Omnichannel and Digital Transformation
Part 2: Operations

Insights from industry experts

Summary

We partnered with the International Council of Shopping Centers (ICSC) to host a two-part webinar for their members to discuss digital transformation in retail and shopping centers from both the strategy and operations perspective. The first webinar, which was focused on strategy, covered changing trends, critical components for omnichannel strategy, the importance of data, and emerging digital innovations. For the second webinar, Gary Burrows, Managing Director of Malls and Meeting Places at FitForCommerce and Mark Burlton, Managing Director at Cross Border Retail got together to discuss the operational side. Their conversation covers common operational challenges, turnover leases and repurposing, the importance of placemaking digital architecture, tenant and landlord relationship changes, and operational innovations. Below is a quick recap of the conversation!

Key Quotes & Notes

1. Operational Challenges

  • Poll Q to audience – What are the top 2-3 operational challenges impeding your organization’s omnichannel / digital transformation?
    • Budget
      • “It’s kind of tough to justify budgets with the lack of liquidity in the market. People are finding that the decision making to be quite tough. There’s a lot of paralysis in the market. The people that invested in digital early are reaping the rewards of that now. Those that haven’t are seriously struggling.” – Gary Burrows, FitForCommerce
    • Not enough time to focus / adapt to the speed of change
      • It’s impossible to adapt quickly enough now. I’ve seen many new malls that have launched new systems (BOPIS, BOPUC, new CRM, etc.). However, creating a digital ecosystem that merges the digital and physical has to be the way to go.” – Gary Burrows, FitForCommerce

2. Accelerated Pace of Change

  • 25% of malls in America are going to close over the next five years. That’s the accepted norm. 10,000 stores are closing in the US this year. When we have companies like JC Penney, Neiman Marcus, and J Crew all filing for bankruptcy, we have a serious evolution happening. The pace of change has caught so many companies that just can’t adapt and evolve quickly enough. On the upside, there has been an evolutionary leap of online sales because of COVID. In the US, only 14-15% of all sales were online sales. That’s taken a 10-point leap up to 24-25%. The reality is, the year 2030 arrived in 2020.” – Gary Burrows, FitForCommerce

3. Repurposing & Placemaking

  • Repurposing is happening all the time. Malls have taken an evolutionary leap to become meeting places using placemaking methodology (based on social, cultural, community needs, and diversification). We’ve mapped out digital architecture that dovetails with the physical architecture. It shows what different components are required within a mall or meeting place and how they can all be encompassed within a digital ecosystem. We can capture data and use biometric information to understand our customers. It’s about creating a sort of cryptographic handshake and true customer proof of presence to provide secure proximity marketing and enhance the customer journey and experience at every touchpoint. ” – Gary Burrows, FitForCommerce
  • “We’re also seeing landlords moving further away from traditional retail as the competitive socializing world grows. Mini-golf, darts, go-karting, and sound recording / blogging studios are getting into shopping centers that where they couldn’t have afforded rent 6-12 months ago. Now landlords are trying to figure out how to make it work because a huge percentage of their stores are going to fail if they don’t act immediately.” – Mark Burlton, Cross Border Retail

4. Landlord / Tenant Relationship

  • “Fixed leases are almost nonexistent anymore. We moved to base rent + turnover a long time ago. In many cases, it’s turnover only. Although it removes risk for retailers, it amasses all of the stress onto the landlord. Anchor tenants often have turnover only leases and benefits like discounted service charges. A lot of those stores, especially grocery stores, are fulfilling from stores. Online sales are being fulfilled in the store in the shopping store. Why is the landlord not receiving a portion of that income?” – Gary Burrows, FitForCommerce
  • The change to turnover leases and repurposing has a lot to do with trust. For years we’ve been told that landlords and tenants have a special relationship. That hasn’t always been the case. If we are going to move away from fixed-term leases to turnover or percentage rents, then there has to be an element of trust. If something is being dealt with in store, it has to be reflected in the turnover of that store. The landlord should be able to benefit from it. If any methods of doing commerce is going through a physical store (last-mile fulfillment, F&B transaction, etc.), then the landlord is probably struggling to capture it and have it reflect in any rent in the current climate. [Landlords] have the ‘if you do what you’ve always done, you’ll get what you’ve always gotten’ mentality and they don’t have the necessary skill sets within their organization to allow them to work with their tenants. It’s great that landlords are investing in sustainability [and other things like that], but for the bottom line of their organization, they have to work harder to capture what is actually going through the tills of their tenants. I don’t feel that that is adequately being done.” – Mark Burlton, Cross Border Retail

5. Data Capturing

  • “There are ways of [capturing big data] while working within GDPR regulations. A lot of retailers and landlords are afraid of GDPR, so they’re not doing everything they can do and are legally able to do in terms of data capture. You might not be able to capture a full name and zip code, but they might be able to capture a first name and half of the zip code. [With that information], they can understand the region the customer is from and their name, and that’s enough.” – Gary Burrows, FitForCommerce
  • It always used to be that we pushed people to the mall or meeting place. It was all about driving visitation and dwell time because the longer you kept them, the more opportunity you had to upsell. Now, Generation Z don’t need to be physically located in your mall to be your customer. Whether they’re at the beach or on their sofa, they can purchase from you and have it delivered anytime. Dubai Mall has recently created a digital twin and [signed] a last-mile logistics agreement with a local operator. Customers can have anything delivered 24/7 now. That is the movement towards the true definition of a seamless merged physical and digital ecosystem.” – Gary Burrows, FitForCommerce

6. “The future is already here, it’s just unevenly distributed” – William Gibson

  • “That [quote] is a truism that I see globally. The pace of change is vertical at the moment, but there are many pieces of technology out there. If you could pull all of them into one mall, it would be the best-performing, most attractive mall and it would have the best customer experience ever. Trying to pull all of that together into one [system] is the challenge that we face today. This is why we’re building these digital ecosystems. We’ve structured the digital architecture of the mall and have put everything into place to allow this seamless, frictionless, easy, merged digital and physical customer journey.” – Gary Burrows, FitForCommerce
  • The pace of change is quite terrifying. So many established mall employees don’t have the necessary skills to enable these new systems and technologies. We need people who have more technology-focused training. That will allow malls to [fully use] the technologies they have.” – Mark Burlton, Cross Border Retail

7. Final Thoughts

  • Digital transformation is what it’s all about. It’s adopting that merged digital and physical reality and creating the ecosystems that customers want and expect now. They expect their smartphone to be able to interface with your smart mall. They expect to be able to order what they want, when they want, how they want. They expect to have that experiential process via the digital as well as the physical.” – Gary Burrows, FitForCommerce
  • We are not in a recession. The landscape is never going to look the same again. If landlords are expecting to ride this out, they’re going to be the ones to go bust. They have to be doing everything in their power to engage with modern retail and the ecommerce world. There are advisors who can help them and people they can recruit to widen their skill set and they’d be wise to invest in that world.” – Mark Burlton, Cross Border Retail

To learn about how FitForCommerce can help retailers and mall operators with digital transformation, contact us.

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