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The retail revolution continues

Written by Mark Dailey, Partner at Madano.

International Council of Shopping Centres (ICSC) is the global governing organisation dedicated to supporting the shopping centre industry - owners, operators and retailers. The latest conference was one of two Asia-Pacific conferences – held in Shanghai and Bangkok. The Americas conference takes place in Las Vegas; the Middle East in Dubai and the European event in Warsaw. Madano’s Mark Dailey facilitated 3 of 5.

They are interesting because they speak to future trends that effect many of our clients and companies in our space – from economic predictions, to drivers of customer engagement, real estate developments and sentiment etc. Following his travels, Mark provides a summary of key information that came out of the Bangkok conference.    

 Headlines

  • U.S. industry suffering from over-capacity and outmoded stock (1970’s suburban malls); whereas Asia-Pacific leads in experiential shopping and food and beverage
  • The perception that bricks and mortar retail is dead is wrong. Bricks and mortar shopping revenue is 10 times that of online: 2016 global figures: $43 trillion vs $472billion BUT growth rate is 1.7% vs 153.3% since 2013
  •  Healthcare is the fastest growing new segment in shopping centres. There is a direct correlation between time spent at a healthcare outlet and spend afterwards in the mall – top spend is in fashion items (reward for going to a healthcare outlet), pharmacy items and healthy food purchases        
  •  Many of the typical anchors of a 1990’s mall have ceased to exist: supermarkets, department stores. Anchors now tend to be: one hypermarket; one Apple store (or equivalent); one leisure outlet (cinemas etc.)
  • Most successful retailers now are comfortable with omni-channel, integrated approach: click and collect, integrated store to website, digital kiosks in-store etc.
  • Pure online businesses will come under pressure soon from investors needing to see a profit – shakeout like dotcom bust is coming
  • What customers value is surprising. The top 3 items are: ability to try product before buying (59%), direct contact with sales staff (43%) and product personalisation (40%). Least valuable are: news and data sharing with customer (22%), customer engagement communications (24%)     

Importance of quality and excellence

  • Power of being ‘intentional’ – what is your intent with customers and clients. This concept helps cut through the clutter to reveal what is really important
  • Exceptional service is architected from the beginning – it has two components: a) credo/commitment/mind-set and b) systems/processes/measurement/continuous improvement
  • Customer service levels have been in decline since 1970’s – it is the single best parameter on which to differentiate
  • Most shopping relationships now are transactional – huge room to improve experience 
  • Creating emotional connection with customers/clients is more valuable than a rational one

madano.com

Madano's Mark Dailey moderating at ICSC Europe, earlier in 2017.

Rise of experiential retailing and food and beverage

  • Experiential retailing really started to accelerate six or seven years ago when arcade quality games were able to be reproduced on the smartphone – meaning that the mall had to offer something that could not be had at home  
  • ‘Social’ rather than ‘shopping’ is the new buzzword
  • Understanding what customers really want is the key to getting experiential shopping right
  • Psychometrics and big data is critical – for instance analytics show that virtual reality (VR) is fantastic at enticing new customers into a mall but offers very poor dwell time and repeat business (been there, done that, got the VR t-shirt)
  • Malls are increasingly transitioning from retail to food/beverage and experience. In Australia 53% of all sales revenue is generated by food and beverage
  • Two big emerging issues as food and beverage outlets stay open later in malls and serve alcohol – a) what happens to the ambience/safety factor? b) What happens to the other stores? – pressure for them to stay open later
  • Airports are the new food and beverage and experiential malls – ‘shopping centres with landing rights’ and again the U.S lags behind. Old style food courts are being phased out everywhere in favour of casual dining

Effect of millennials and Gen Z

  • ½ of all millennials live in Asia-Pacific; however youngest regions are: Middle East (34.9% millennials) and Latin America (34.7%)
  • Millennials care about: personalisation of product, authenticity of customer engagement and brands that overtly do good. By comparison Gen Z are sceptical of brands and are driven more by communities and brands that support communities not the brands themselves
  • Gen Z first generation to be digital natives (Millennials were digital pioneers) 
  • Gen Z preferences:  58% would pay $5 for 1 hour delivery; 73% would pay for curated or personalised offers/subscription services; 60% prefer to buy in store than online    
  • Gen Z don’t have short attention spans but rather a ruthless 8 second filter. You have 8 seconds to persuade them they should listen       
  • 84% turn to YouTube before making a purchase
  • 40% regularly provide online feedback to retailers
  • Specialised influencers are their most important frame of reference
  • Not brand but community loyal 

Gen Z

Millennials

First phone at 12 years old 

First phone at 16-20

Realistic

Optimistic

Independent

Collaborative

Digital natives

Digital pioneers

Private

Public

On-demand education

Formal education

ICSC has been a Madano client since April 2017.