When bricks, mortar and clicks collide

brandon-park-shopping-centre-food-courtby Peri Macdonald, executive general manager – retail, Frasers Property Australia.

Each week it seems a new cutting-edge technology is unveiled that will apparently change the way we do business forever. The online shopping mall is expanding exponentially. But rather than spelling the end for physical shopping centres, technology actually presents an opportunity to cement the future of retail property – so long as it helps people connect.

It’s unsurprising that some people in retail interpret new technology and the rise of online shopping as a threat. Indeed, the “sameness” of the cookie-cutter approach to many shopping centres is dying. But it’s hardly doom and gloom for the retail property sector.

The shopping centres of the future will need to embrace technology but if they do it right, there will be bottom line benefits. And on the flipside, some progressive online businesses are seeing their future in bricks and mortar.

Recent initiatives from online powerhouses such as Amazon, Arianna Huffington and Alibaba suggest physical stores may be a key tool in their continued growth. This strategy enables them to do things they can’t do online.

More than just trying before buying, retail stores enable them to establish real connections with their customers. American e-commerce giant Amazon is one of a number of major brands to begin experimenting with pop-up stores. Its “Amazon Pop-Up” outlets in malls across the United States primarily showcase devices such as Echo home speakers, Kindle e-readers and Fire TV.

These pop-ups increase Amazon’s already impressive reach. The variety of access points for customers shopping with Amazon is staggering, with technology ensuring no purchasing opportunity is missed. Amazon Dash Buttons, for example, enable customers to purchase the very moment they realise they’re running low on an item.

Given the increasing expense and competition for eyeballs in the online space, we can expect more e-commerce retailers to follow in these footsteps.

Consider Alibaba’s $2.6 billion takeover of Chinese department chain, Intime. This move into bricks and mortar adds to its increasing foothold in physical retail as it pursues growth against the background of slowing online sales. Combined with technology, physical stores are a key part of any successful omni-channel strategy for retailers.

Athletic apparel retailer Lululemon has an interesting take. Its recently launched new London store not only features a concierge and in-store cafe, but adaptable changeroom lighting lets customers experience how their outfits will look first thing in the morning or late at night.

Shopping-Centre-modern-PolandSo as retailers consider how they use technology in their physical stores to better connect with shoppers, in both the online and offline worlds, shopping centre owners and landlords need to ask themselves how they design a centre nimble enough to embrace technological advances.

Will tenancies become smaller and essentially serve a showroom function, with little to no storage, as shoppers increasingly customise items to their liking?

Do pop-ups and revolving retail concepts – once viewed as a last resort for dead space – become the status quo to keep the experience fresh?

And how will interactive displays, customer loyalty tools and other technologies encourage great in-centre experiences?

At Sydney’s Central Park, we’ve found millennials are the ones most interested in the experiential elements of a shopping centre. They’re the ones visiting to meet up with friends, to socialise, play ping pong and chat – as opposed to just doing their shopping and leaving.

This is the demographic more likely to visit physical stores that offer entertainment, dining, interactive experiences, demonstrations and the ability to customise products. They recognise there’s more to “buying” than just “spending”. As J. Walter Thompson’s Innovation Group identified in its state of the industry report Frontier(less) Retail, the physical and digital realms are merging and blurring. Physical and online stores can create the most seamless omnichannel experience for customers.

By embracing technology, progressive retailers can use the best of both worlds to create interesting, immersive, fascinating and – ultimately – profitable retail spaces.

Comments

1 comment

  1. Max Ryerson posted on March 7, 2017

    The problem for shopping centres isn't technology. Nor is ecommerce and technology a problem for retailers. All retailers who will go on to do business in the next decade will drive their sales from both online and bricks & mortar. Amazon's pop-ups are not new. They've been experimenting with them for years in the US. Same with Ebay. What is clear is that online retailers who do open offline stores are commanding far greater sales per sqm than offline retailers who have only recently gone online. That's because online retailers have a massive advantage over offline retailers: data - they know their customers far better because they've been keeping track and recording their interactions, which they've now been able to leverage to deliver superior customer service and experiences. The future of offline retail is all about in-store experience. The problem for shopping centres is that we have too many in Australia and, as much as bricks & mortar will always have a place, retailers don't need as many stores now that 20-60% of speciality retail is done online. So for shopping centre owners in Australia, it is pretty gloomy. They will need to embrace technology much more significantly in order to compete as a place where shoppers want to shop and where retailers want to have stores. The digital world is so foreign to REITs and those who run them that they have struggled with it for years, are barely getting to grips with it, and have considered it as a nice to have extra instead of treating it as core to their business. REITs are almost too big to fail but had their attitude towards digital and technology been the same in another business they would have long gone the way of Blockbuster. For retailers, it's an amazing time for those that embrace technology to support and deliver amazing customer experiences. The reason retailers fail today is because of poor management, lack of bigger picture vision, and lack of customer experience investment led by digital technology. reply

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