Malls vs E-commerce: How the traditional channels are preparing to stay relevant?

Is the apocalypse for shopping malls already here? Are we beginning to see the end of the shopping malls, the model they operate in, and their hold on the consumer?

The rapidly increasing sales through e-commerce have overshadowed every other channel of growth consistently over the past few years. Hundreds of retailers who operated as independent stores or within shopping malls have borne the brunt of this, and many of them have had to shut shop. An indication of how fast e-commerce has grown can be seen from these statistics reported. The figures indicating the growth of e-commerce against traditional retail are indeed staggering.

Even though the times are tough for bricks and mortar businesses, fast-moving technology and a new generation of shoppers have created opportunities that were either left untapped or did not exist before. Specifically, for shopping malls, the horizon has shifted remarkably from being a "place where you'd come to shop", to an "experience/destination that will fulfil all your needs”.

Here are 5 key changes that the commercial property owners are looking at, in order to compete and stay relevant in the space of digital retail.

1. Creating a true Omni Channel Experience: For years, retailers have been working to merge online and offline experiences to make the customer's journey truly Omni-channel. Shopping-centres are also focusing on creating such experiences across their locations. They are making use of mobile apps to enable browsing products at their stores with convenience. Some are partnering with retailers to expose their catalogues online and enabling customers to check for stock at a shopping centre location before making a visit. A few have even created online marketplaces with partner retailers under the brand of the shopping centre. Engaging the customer through loyalty programs and rich content is another area being explored by shopping malls. Through these initiatives, the malls are creating a more engaging and Omni-channel experience for the customers.

2. Shopping-centers vs Experience/Destination centres: The definition of a shopping centre is changing from a place where a customer come to shop, to one that offers shopping with unique experiences. Westfield Labs has rolled out ticketless, smartphone parking at Westfield London, solving one of the biggest pain points of visiting a mall. They have also included a food ordering feature in their app for Westfield San Francisco and Sydney. By identifying the reasons for not visiting the mall, and converting them into opportunities, mall owners are sending out a message that they recognize the needs of their customers.

3. Shopping-centres as economies of scope: Unlike E-commerce, shopping malls have the advantage of being close to the customer and offering services in person to them. Many retailers are offering the facility of "buy online, collect in store" to their customers, that resolves the pain associated with shipping costs, and generates more sales while the customer is in the store. Few have also provided the ability to reserve stock within a store and pick it up at a convenient time. Shopping malls are following suit. Mall owners like General Growth Properties, Simon Inc., and Westfield are using a delivery service called Deliv Inc. that uses crowdsourcing to deliver online or in-store purchases to the customer at a significantly lower shipping cost. Westfield has gone a step ahead by launching a luxurious click and collect lounge in their London outlet. Consumers can collect their orders from participating partners in these lounges, try them on, return them or get a replacement, and enjoy complimentary refreshments while they are at it. The opportunities to exploit malls as economies of scale, given their existing customer footfall, are endless.

4. Using technology and data as an enabler: Retailers with strong bricks and mortar presence are using data to get close to their customers, understand their behaviour, buying patterns, and other preferences thus creating a footprint that enables them to personalize the offerings made to the customers. Shopping centres are also turning to the power of data to ensure that the experiences offered to their customers are personalized and relevant. By gathering data both through the customer’s journey in the mall and through the retailers, shopping malls are able to get an in-depth look into the needs of the visiting customer.

5. Exploring new business models with retailers: Traditional rental models that involved long and short term lease agreements with the tenants based on overall sales in the space will soon be a thing of the past. A completely new relationship is now emerging between the property owners and the tenants that are based on increasing sales through better sharing of data and technology keeping the customer at the centre of the business. For example, a sale, initiated from the online channel and completed in the store, or vice versa (showrooming & web-rooming), are all going to be factors that drive the success of the tenant and thus for the mall as well. Blended rental models that take care of these calculations are the future.

The India story

Back home in India, the situation is clearly no different. E-commerce penetration in India has increased multifold and even though it is only around 2.1% of the overall retail market of $770 billion, the projections for future are staggering with a potential increase of online shoppers from 69 million to 215 million in the next 4 years. Retailers and shopping malls in India are working together on similar lines as mentioned above to ensure that they are up to the challenge of the rise of e-commerce through collaboration and investment in innovative technologies.

DLF, the real estate major, and owner of many shopping malls, that provide a unique experience to the customer through a combination of shopping and entertainment, has combined technologies like Internet of things, cloud, big data, analytics and machine learning to increase customer footfall in its premises. They have partnered with ICICI Bank and SBI to offer cashback to customers on monthly total spend. This is done through access to more than 35000 Point of sale machines across stores in their malls that track customer transactions through the 2 banks. IoT sensors installed across their premises track customers through the malls giving them information that is used to create valuable offerings to the customer. DLF has also launched a mobile app ‘Lukout’, that exposes the catalogues of different stores and brands to the user, personalizes their shopping experience, and provides information about discounts and offers. By investing in the right areas and keeping the needs of the customer first, they have clearly shown the path ahead for shopping malls in the country.

Even with the emergence of e-commerce at a pace that is staggering, physical stores and shopping malls have a central role to play in meeting the needs of the consumers. What is important is to recognize the opportunities and use technology as a backbone to not only partner with each other, but also with the customer to provide them with a truly incredible experience.