The bricks-and-mortar retail sector is facing major challenges. But it is not only in city centres that it is becoming increasingly difficult for shops to satisfy and retain customers; shopping centres also must reinvent themselves again and again. The strategy over the last 20 years has been - newer, bigger, more shops. But that is no longer enough. There are many reasons for change - the coronavirus crisis, growing digitalisation, increasing online retail, weakening infrastructure, demographic change - and all factors need to be addressed. In particular, customer wishes should be taken into account. You can no longer attract customers with the cheapest offer.
Everyone is complaining about declining figures and the bricks-and-mortar retail sector is particularly affected. Whereas 30 years ago, shopping centres were the biggest competition for shops and department stores' concepts in city centres, the reasons for the decline in consumption and thus the death of the retail trade are much more complex today.
Why is the retail sector weakening?
Online retail is always mentioned first and foremost. This is certainly true, as e-commerce accounted for 13.5 per cent of retail sales in 2022. The reasons for shopping online are just as varied. Shoppers have access to a huge, global product range that is available 24/7.
Thanks to lower costs, goods can usually be offered at lower prices online than in stores. Favourite items can simply be selected on the go and delivered directly to the buyer's home, saving them a considerable amount of time. Last but not least, the pandemic has also contributed to the immense increase in online purchases in recent years, bringing many shops to their knees. This has not only affected small, individual boutiques, but also shops in city centres and shopping centres.
And these have to contend with additional challenges because, according to shopping centre operator ECE, the market is saturated. According to the EHI Retail Institute, there are currently 534 centres in Germany and a further 15 are being planned. Added to this is the generally tense economic situation at the moment - rising prices, the high inflation rate, money is no longer sitting so loosely. Germans have become more frugal, as additional costs can also arise unexpectedly, such as the immense rise in heating costs in the winter of 2022/23, which also caused financial hardship for many.
Last but not least, demographic change is also making itself felt here. The 50+ generations are still very familiar with conventional shopping behaviour. The aim is to own things, to show off what you have. My jewellery, my car, my house - status symbols that younger generations no longer value to the same extent. They strive for immaterial values, experiences and an exchange of experiences.
Shopping centres must combine these intangible values with the tangible offerings on site in order to remain attractive, because according to a study by pwc (PriceWaterhoueCoopers), shopping centres are no longer fit for the future in the old familiar way, but must reinvent themselves in order to survive.
What customers want
The decisive factor is to fulfil customer needs. But what does the customer of the future want? The most frequently cited customer needs are to make meaningful, valuable use of their time and to associate positive experiences with shopping. So occasions and events need to be created that online retail cannot fulfil.
32 per cent of the customers surveyed in the pwc study stated that they would like to use leisure and entertainment facilities, but that there are not enough on offer. The future of shopping centres lies in the combination of fulfilling needs.
An attractive shopping environment must be created that can be combined with entertainment, catering, work, life, health and well-being. The customer is enticed and persuaded to stay, because several needs can be satisfied in one place. Open offices offer space to work, while the children are accommodated in the integrated Kindergarten, from where they can be picked up after a workout and enjoy a healthy dinner with friends in one of the numerous restaurants after a visit to the play paradise.
An utopia? No. The Scandinavians in Malmö are already making good progress in this direction. The idea behind the architecturally impressive "Emporia" building complex by Swedish star architect Gert Wingårdh is to combine shopping, working, and living in a single neighbourhood. In addition to well-known shopping chains, individual designer labels, restaurants and art can be admired throughout the centre.
Further office buildings, combined with residential space, are intended to make the district around Hyllie station even more attractive, as entertainment is already provided by the Emphoria roof garden, the adjacent Malmö event hall and the exhibition centre.
New utilisation concepts breathe new life into the area
But not everything can be built and designed from scratch. Existing properties need to be repositioned and revitalised. Variety is needed, for example through convertible spaces for pop-up stores and the networking of digital and analogue shopping experiences. The future could also be integrated "lifestyle hubs" that combine community events, co-working spaces, and supper clubs in one place. In any case, a better mix of offerings and a significant increase in the gastronomic and leisure offerings for customers is required. According to the pwc study, this can even be a decisive factor in the choice of shopping centre. A clear positioning of what the centre stands for, with its own storytelling and uniqueness, can secure its future. This can be art, culture or even the conversion of vacant retail space for medical practices, wellness oases or fitness centres.
The marketing researchers at A.T. Kearney, one of the world's largest management consultancies, have also looked at promising concepts for shopping centres that may no longer be utopian in ten years' time.
So-called "destination centres" have a special attraction, such as theme parks, indoor skiing, or special cultural sites as their focal point, which also tempt visitors to stay for several days. The attraction is then further enhanced by catering, hotels and changing pop-up stores.
The so-called "value centres" focus on the added value of the products, which younger target groups generally no longer want to do without. Regionality, sustainability through upcycling or philosophies of life such as vegan nutrition form the framework for products and other offers, such as lectures and exhibitions, in which like-minded people like to come together.
Centres in which various offerings provide a demographic-specific mix of retail, restaurants, entertainment and services are grouped under "retaildential spaces" - "retail" for retail and "residential" for residential. The offerings in these centres therefore provide everything you need to live there, tailored to hipsters, young families or senior citizens. This concept has already been implemented in Japan in the AEON Mall: All offers and services have been precisely tailored to the older target group: senior care, pharmacies and a health centre are fully integrated into the centre.
You can be part of the future in the "Innovation Centres". As a customer, where you can test products and offers in advance and thus become a pioneer, and as a company, which can set new trends with the resulting data. The providers of these centres are anthropologists, cultural psychologists and mall ethnographers who analyse customer behaviour and offer it to companies.
These new concepts are then no longer necessarily found in completely new shopping centres, but existing properties are developed further. According to the operator group ECE, the market in Germany is saturated and there are no more new, suitable, promising locations. The group is therefore investing in existing properties, as it believes that shopping centres are still fit for the future. As "flexible shells", the centres are ideally suited to keeping pace with the rise in online retail and adapting to changing customer requirements thanks to continuous investment.
Hygiene as a decisive feel-good factor
Another important aspect that can increase customer well-being, and not just since the pandemic, is hygiene. And two examples show that investments in this area of facility management pay off. Firstly, according to the pwc study, 32% of respondents would be more likely to choose a shopping centre where using the toilet costs nothing.
Secondly, hygiene also means increased safety in the shopping centre. One area that is perhaps not immediately thought of in this context is the hygiene of escalators, or more precisely their handrails. This is because many users do not hold on to the handrails for fear of harmful germs, but this can result in serious injuries if an incident occurs on the escalator, such as tripping or even an emergency stop.
However, measures that fall under facility management are usually difficult to measure and additional investments are therefore not always easy to plan. However, Dr Christian Schlicht's doctoral thesis shows just how worthwhile and measurable this financial investment can be. In his former position at the ECE Group, the corporate real estate management (CREM) and facility management (FM) expert introduced a hygiene measure at the Phoenix Center in Hamburg-Harburg, which significantly increased safety in the centre and at the same time customer satisfaction and positive perception. This in turn made the effect of the investment in this area of facility management measurable and therefore comparable to a certain extent with marketing measures, for example.
The ESCALITE UVC disinfection module, which continuously eliminates up to 99.99 per cent of all germs on the handrails, was installed in the escalators. The centre customers were made aware of this with appropriate notices and asked about various impressions. Compared to the survey before the installation, the perception of cleanliness increased from 67 to 86 percent, the impression of a well-maintained centre from 73 to 90 percent and the overall image from 68 to 81 percent.
Conclusion
Operators need to reinvent themselves and their centres. Pure consumption has long since ceased to be an attractive option; instead, holistic concepts tailored to the target group must be created in order to ensure the survival of the retail trade. Not only in shopping centres, but also in city centres, the attractiveness of the location must be increased through an individualised mix of offers.
References:
PWC – Sind Shoppingcenter noch zukunftsfähig?
https://www.de.kearney.com/media-center/article/-/insights/einkaufszentren-der-zukunft-austausch-innovation-werte-und-wohnen-im-mittelpunkt[KO1] [TU2]
Dr. Christian Schlicht, BSc, MBA, CUS City University of Seattle, VSM: Methods of measuring the added value of Facility Management for generating competitive advantages
Photocredit: UVIS, Tord-Rikard Söderström & Perry Nordeng
Published: 04.01.2024