Thinking

Building next generation shopping centres and department stores

To thrive in a digital age, shopping centres and department stores have to reinvent themselves, and go beyond digital in order to stay relevant, combining bricks and clicks Shopping centres have been at the centre of communities for decades and their appeal has spread beyond the United States to form vibrant and lucrative environments.

To thrive in a digital age, shopping centres and department stores have to reinvent themselves, and go beyond digital in order to stay relevant, combining bricks and clicks

Shopping centres have been at the centre of communities for decades and their appeal has spread beyond the United States to form vibrant and lucrative environments. That is why, in the United States alone, the number of malls quadrupled between 1970 and 2017 - but much has changed since then. Only 20% of malls account for 72% of mall sales in the US, and traffic into malls and department stores was down 17% even before the November lockdown measures were announced. In the UK the story is similar with the last year being the lowest year for shopping centre investments since 1995 according to Savills.

There are increasingly more underperforming shopping centres and department stores that face the difficulty that 65% shoppers intend to continue with their new Covid shopping behaviours, which means less bricks and more clicks. So where does this leave the next generation of shopping malls and department stores?

An analysis by Retail Economics predicts that by 2029, 53% of sales will be done online. High streets, shopping centres and department stores face a growing challenge, but they still have a role to play - if they understand how their customers shop. Shopping is primarily about value, experience and convenience. Clicks can trump bricks when it comes to value and convenience, but a physical store will always have more opportunities to win through experience. 

The real challenge now is to understand what this experience can look like, implementing it in line with easing restrictions and raising enough capital to see the transformation through. In the short term, shoppers are less likely to return to enclosed places with long waits, one way systems and mediocre experiences. Equally the consequence of not investing into future experiences now increases the risk of empty shopping centres in the future, going into administration, or even liquidation as Debenhams recently announced - a 242 year old department store. There is however a real place for the top tier shopping centres and department stores to create engaging and exciting communities that complement online channels and give the visitors multiple reasons to visit. So how do you create the next generation of shopping malls and department stores?

Create a blended environment

The key for shopping centres and department stores is to give visitors multiple reasons to visit and have the consumption be a favourable side effect. Currently people want to go outside and have positive experiences where they can go to have a good time. Shopping centres will not exclusively be about shopping, but be open and natural places with a blend of shops and offices, as well as residential and entertainment spaces. As such, the retailers’, brands’ and shoppers’ experience will all need to be aligned and balanced. 

Shopping centres can be exciting places that include spas, restaurants, gyms and concert halls, or even amusement parks - that connect retailers, consumers and entertainment. This will create a one-stop shop and be more exciting than old malls or pure online shopping, by nurturing personal and physical connections. Examples of this include the Westfield 2028 shopping centre that aims to become a hyper-connected microcity, or the American Dream Miami mall that will have a water park and indoor ski slope.

Department stores will not be in a position to implement these blended environments at such a scale, but they can still create leisure or entertainment spaces that share the same principles. In addition, location becomes even more important as the setting of the department store can influence the contextual experience. 

Omnichannel is king

Customers who shop using multiple channels are more loyal, and generate more sales and profit. Combining curbside pick up, click and collect, instore purchases and online delivery create an omnichannel sales strategy that can significantly enhance an experience. For example, a prospective customer could look at product reviews online, come in store for a demo or interactive session, purchase the product in store and then order an add-on online afterwards. 

The key is to enable the customer to shop through as many channels as possible and connect the experience. While 20% of transactions are currently online in the UK, 90% of all sales are influenced by online nudges. By operating with bricks and clicks, retailers combine the benefits of both while mitigating the disadvantages. This offers the maximum flexibility, value, convenience and experience to the customer - a true end-to-end customer lifecycle combining the on- and offline experience over time.

Encouraging glocal pop-ups

Shoppers are increasingly focusing on encouraging local and small shops again as their existence is threatened by larger and online retailers. Shopping centres and small shops do not have to be in constant competition though. Shopping centres can reserve a portion of their space for local farms or independent shops creating a differentiated offering. Equally, start-ups or e-commerce firms also look for a physical location to connect with their customers on a different level. Simon Malls work with pop-up stores and e-commerce firms to provide that personal experience while creating an ever-changing environment that customers want to return to in order to discover something new and support the sustainable underdog.

While department stores are unlikely to be able to encourage this at the scale of shopping centres, they too can reserve spaces for complementing shops and in-store promotions by new, innovative and local products and services. An example of this could be a local food-hall that invites pop-up restaurants or a reserved area where small business owners can promote their products.

Delight with technology and a personalised experience

There are a multitude of technologies such as VR, sensors, location-based marketing, augmented reality apps for navigation or purchasing, and digital loyalty schemes that can all enhance the experience when visiting a department store or shopping centre. Importantly these technologies need to create a consistent proposition. The pre-and-post-mall visit experience needs to complement the physical experience.

Know your customer end-to-end

By offering an omnichannel and end-to-end experience the department store or shopping centre of the future can offer a much more personalised experience. With 80% of customers being more likely to purchase from brands that offer personalisation, these brick and mortar stores can go beyond digital and offer a superior experience. The stores that reinvent themselves can be ‘the place to be’, connecting people and creating entertainment and leisure spaces that people want to keep returning to. So where to start?

  1. Build the vision for how your customers will engage with you
  2. Assess and segment your customers’ current behaviours and needs across your portfolio and assess how you currently serve them end-to-end
  3. Identify, prioritise and shape enhancement opportunities in a roadmap while leaving enough room for interpretation along the way
  4. Implement the highest value enhancements, and then test, monitor and refine them as needed

Since some spaces can be enhanced, while others will be built from the foundation. Different approaches may work better depending on where you are on your transformation journey:

An important distinction between shopping centres and department stores is that owners of shopping centres do not only need to look at the customers’ experience, but they also need to look at their customers’ customer experience. As such, owners of shopping centres can act as an enabler to the stores to become more customer centric and create an environment across multiple stores where people want to visit.

Even though online sales are expected to overtake in-store sales in the next decade, the physical experience will always be able to create a more personalised experience and create a stronger emotional bond. These physical places will need to become entertainment and engagement spaces where people want to keep returning to, while they seamlessly integrate into our digital lives. The priority now is to assess and understand how and where to start combining bricks & clicks to bring together a superior end-to-end experience - and that will depend on the personal transformation journey of shopping centres and department stores alike.