Seven immutable truths of prosperous shopping centres

Dubai mallNot all malls will survive, not all malls will die. The question is what to do to ensure your mall is winner?

In the coming evolution of malls, there are a few self-evident truths to be considered.

Truth one: The Offer

The offer (retail mix) will change, possibly unrecognisably so. At one point, malls have become the go-to place for any shopping, primarily offering convenience. The mainstay of the mall became the easy shopping for functional comparison goods like fashion.

In the last decade or so the trend has been towards more experiential forms of retailing, but to be honest, ‘experiential’ meant adding food – ala ‘eat street’. This was a relatively one-dimensional view of ‘experience’.

Recently the emphasis has widened to include services (healthcare, libraries, gyms).

The two obstacles that prevent malls from evolving sooner and better are:

Lack of retailer-led innovation.

Mall owners can only facilitate the infrastructure needed to retail; they are not retailers or even in the retail business. Too many retailers are acting like deer caught in the headlights of e-commerce (or the B-Double called Amazon.) And, very importantly, ‘retail experience’ has become a buzzword and few people seem to be able to articulate.

The other obstacle is the lack of flexibility.

Some of that is caused by local government planning regulations. And some of that is self-inflicted, as investors demand rigid lease structures (to minimise risk and differentiate from other investment classes) but these structures do not facilitate agile retail and innovation.

Truth two: Time horizon and lag

The malls that will survive have owners who play the long game. The current system has considerable inefficiencies caused by the (a) different investment and performance profiles of landlords vs tenants, and (b) the resultant friction costs caused by the lag in relative fortunes.

The solution is to adopt an ‘agile’ lease structure. I will address this in another post.

Truth three: balance of power

The balance of power between landlord and tenant will oscillate during the transition, even if it now favours the retailer in most instances.

Truth four: e-ommerce

The nature of e-commerce will influence the format of the new mall.

It is shaping what customers expect to be available, both in product, expediency, price and service. Responding to this challenge requires two tactical responses:

Attack by differentiating:

A physical space with real people interactions cannot compete with a virtual/digital space on many of these elements, so it is critical to find/create and then focus (relentlessly) on the differentiators.

Defend by seamless integration:

This is what the commentaries mean by ‘multi-channel’ retail. Ensure the customer can seamlessly move between channels, irrespective of the specific stage of the purchase journey.

This will eventually determine the retail mix of the mall in very specific ways. (Keep reading Inside Retail and I’ll share those thoughts in future article.)

Truth 5: technology

Technology will play a key part in the functionality and features of the new mall.

In psychology, there are two types of stress: one is called eustress and then the old fashioned distress. Point-of-sale causes distress. That is why tap-and-go payment resulted in higher frequency of purchase. Trütsch  found (2014) that “contactless credit and debit card adopters undertake statistically significantly more transactions by their corresponding payment cards compared to non-adopters while this also holds true for overall card services payments.”

Walk in, walk out shopping (WIWO) with no interaction at all will be adopted to some extent by certain consumers for certain types of experience. WIWO shopping behaviour is adopted where less friction is desired, but less friction is not required in all elements of shopping.

If there is no friction there is no interaction, if there is no interaction, there can’t be a (pleasurable) experience. (Ahem.)

Truth six: fundamentals

The malls that survive will do so because they address the core values that underpin all consumption. An important consumption value is “the experience”. But there are five additional patronage values.

The more complete (and strategic) the landlord is about responding to these values, the more prosperous the future. Strategies like ‘community engagement’ and ‘placemaking’ are tentative steps in the right direction of tapping into some of these other consumption values.

Truth seven: No one knows

No one knows for sure the exact nature and details of what that looks like specifically. But on aggregate, the mall owners can and will figure out what works.

If you are an owner or investor, I hope it is you.

As always, many of these truths must be addressed by spending money. The challenge is to do so when the return on investment is over the horizon, or maybe even unquantifiable. Ultimately, this will be the real differentiator for shopping centre landlords: a commitment to investing in a future with uncertain returns.

I didn’t say it would be easy, or that it wouldn’t require courage; just that it is possible.

Dennis Price: Co-Founder at www.yearone.solutions

Comments

3 comments

  1. Dennis Price posted on June 21, 2017

    Jan, Appreciate your sentiment. But maybe it is time you visited one or two again, hey? You may find they are not exactly what you thought? Malls reflect the modern trading market places - and on average they represent the way people want to shop. There may be some lag because it takes time to build/adapt/develop according to confirmed consumer needs. And it is not 'too expensive'; the ones who 'can afford it' are the ones who also best /profitably meet consumer needs. And isnt that what you say you want? Again, there may be some natural market tensions that occur on an individual basis, but malls charge what they can optimally achieve in a free market by balancing income (rent) and cost (vacancy). Retailers pay what they can afford. Malls are only 'the same' to the degree that the consumer votes with their wallets. Us 'insiders' sometimes find similarity in various malls because we visit so many. The consumer doesn't though - they typically visit the same mall/destinations habitually. The fact that Liverpool is similar to Parramatta isn't really all that relevant if you live in Pararramatta or live in Liverpool. How would you suggest they change? Be interested to know... reply

    • Jan posted on June 21, 2017

      Well yes, I would visit a mall again if I want to shop at Country Road, Cotton On, Just Jeans, Jackie E, Michael Hill Jewellers, Wittners, Coach, etc. etc. but I don't. I actually prefer individual, local shops such as those in suburbs close to where I live, although these are being edged out by the chains as landlord chase so called "gilt-edged tenants" such as the brands above. What gets on my nerves is the fanfare when a new centre opens such as Emporium and St Collins Lane in Melbourne. You go there hoping to find something different and what do you see? Sketchers, Tag Heuer, Seed, Cue etc. etc. etc. - all available elsewhere in the city and also in DJs and Myer. Major shopping centres that i have frequented in the past - Knox City, Eastland and Fountain Gate are virtually indistinguishable from each other. People shop in these places because there is nowhere else to shop out there. As the food industry becomes more corporatised, I notice these places are now full of what were one-of restaurants that have become chains (i.e. Huxtaburger) - nothing is sacred! That is why i try to support my local shopping strips such as those in Albert Park, South Melbourne, Hawkesburn etc for both clothing, homewares and definitely eating out! But that's me. Obviously the malls have their supporters and I used to be one myself but now I have moved so I have a choice. I didn't know what I was missing! reply

      • Evan posted on June 21, 2017

        Totally agree with you Jan but these malls chase the majority's not the minority's and the problem is most strips are dreadful, boasting run down junkyard stores due to dishonest grubby local councils/politicians eating from the troffs of Scentre, GPT, Stockland etc. etc. reply

Comment Manually

Loading...

Inside Retail Polls

The Amazon effect...
What impact will the e-commerce giant have on Aussie retail?

Inside Retail Directory

Twitter

Food and beverage retailer focuses on next phase of growth https://t.co/9Hw2fl1NTC

2 hours ago

Aussie retailers must reignite product development for consumer acknowledged differentiation or they are dead https://t.co/xPghbMg5tm

3 hours ago

Fast fashion giant locks in fifth Victorian opening https://t.co/iAT3JrXmvw

4 hours ago
x

SUBSCRIBE
FREE NEWS BRIEFS Get breaking news delivered