The dinosaurs are back
The e-commerce boom across the world led technology firms to call shopping centres and mainstream retailers dinosaurs. What they forgot was that dinosaurs lived an awfully time and did very well for themselves.
The dinosaurs survived from the Triassic Period about 230 million years ago to the end of the Cretaceous, 65 millions years ago. That’s a good run – for the maths impaired it’s 165 million years.
So if retail property is for dinosaurs then maybe it’s a moniker that property owners are happy to wear – they can look forward to just under 165 million years of continued dominance.
There are an increasing number of signs that such dominance will be secured, at least for the next 50 years or so, by the same technology revolution that has brought e-commerce from a standing start to a meaningful retail channel in just a decade.
The leading edge of the tech revolution is now turning its attention away from niche online concepts toward physical space itself. Hold on for a great ride.
What are the signs of an inflection point in the fortunes of property? How is technology going to underpin the supremacy of physical space?
First, we are a long way from the launch of the most innovative e-commerce concepts.
Concepts like Amazon, eBay, Groupon, Rent the Runway, and Warby Parker have been in business for a long time now. They were absolutely on the cutting edge and have changed retail forever, each in its own unique way. None of them would have been possible without the the internet.
But there are clear signs of consumer fatigue and saturation even in some of the better e-commerce models.
Daily deals represent a good example. The number of active Groupon users plateaued sharply in 2012 and the company is having to pivot its business model toward something that looks a lot more like garden-variety e-commerce.
Meanwhile, Amazon, which invested $175 million in LivingSocial, ended up taking a bath on it and writing down almost the whole lot.
New internet pure play concepts are looking pretty stale right out of the box. Some of them seem like answers looking for a question.
Take a couple of recent examples: One Dress A Day and Le Tote.
One Dress a Day launched in late August. It’s the brainchild of Australian designer, Bruno Schiavi, and the idea is that it will create a new limited edition dress every single day, 365 days a year.
The average price for a dress is $169 in the US and shipping is available worldwide. Nice idea, but the model has ‘built in fatigue’ written all over it.
Le Tote is a rental model that ships any three garments and two accessories to its members for a $49/month subscription fee. The shipment comes with a prepaid bag to send the stuff back.
Clothes that are not returned within the required window are automatically charged as a purchased.
Again, it’s a nice idea but essentially derivative, kind of like DVD rental service, Netflix, to which Le Tote has been compared. It remains to be seen whether the model has legs and at best will appeal only to a niche.
These signs don’t indicate that e-commerce is running out of steam – far from it – but they do suggest that technological innovation is slowing out there in cyberspace.
Even the vaunted showrooming trend holds diminishing fear, as the best mainstream retailers turn to product innovation and dynamic pricing technologies to ensure they maintain a competitive advantage over online rivals.
Moreover, consumer data is indicating that millennials – you remember, the ones who were supposed to swallow e-commerce hook, line, and sinker – are actually exhibiting a strong preference for stores.
They like to shop with their friends and they like to be able to see things in real life. Wow.
Meanwhile, the store itself is becoming a hub of innovation, with technology being used in a variety of ways to improve the shopping experience.
Hointer in Seattle, Uniqlo in Hong Kong, and Starbucks in Canada, have either made shopping more fun or eliminated some of the inconveniences that proponents of e-commerce commonly cite as reasons people will stop shopping at stores.
When the technology is harnessed to outstanding visual merchandising and service, the result is an awesome shopping experience.
What are the centres doing?
Shopping centres are jumping on board. Large shopping centre owners are rolling out wi-fi in their properties because both of their most important constituencies – tenants and customers – want it.
Tenants want it to be able to execute their own technology initiatives. Customers want it because so much of what they want to do in shopping centres places too heavy a demand on their 4G.
Centre owners are also becoming more involved in new technologies for physical space.
These include location-based services such as geo-fencing programs that help drive store traffic, and customer analytics technologies that work off the digital footprint of customers moving through the centre.
An exec from a large North American shopping centre operator told me last week that the company has a team working exclusively on trialling emergent big data and predictive analytics technologies to meet a range of customer facing and back office functions.
There is one big question though – is the second wave of the technology revolution going to benefit all stores and shopping centres or only the better ones? Will it further drive a wedge between outperformer and underperformer?
One hopes that it will not be as simple as that. Either way, some good signs are out there.
Property, long on the defensive from technology, is on the verge of launching a technology offensive of its own.
This is one dinosaur that’s a long way from extinction.
Michael Baker is principal of Baker Consulting and can be reached at email@example.com and www.mbaker-retail.com.