Retail: How essential is diversification to survival?
In 2017 Amazon’s US$583 million-dollar acquisition of Souq.com, swiftly followed by Emaar’s own US$1 billion market entrance with Noon.com, marked a watershed moment for the region’s fledgling ecommerce industry.
The two well-funded and organised competitors joined a growing field of digital businesses challenging the traditional retail landscape that has been dominated by mega malls and international brands.
Until recently the GGC’s move to embrace online shopping has been slow. However, a young, affluent and internet-savvy population, combined with smart phone penetration, make it an attractive market for digital entrepreneurs.
Despite the attraction of a digital shopping experience, physical retail is far from finished – if anything it is evolving.
Is a digital shopping experience what customers want?
Despite the attraction of a digital shopping experience, physical retail is far from finished – if anything it is evolving. Research by Google UK indicates that for every individual purchasing a product online there are four people buying in stores with 85% of consumers claiming to prefer shopping in stores because they want to ‘touch and feel the products’ before making purchasing decisions.
The human need for connection and experience is vital to the future of retail. Luxury fashion and watch brands have long sort to build an instore experience that immerses customers in their brand culture. Apple’s retail strategy follows a similar vein, providing users with a ‘hands on’ experience that they can depend on.
The future for retailers and mall operators is to bring a ‘wow’ experience to shopping. Brands are recognising the need to continually improve customer experience through better service, deploying virtual technologies or changing the design of the store to offer consumers a different, more engaging experience.
The shift to towards experiential retail isn’t just being driven by brands though – mall developers, owners and operators are also buying into the concept. Malls of the future will reflect a greater degree of collaboration between retailers and mall operators as they attempt to deliver engaging, entertaining and even ‘jaw-dropping’ moments for every visitor.
Previously, a mall might have 70-to-80% of its floorspace earmarked for retail. That split will be dramatically different in the future as entertainment & leisure offerings begin to dominate malls alongside food and beverage brands. This shift towards a never ending range of entertainment options in malls marks a distinct departure from the ‘build and they will come’ approach of the late 1990s and early 2000s. Mall owners and operators are finding they must be people-centric, exceeding the expectations of consumers and facilitating the ever changing trends that technology delivers.
A constantly evolving retail environment means that flexibility must be a fundamental principle of mall design allowing for future changes as brands and shopping habits evolve, however the degree in which flexibility is designed in to a mall or shopping destination requires a fine balancing act between maximising commercial space and the need to plan for cost effective change.
The human need for connection and experience is vital to the future of retail.
Community is king
It is clear that shopping destinations must be designed with change in mind. Retailers recognise the need to be responsive to change and malls are quickly appreciating the power of experience, with malls reclaiming spaces such as roof tops and car parks to create urban parks or adapting lobby areas in to dedicated entertainment spaces, pulling visitors through the mall, subsequently boosting footfall and encouraging engagement with retailers.
Communal and event spaces, coupled with investment from local entrepreneurs, will be increasingly important to the future of retail as they not only offer visitors a more varied and localised retail experience, they offer people the opportunity to connect with others and feel the sense of community once offered by the high street.
This need to connect with other people is clear in popularity of smaller malls, tightly integrated into residential areas that offer convenience to local customers and the opportunity to connect with neighbours, friends and family. As we move to a future where the places we live will also serve as our place of work and entertainment it may just be local community retail that becomes the biggest threat to mega malls rather than the world wide web.
A constantly evolving retail environment means that flexibility must be a fundamental principle of mall design allowing for future changes as brands and shopping habits evolve.
What advantages can technology offer?
One of the key advantages of online retail is how it targets services and products based on a consumer’s browsing and purchasing history making the experience feel somewhat personalised.
Retailers in Europe and the US are assessing a range of technologies to ‘digitalise’ the instore experience. Everything from AR and VR headsets, to virtual mirrors that allow consumers to see how clothes, makeup or hairstyles might look are all being tested.
Mall operators aren’t being left behind in the rush to embrace information technology with various technologies such as smart screens integrating with CCTV to display targeted messages to visitors of the mall, offering customers unique and timely benefits that suit their location or activity within the mall; imagine passing a certain shop and a screen or app offering you discount if you step inside?
The ability to offer customers a unique experience will undoubtedly increase revenue opportunities for operators of local and mega malls alike, however it relies heavily on the willingness of developers, retailers and mall operators to invest in ways to predict future trends, facilitate future technologies and manage the data required to integrate them successfully in to our shopping experience.