Technology and focus on customer experience is disrupting the industry.
There is no question that technology has changed the retail industry. As e-commerce has grown into multichannel retailing that creates a shopping experience over a variety of online and physical stores, the challenges for retail facility managers have also increased.
Stores incorporate more technology to provide a seamless experience for customers – the ability to browse through one channel, purchase on another and return merchandise via a different channel. Although some experts predicted the elimination of physical stores completely when technology began disrupting the retail industry, customers have demonstrated the need for some physical locations.
Although retail centers will remain a critical component for many retailers’ business plans, the centers will look different in coming years, said Garrick Brown, Cushman Wakefield’s Vice President of Retail Research, Americas. “Our shopping malls have developed very differently than malls in Europe,” he said. While shopping malls in the U.S. house pure retail stores with similar price points and merchandise, such as apparel, cosmetics and gift items, and price points, shopping malls in Europe contain a wide variety of stores that include all retailers selling at all price points, grocery stores and services such as dry cleaners. “Our retailers self-segregate so that there are neighborhood centers with the grocery and drug stores as well as services and lower cost apparel, malls with higher priced merchandise and other centers geared toward big box stores – a giant cousin of the neighborhood centers,” he explained.
“We are the only country that has approached retail this way, except for a few areas in Canada,” Brown said. This is changing as the need for physical retail space shrinks, he said. “We have 12 billion square feet of retail space in this country, and we need 10 percent of it to go away,” he said. “In the stock market, a 10 percent change is a correction, but in the retail industry, 10 percent is an apocalypse.”
What will this new reality look like?
“The weakest malls and shopping centers will disappear,” Brown said. “The remaining malls and centers will have to adapt and change their strategy.” He predicts that Class A malls will take on a luxury feel while Class B malls will have more discount retailers as well as service businesses. “Although some retailers are cutting back on physical locations, Ross has announced that they will open 100 new stores versus the 50 that they had previously announced.”
The next wave of innovative uses for malls is the addition of food halls that are a mix of artisan vendors offering specialty ingredients and prepared foods in a casual environment – similar to a farmers’ market with “stalls” for each retailer. “This appeals to millennials who want experiences and the current food culture that appreciates fresh, fast food,” Brown said.
The retail power centers that include retailers such as Target and Walmart will continue with some exceptions. “Some big-box centers will pivot towards becoming multi-use, adding multifamily residences, retail, entertainment and dining components to replace vacant retail,” he said. “These lifestyle centers will also include medical centers, hotels and office space to create traffic for retailers.” The lifestyle centers that have been trending upwards in recent years are very normal in other parts of the world, he added.
In addition to the type of center or mall in which stores are located, technology and consumer expectations will disrupt the interior design of stores, Brown predicted. “Everything will be about elevating the customer experience,” he explained.
Because customers hate standing in line, retailers will find ways to eliminate the cash register at the door. Amazon has already built one store in Seattle, Wash., that uses the customer’s Amazon account, a smartphone app and smart technology, such as computer vision, sensor fusion and deep learning to track merchandise selected by the customer and place it in a virtual cart. There are no checkout lines – the customer just walks out with the merchandise and receives a digital receipt for the items purchased through their Amazon account.
Although not all retailers will automate to the level Amazon Go automates, there are opportunities to use technology to improve efficiency and quality of service. “Retailers, such as fast food restaurants, will turn to automation and robots to handle low-level customer service interactions,” Brown said.
How can retail FMs prepare for changes?
Future retail stores that rely more on automation and new technology will require FMs to be familiar with the technology’s maintenance requirements as well as IT protocols for security and protection of customer information, Brown suggested.
The biggest challenge for retailers in any type of shopping center or mall will be the focus on customer experience, the addition of entertainment and events, and increased foot traffic, Brown forecasted. Knowing when peak times for crowds may be and scheduling maintenance around those times will be important.
Emerging changes in shopping centers, malls and mixed-use centers offer retailers ahead of the curve opportunities to position themselves for the future. “Retailers should understand that this is a slow-moving train that will take years to become the norm in retail,” Brown said.
Brown cautions FMs not to interpret the slow pace of change as a reason not to address changes in the company’s long term strategic plans. He referred to a quote by Bill Gates: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.”
By: Sheryl S. Jackson
