Shopping across the digital divide

Just a few years ago many feared that the growth of e-commerce would mean the end of in-store retail operations. But as the biggest pure online players, such as Amazon and Zalando, now expand into the real world and open their first physical stores, it is clear that the death of bricks-and-mortar has been much exaggerated. Instead, physical stores have evolved into a vital piece of an advanced consumer-centred retail environment, profoundly impacting both retail tenants and landlords. While their ordering and fulfilment operations might be comprehensively sorted out, online merchants still have serious problems with finding virtual alternatives for real-life showrooms, fitting rooms, or face-to-face customer services. Neither digital store fronts (tested by EBay), nor pop-store stores (used by Zalando), nor specialised vending machines (launched by Amazon to sell e-book readers and tablets) have resolved this issue.

Pain of transition

“There are certain things that the online environment does for you — it makes fulfilment easy, it makes it easy to scale. But there are other critical things that offline does for you as well. It makes it much easier to relay information to other people. It also makes it much easier to establish the credibility of your brand if you actually have a physical-world presence,” says David R. Bell, a professor at the Wharton School of the University of Pennsylvania. A long-established physical presence might have yet another advantage. In many cases, it could put traditional merchants who are entering the online, and thus omni-channel, world in a much better starting position than developing a bricks-and-mortar chain from scratch is for the pure online players who are trying to expand into the physical world. According to Forrester, web-influenced in-store sales are currently five times bigger than online sales alone and are set to account for a staggering 44 pct of overall EU retail sales by 2018. “Europeans are increasingly being influenced by digital touchpoints when they shop. Mobile is an important touchpoint for facilitating and influencing shopper behaviour across multiple contexts and at different stages of the path to purchase,” says Michelle Beeson, an analyst at Forrester. “E-business professionals need to bolster the role of digital touchpoints as an influencer of overall purchase behaviour, not just online sales,” she adds. Obviously, not everyone will be able to profit equally from the mobile and omni-channel retail revolution. While retail chains treat online as an additional – and therefore obligatory – sales opportunity, as well as a significant and cost-effective operations facilitator, shopping centres adopt digital strategies for a different set of reasons – to support and attract their decreasingly physical-reliant tenants, in other words, to help themselves survive. In such a situation monitoring their tenants' wants and recognising long-term industry trends becomes of paramount importance, believes Marcus Laitenberger, the principal of Real Estate Boutique at Mercer Germany.

Mobile first

But even the finest and most carefully selected locations will not impress today’s digital clients, if they don’t answer their needs. And these are now becoming increasingly technology-driven. The revenue-boosting impact of mobile devices used in-store has lately become very evident. Google estimates that those shoppers who use their mobiles when making a shopping decision (now 80 pct of all shoppers) spend 25 pct more in-store on average, as compared those who don’t. The growing popularity of mobile devices has certainly changed shopping from a store-centred phenomenon into a consumer-centred environment. Armed with hand-held devices – whether when only planning a shopping trip, or already in-store – the “always-on” customers now expect to be able to freely browse the web (including retailers’ online catalogues), finalise transactions, make price comparisons and shopping lists, as well as check product information, reviews and stock availability, to name just a few, leaving the field clear for retail players. At the same time, mobiles represent a powerful tool for both retail tenants and landlords for communicating with customers in-store and analysing their activity and shopping habits.

Beacon to find bacon

This could be done by using beacons, for instance. The small mobile signal-tracking devices use Bluetooth technology to allow retailers locate customers or send out messages with special offers and product information. They also help customers to find products, an especially useful feature in large stores. “Beacon tech is quickly emerging as a powerful tool in bridging the physical and the digital in a variety of different spaces, not just retail,” Steve Cheney, the co-founder and SVP of business and operations of beacon manufacturer Estimote, tells ‘Eurobuild CEE’. “It can be beneficial for both the mall and the anchor tenants to install beacons. For instance, the mall’s beacon network can help direct a visitor to a specific store, but once inside, the brand may want to own and control the beacon-triggered mobile experience, in which case it makes sense to have their own smaller network of beacons deployed,” he says. “In our experience, the interest is the same from all players within the retail sector, both shopping centres and retail chains.” Recently, 180 Estimote beacons were installed in Toronto’s Eaton Centre, one of Canada’s largest malls, with 50,000 visitors a year and over 230 tenants. The mall’s customers are now able to use a special app that allows them to find the relevant stores and promotions by choosing their favourite shops from the list. “The app will remember your choice and let you know if there are any interesting promotions available in your chosen place anytime you’re nearby. (…) Eaton Centre administration can easily manage the beacons, take advantage of the advanced analytic tools to measure foot traffic and create meaningful heatmaps,” Estimote explains. Recently Macy’s, the US department store chain with 840 outlets, has decided to expand the use of beacon technology and the loyalty app Shopkick it uses. “In what will be the largest implementation of iBeacon technology in stores to date, with more than 4,000 devices, shopBeacons (…) will be placed within various departments at Macy’s locations, allowing for users of the Shopkick app to receive more personalised department-level deals, discounts, recommendations and rewards,” the company has revealed.

Light me up

But beacons also have some rapidly emerging competition. Lately, two lighting experts, Philips Lighting and GE, have independently developed visual light communications (VLC) devices that allow retailers to use their in-store lighting fixtures as ports for positioning and communicating with customers. The fixtures give the beacon functionality, while at the same time offering 2-in-1 efficiency. “The beauty of the system is that retailers do not have to invest in additional infrastructure to house, power and support location beacons for indoor positioning,” explains Gerben van der Lugt, the business development leader at Philips Lighting Netherlands. “The light fixtures themselves can communicate this information by virtue of their presence everywhere in the store,” he added. Mobile technology is also useful for the store administration and customer services. Not that long ago, fashion and fragrance retailer Kenzo adapted an integrated Samsung system comprised of LFD displays and mobile devices for staff members, as well as tablets installed in the changing rooms in its L’avenue store in Shanghai. The solution facilitates in-store operations and offers a comparable customer experience in-store and on the company’s online platform. The high-quality giant touchscreen displays were designed to encourage customers into real-time interaction with products and brands. “Connecting real-world and digital experiences through in-store kiosks, interactive displays or tablet-enabled sales assistants links the digital and physical shopping experiences, so that the use of one drives the use of the other,” says Michelle Beeson.

Innovate or die

According to Steven Lowy, the co-CEO of international shopping centre operator Westfield, “it is the convergence of the physical and digital experiences that provides the competitive advantage that physical real estate can have over pure players.” In order to make the most of its bricks-and-mortar presence, the company, which holds stakes in more than 100 shopping centres worldwide, launched an in-house technology-dedicated engineering hub, Westfield Labs. It is focused on testing, introducing and improving the latest ideas and solutions that serve both Westfield’s malls and their tenants. “We are not just thinking about the digital experience, we have put a lot of work into the physical experience and services such as hands-free shopping – where you pick up and buy the product, or have it delivered right to your car or even home,” says the company. Recently Westfield partnered up with the restaurant operators that rent space in its malls to roll out an app-based food pre-ordering system that allows customers to pick up prepared meals or order them for home or office delivery. Last year, in its 150,000 sqm London mall the company launched a click-and-collect and drop-off point with an additional changing room floor designed for online shoppers ordering from Westfield’s tenants. When picking up their parcels, the e-buyers are able to immediately return the items they don’t like. Another good example of a large-scale, technology-wise retail player that is now working hard on its omni-channel strategy is Macy’s. In September, the US department store chain, which runs 840 outlets in total, rolled out a series of technological improvements that were also partly aimed at retaining the large number of retail locations. These include the introduction of: Apple Pay-powered near-field communication (NFC) point-of-sale terminals that allow customers to make contactless in-store payments with their iPhones; the Buy Online Pickup in Store (BOPS) system; as well as visual search engine app Macy’s Image Search, which allows customers to search for products without using words. Macy’s has also expanded its adoption of radio frequency identification (RFID) technology to improve its in-store inventory accuracy. “Macy’s has documented RFID’s ability to significantly improve sales, gross margins and markdowns through improved inventory counts that are real-time and accurate,” says the company. Meanwhile, Bloomingdale’s, a Macy’s-owned high-end department store brand, has launched “smart fitting rooms”. For now situated in the chain’s five locations, the fitting rooms feature wall-mounted tablets with scanners enabling both customers and store assistants to check productavailability, as well as different colours and sizes.

CEE plays catch up

Although omni-channel retail strategies are currently much more common among Western retailers and shopping centre operators, the pioneering approach towards retailing is gradually spreading across the globe. French-financed developer Apsys, which operates several malls in Poland and France, plans on introducing a range of digital, client-oriented solutions in its new, 100,000 sqm shopping centre currently under development in Poznań. Scheduled to open in 2015, the mall will offer dedicated mobile apps, loyalty programmes and maps, among others. The enhancements are set to not only attract tenants, but also pave the way for developing the company’s omni-channel strategy for the two markets it operates in. In order to attain this goal, Apsys has set up a special tech project team, Apsys Lab, which will be based in one of its operating Polish malls, Centrum Manufaktura. “We thoroughly analyse the usability of all the technology that could be attractive tools for clients. Today, just having stores is not enough. Customers return to shopping centres not only to shop, but also for an exceptional customer experience. New technology can become an important growth driver, if it contributes to reducing the operational costs of our tenants or improving their work comfort,” claims Sławomir Murawski, the director of Centrum Manufaktura. “We expect the omni-channel model to stabilise at some point – with online retail becoming the prevailing sales channel for particular retail sectors, while physical retail dominates others,” he adds.

Property in perpetual motion

There is, of course, also the other side of the coin. Even if tech-impacted retailing translates into fewer or smaller leases in shopping centres, it is likely that an increased demand for technological solutions will make room for another breed of tenant. The importance of technological know-how, networking and access to the latest industry trends is being slowly but surely recognised by all real estate market players. Recently Cushman & Wakefield, which has a specialist tech sector team in its London office, has partnered up with PiLabs, the UK property-focused technology accelerator company. “Our partnership with Pi Labs puts us at the very core of London’s burgeoning tech sector, and the collaboration and networking opportunities for us and our clients will be game-changing in our industry,” declares Digby Flower, C&W’s UK CEO. “The convergence of property and technology will transform the way we and our clients operate in the future – and the tech and creative industries driving this revolution can be found right on our doorstep in East London,” he adds. Westfield is currently also discovering other aspects of technology-influenced real estate. The shopping centre operator has just announced the introduction of Bespoke, a co-working, networking and events venue situated in its San Francisco mall, “all under one roof in the centre of downtown, where the quintessential tech marketplace of San Francisco brushes against the retail district.” One thing is for sure. A retail property player should be ready to respond to the rise of new retail technology. There is simply no way back from where retail is today. While the world’s largest mobile device makers, such as Apple and Samsung, are now turning slowly towards wearable tech and the ‘Internet of Things’, voice operated-shopping apps, for instance, might soon prove to be exactly what the “always-on” customers, and also retailers, need. According to Deloitte, digital technology’s influence on in-store purchasing behaviour is growing much faster than has been anticipated – today it accounts for 36 pct, or USD 1.1. tln, of in-store sales. And this number is likely to have grown by 50 pct by the end of the year. ν