24 April 2020

“The Future of Retail” series – Shopping Centres

by Gwyn Davis

I get asked a lot about this by my clients and it could be neatly sidestepped by saying, a bit like tomorrow, the future never really arrives, it is just an ever-evolving situation which we need to anticipate and adapt to. That said, whilst there is no silver bullet, there are certain learnings we can take onboard to ensure shopping centres (and outlets) continue to give customers what they want.

Shopping centres have evolved over time, from being of varying size and quality based on their catchment, to huge monoliths of retail therapy. Over the last 10 years I have seen some property companies moving away from the smaller centres and focusing on the larger ones. This is partly because it is hard to efficiently and effectively market a “mixed bag” of properties under the same brand, but more importantly, the larger centres tend to be in or near areas with large resident populations and large transient populations. That level of potential footfall makes these centres commercially viable and attractive to brands who similarly want to downsize and upscale, focussing instead on flagship brand experience stores.

However, things can go too far. Give people too much choice and it becomes inconvenient and unexciting. A building full of hundreds of shops and little else is not much different to staring blankly at the screen after searching for “t-shirt” on a large fashion e-commerce site. Overwhelming choice and quite the unattractive prospect to trawl through. Faced with this situation, shopping centres should be challenging their tenants to do something different. Come up with an engaging instore experience or concept store. Get customers to buy into your brand, your provenance and your craftmanship and let them feel it in their fingers; not just buy your products, as they can do that online and save themselves the trip.

Once upon a time people bought things because they really needed them, whereas nowadays retail is largely a leisure pastime. People buy things for how it makes them feel (which should be a key consideration in all brand development). And it is that feeling that we humans crave. We are social beings and shopping centres need to become true destinations. Places for us to go and interact, be entertained, feel something. One of the keys to this is ensuring a relevant and engaging mix of F&B and leisure packaged up in an attractive environment where your customers feel welcome, looked after and important (think of the hospitality you get in a good hotel). For it is these facets that add to the experience and keep us coming back. People are increasingly time poor, but what you want customers to do is invest their time and feel it is worthwhile doing so. As if they invest their time, they will invest their money. To complete the loop shopping centres should reward customers for this behaviour, but that is a story for another time.

The immediate challenge, once shopping centres start to reopen, is that focusing on F&B and leisure, which encourages social interaction, is incongruous to the social distancing measures that will undoubtedly be in place for some time to come. That said, a holistic customer-focussed experience will be key to a shopping centre’s survival post-COVID-19, as situationally enforced widespread adoption of e-commerce will change consumer habits forever, and means a customer will need more than just breadth of shops to draw them in. They need a world class destination where they can shop, eat and play, and even work and live.  

On that last point, residential is another increasingly important facet of a mixed-use scheme. It pretty much guarantees you regular footfall, it will undoubtedly extend the trading peaks of the F&B and leisure onsite, and it will develop a community feel and a buzzy environment, all of which is otherwise very hard to achieve continuously in a large shopping centre. The same goes for office space. Shopping centres are regularly, almost by default, anchored by big retailers, when they could be anchored by a hotel, large leisure operator and an office block. This opens you up to different audiences there for different reasons, visiting at different times, but all enjoying the same facilities. It is hard to replicate that demand in a retail-dominated environment.

This does not mean that small local shopping centres won’t survive. They can, but they too need to adapt. They don’t have the scale, or the requirement, to be world class destinations. They are for the local community and need to ensure they are part of it. A limited range of national brands will struggle to deliver the authenticity needed for a local shopping centre. Much like the high street they will need to change, revert even, championing local products, producers and businesses, and become commercial hubs and meeting points for the community. If they can carve out that role for themselves, and they will need to change their leasing structures to do so (another story for another time), they have a shot.

To summarise, and back to my original point – you need to give customers what they want. And we want to feel something. We want to engage all our senses, whether audio-visual, olfactory or tactile. Self-isolation has really highlighted how much we crave physical and human interaction and that is something that can never truly be replicated online. And for shopping centres, it is there for the taking.

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