Luxury stores have always understood the allure of great customer experiences. Now, driven by a new generation of consumer, retail centres are taking cues from luxury, entertainment and hospitality to transform the shopping centre as you know it.
The post-millennial shopper has arrived. Also known as Gen Z, this newest generation in their mid-20s and younger are true digital natives who stretch to imagine a world before mobile phones, the internet, social media and ‘frictionless’ technology. However, their shopping behaviours are not what you’d expect, with new research1 showing that post-millennials take to the shopping centre more than any other generation.
In contrast to millennials, who now do most of their shopping online, nine out of ten post-millennials prefer to shop in a physical store environment2. They like to touch and feel the product, and they appreciate and search out great customer service. They see it as an experience.
In terms of spending power, Gen Z will come into their own in just six years3 but, for now, half of it on average is given to them by their elders. Both now and in the not-too-distant future, they are an important customer to understand and deliver experiences and places for.
All this is exciting news for landlords and placemakers. And it is the driving force behind a massive evolution of the shopping mall.
At a recent meeting of ICSC ReCon in the US, the largest retail conference in the world, the change was unmistakeable. Landlords described themselves as not in the retail game – that is what their tenants specialise in – but in the business of hospitality and entertainment. Leading US landlords said they take customer service inspiration from the best hotels in the world and customer experience inspiration from some of the best-loved theme parks. This ‘theme park thinking’ is seeing the rise of new and interesting neighbourhood precincts where different types of amenity are converging with retail.
Community at the core
Today, precincts are building new kinds of social and community spaces where people feel they belong – investing in experiences and authenticity that you can’t get online. As precincts bring new, much-valued richness and amenity to neighbourhoods they are fast shaping what ‘the local’ of the future can be.
When AMP Capital develops a space we think about what we can activate for the community: what place cues we can include to allow a natural community activation; how we can allow our retailers to expand past their lease lines and bring their brands to life in the common mall space.
In Australia, some of the strongest growth is in food and dining precincts which has been on the rise for some years, followed by entertainment and leisure. One of our large food and dining developments in Sydney will deliver what we believe to be a global best practice food hall, complete with microbrewery, celebrity chef concepts and artisan fresh food concepts.
The experiences and offerings we are currently seeing as the biggest drivers of customer visitation are changing rapidly and quite dramatically.
A library in one of our centres attracts more than 500,000 visits a year; a play area attracts over 10,000 people a week. Community spaces like these and beautiful public spaces are incredibly important to us. They support social connections, a sense of community and are another strong reason why customers visit our places.
We also see strong results from the events we create within our centres. These are about creating omnichannel experiences that resonate with individual customers. They have strong online elements in the leadup and afterburn, as well as crossovers like bloggers or online personalities headlining events.
Our beauty weekends attract tens of thousands of customers. Intimate events like masterclasses with a restaurateurs or styling with local designers are mainstays. Coding courses for our senior customers are typically booked out within a day, and robotics courses for children during the school holidays are loved by parents and children alike. Ice skating in winter, Instagram events like Sugar Republic – all these events are designed to connect with a different customer market and create a new reason to visit and experience our centres. Whether it’s entertainment, learning or simply connecting and socialising, we learn what our customer ‘tribes’ are interested in so we can support their aspiration.
Where purpose meets purchase
Perhaps most interestingly, we are seeing a generation of shoppers who are purchasing less ‘stuff’. They are looking for experiences and brands they can connect with, that have a sense of purpose of authenticity.
Authenticity is about being real. For our centres, it is as simple as understanding our customers and our community and delivering a place and an experience that resonates and connects with them.
For this reason, AMP Capital is developing social investment plans for all our centres. At a time when, in our view, customers are craving customisation and personalisation more than at times in the past, it is imperative for us to gain a deep insight into the community; their needs, their wants and their aspirations, so we ensure that the place, product and programming of that space connects with those people in a meaningful way.
In our view, as citizens we are becoming increasingly socially aware, health conscious, environmentally aware. As consumers, we are looking for brands and places that understand social and environmental responsibilities and are giving something back.
Structural pathways to growth
The prevailing view used to be that online spelled the demise of bricks and mortar retailing. But more and more, we are seeing companies that started online expanding to physical stores.
In the US alone, 850 digital native brick-and-mortar stores are expected to open in the next five years while pop-up shops are growing in popularity and now generate US$80 billion a year4.
Gen Z customers who ‘try before they buy’ like the convenience of local store outlets to touch and feel the products, but also for easy returns of online purchases. Brands that embrace ‘webrooming’ and ‘showrooming’ and deliver joined-up omnichannel experiences are capturing the value that online offers bricks and mortar retail, and vice versa.
AMP Capital works with retailers to support their business growth in the most effective way possible, by gaining a deep understanding of their business strategy and direction and tailoring an approach to meet current and future needs. This includes identifying new trends and understanding how they can be integrated into our retail centres; to ensure a fresh, relevant and dynamic retail mix.
1Retail Trends Reporting, Quantium Research, 2019
2Harvard Business Review, A Study of 46,000 Shoppers Shows That Omnichannel Retailing Works, 2017
3Retail Trends Reporting, Quantium Research, 2019
4Forbes, 50 Retail Innovation Stats That Prove The Power Of Customer Experience, 2019
While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.