As we move into the fourth industrial revolution of technology led innovation, it’s an exciting time to be in the retail space, with powerful transformative forces reshaping shopping and shopping centres.
New York University professor of marketing Scott Galloway wowed the audience during his exploration of the future of consumerism at AMP’s recent Amplify event, which brought together thought leaders from around the world to explore emerging trends.
Galloway argued Amazon, Apple, Facebook, and Google are the dominant global businesses; the major force changing the customer experience and retailing as we know it. As these businesses reshape the commercial landscape, it will create significant change and opportunity for our bricks and mortar retail centres.
Today, customers expect seamless, personalised, and valuable experiences – not only with the likes of Amazon or Apple – but with almost every purchasing decision they make.
This isn’t any different for shopping centres, and when we look back at their history, we can see a trend of high-performing centres evolving to bring new experiences to customers.
In the 1990s, the trend was for cinema complexes to be built alongside shopping centres. In the early part of this century the entertainment offering evolved to incorporate attractions like bowling and laser tag centres.
In an increasingly digitally connected world, customers are seeking out great experiences and the opportunity to connect socially, often over a meal with friends. Creating great places, rather than just great shops, is an increasingly important part of the overall customer experience. At the same time, people still visit shopping centres to go to the bank, post office, or get a haircut.
The nature of leasing means as tenants come and go, there’s an opportunity to refresh shopping centres. So, the ability to adapt in retailing is critical. This is especially the case as consumers increasingly travel overseas and benchmark local centres with their overseas equivalents.
The truth about online retailing
There’s a lot of noise at the moment about the impact of online retailing on bricks and mortar businesses. It’s true online is a growing segment of retail, but it’s only one part of the market, as figures show. According to data from the Australian Bureau of Statistics (ABS), online sales made up just 5.4 per cent of retail sales in April 2018, up from 5.1 per cent in March.
At the moment, many retailers are working on combining successful online and offline offerings. Businesses that have a great online presence often use this to drive people to their bricks-and-mortar shop. This multi-channel strategy is becoming an increasingly important aspect of many traditional retailers’ business models and is the fastest growing category in online spending according to the ABS, growing by over 40% in the last 12 months.
Additionally, retailers and shopping centres are starting to work together to share information about their customers and their spending patterns. Data about loyalty schemes, traffic flows and car park numbers can be used for everyone’s benefit to build better shopping centres and customer experiences.
However, population growth is one of the key drivers of retail sales. ABS figures show the population grew by 1.6 per cent for the year ended 31 December 2017, and all states and territories experienced a rise in population. This demonstrates the importance of this economic relationship in driving enhanced sales performance.
The right approach
Against this backdrop, it’s essential for savvy fund managers to invest heavily in understanding customers. Properties are all different – some are small, locally-focused centres, while others are landmark destinations, with everything in between. What’s important is to appreciate what each shopping centre’s customers need.
As a result, substantial research must go into the economic drivers for each centre’s trading area, competitive forces, and opportunities to win market share and ensure the right centre is developed for the right market. Right sizing a centre for its market means ensuring properties are fit-for-purpose – this why we treat every shopping centre in our portfolio differently.
At the same time, it’s essential to understand consumers’ lifestyles, as well as other properties and activities with which a centre competes for time. Ample parking and knowledgeable customer service, backed by a digital offering, are vital. It’s about making sure every customer touch point is the best as it can be.
Pacific Fair on the Gold Coast, one of the flagship shopping centres in our portfolio, is a good example. Located in the heart of the tourist precinct, it has a bold and playful atmosphere that locals and visitors enjoy. In contrast, Sydney’s Macquarie Centre is situated in an established and affluent residential catchment, adjacent to a business park and Macquarie University. Both are five-star centres, but very different in their persona and presentation, in order to resonate with the different consumers and visitors in their respective area.
The shopping centre of the future will need to focus on the offer and destination, incorporating the right mix of services and offerings that engage, surprise and draw consumers locally and from beyond the traditional catchments. This deep understanding and focus on our customers is what ultimately drives the performance of our centres. When investing in shopping centres, it’s crucial to look for property managers that are focusing on these long-term trends, as this will ensure the best opportunity for returns now and into the future.
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.