square metres in 2016.
“A few years ago, most cities had an under-supply, but there is a monumental supply coming through,” says Stephen. “Basically, half of the entire world’s shopping centre pipeline is coming through in China.”
This article is from the December issue of INTHEBLACK