ComCap Webinar – Mall Transformation
Gary Burrows was invited to discuss retail singularity and the necessary merging of the physical and digital on ComCap’s Webinar about Mall Transformation. Comcap gathered five industry experts to share their thoughts about how malls and brick-and-mortar retailers can take advantage of the huge wave of ecommerce that has happened due to COVID. Gary Burrows, Managing Director – Malls & Meeting Places at FitForCommerce, Tom McFadyen, CEO at McFadyen Digital, Jennie Baik, CEO at Orchard Mile, Ashok Narasimhan, CEO & Co-Founder at Omnyway, and Kelsey Groome, Sr. Managing Director at Traub each touch on different innovative approaches that are transforming the mall landscape. Below is a quick recap of the conversation!
Gary Burrows (FitForCommerce) - Retail Singularity
- Many retailers and malls were already ‘at risk’ prior to COVID – which just exasperated their demise. Many people didn’t invest in digital when the going was good.
- 25% of malls in the US expect to close their doors permanently over the next 3-5 years, mainly due to oversupply. There was a lack of innovation and investment when the time was good. People have been drawing what they can out of their businesses – rather than investing in the future.
- With the 72% YoY uplift in digital shopping we’ve seen as a result of COVID, the US [pre-Pandemic] was tracking at about 14% of online vs. physical sales and the UK was at 18%. We’ve sent a 10% jump in online sales in both the US & the UK, which is massive.
- Generation Z doesn’t have to be geographically located [to shop ‘in’ the mall]. It was always about driving footfall and driving people to that store, mall, or meeting place. Now, people can [still] be a customer while sat at home, on the train or at the beach. They can be resonating with the [mall’s] brand and buying as a customer no matter where they are.
- Dubai Mall has a 24/7 mall – a full digital twin of their physical space. I think we’ll see more and more of that.
- We’re starting to see more and more algorithms where you can predict consumer behavior. Data is the new oil. The more we can predict consumer behavior, the more we’re able to manipulate consumer behavior.
- The future is a retail singularity which is a merged physical and digital environment. It’s the way forward.
Audience Question – What advance innovations could you see becoming more important in the short term?
- Whoever has the most data can accurately predict consumer behavior and can provide the personalized customer experience. Algorithms like Facebook has are what future malls need to include. Even within GDPR regulations, they’re able to capture data and provide that [necessary] personalized experience.
Tom McFadyen (McFadyen Digital) - Marketplaces’ effect on mall and retailers
- More than 50% of ecommerce happens on marketplaces and it’s growing to be up to 75%
- There is a lot of traffic going to marketplaces. Fish where the fish are. Customers are going to the marketplaces so a lot of retailers are more heavily investing in their own marketplace to drive more conversion.
- Amazon flywheel effect. More sellers drives more selection of product availability. That improves the customer experience which drives more traffic. The fly wheel keeps building on itself and lowers the cost structure and prices.
- 5 levels of marketplace maturity model (mmm) Level 1 is 1st party ecommerce (operator sources, manages, controls pricing, handles fulfillment, etc.) Level 2 adds drop ship. The operator outsources a little bit. The 3rd tier is where the operator bring on 3rd party sellers and offload merchandising, pricing, fulfillment, etc. Level 4 is when the operator lets the data drive insights. This includes optimizing physical store inventory, managing vendors, and automating based on data. The 5th tier is where the operator is constantly innovating and changing the business model (e.g., offering services in addition to products like Amazon)
- Galeries Lafayette – Example of a retailer leveraging marketplace model to expand operations. They increased their online revenue by 20% by adding a marketplace and 3rd party sellers have added 200,000+ items into the Garleries Lafayette catalog.
Audience Question – What can be done with supply chain issues?
- Supply chains that have a dependency on single sourcing of products are fairly fragile. In Marketplaces, there is a more resilient supply chain due to the number of 3rd party sellers. It provides a diversity of sales and sourcing opportunities. A good example is Etsy. Sometimes you couldn’t buy a mask at a normal retailer, but Etsy had thousands of sellers making masks and it was a much more reliable source of buying masks during the pandemic.
Jennie Baik (Orchard Mile) - Universal cart platforms & the new age of retail
- If you’re building a marketplace with zero lift, a kind of turnkey solution, there are so many different side products that must be built to support a perfectly integrated customer experience.
- Video shown as an example in Hudson Yards:
- Customer sees an ad with a QR code. Code takes her to a curated version of local mall.
- The client wants to click-and-collect. She decides to pick it up at Hudson Yards but doesn’t have much time.
- She uses a QR code on the directory to find the store she wants to go to – the item she wants has been reserved. Meanwhile, she’s getting notifications encouraging her to shop other items.
- She does more window shopping, shops online while in the mall, and has items shipped to her home.
- Why isn’t the mall getting a piece of the action [of these online sales that are occurring]?
Audience Question – With existing shopping center clients, are you seeing most brands joining the Orchard Mile platform?
- Orchard mile has signed 250 brands directly and the rest are multi-brand. Because the transaction happens in the cloud, it’s technically ecommerce. Brands are looking for omnichannel solutions that helps them track their sales. They’re looking for ways of justifying rent to landlords while also driving people back in-store.
Ashok Narasimhan (Omnyway) - Bridging in store and digital commerce
- 3 rails of commerce:
- 1 – Ecommerce
- 2 – Physical
- 3 (what Omnyway does) – hybrid combining ecommerce and physical experience
- Ecommerce is booming. Malls are becoming fulfillment centers. People are coming in to pick it up or stores are fulfilling orders. Malls are not getting any part of that. It’s all going to the ecommerce site. That’s a problem and it’s a problem that is going to stay for a while. It’s changing consumer habits and you can’t change them back – at least not that rapidly.
- COVID has accelerated virtuality. These are long-term changes in consumer behavior and will accelerate the adoption of virtual in-store shopping. At work, Zoom replaces the interaction between people – it doesn’t replace email. In a similar way, virtual in-store shopping experiences replace the in-store experience, not the ecommerce experience.
Audience Question – Many retailers struggle with visibility on in-store inventory. With ecommerce sales dramatically increasing, what’s the challenge you see?
- Experience is what makes the difference between in-store and ecommerce.
- Leveraging social media is important. Retailers can show their in-store inventory across all social media, have people look at their inventory on social media, and buy within social media platforms.
Kelsey Groome (TRAUB) - Planning for the future of mixed-use developments
- Shopping centers needed to have an online / marketplace presence. [This is] specially [important for] shopping centers that rely heavily on tourists. They should be able to reach their customers 365 days a year – even when they leave the city they’re in when
- Value Retail example
- A huge part of their business is dependent on long-haul tourists. That changed overnight with the pandemic. Everyone has to be laser focused on local customers. Using virtual shopping as a way of reaching customers that can’t come to you really works.
- At the end of the day, customers want to shop. They not only want to shop – they want a personalized experience. This notion of using platforms to power things like BOPIS to drop shipping to your doorstep is what the customer wants – COVID or no COVID.
- People crave being together, but they also have high expectations for those experiences. Having that enabled and powered by technology is table stakes.
Audience Question – How will digitalization effect underlying valuation of retail spaces. Also how does that relationship get monetized?
- It still amazes me that on the analyst calls, etc. for publicly-traded companies, people are still talking about same-store sales vs. lifetime value of customers. Not real estate developers but the brands themselves need to start valuing their businesses from the lifetime value of their customer. That’s what shows how powerful it is to have omnichannel customers. Same-store sales are dated and it doesn’t show the whole picture.
- It’s about bringing not a million sqft of real estate to life digitally, but it’s about bringing 100 million sqft of retail to a customer’s fingertips.