In light of the glut scare plaguing Klang Valley’s retail sector, Dr Victor Gan shares mall survival strategies and constructive insights from the perspective of a modern consumer.
Earlier this year, property consultant firm Rahim & Co International raised oversupply concerns over Klang Valley’s commercial sector – there is the in-coming new supply of nearly 18 million sq ft for the retail segment in the next 3-5 years. As it is, the amount of vacant retail space in KL in H1 2017 totalled 5 million sq ft!
Representing the majority, Dr Victor Gan affirms that nowadays, when consumers do visit malls they are looking for experiences that go well beyond traditional shopping. The e-commerce revolution has caused an upheaval in consumer’s behaviour, one can easily shop online now from anywhere, anytime.
Hence, changing the role of malls in people’s lives. Consumers now see malls as a place to congregate, socialize and to have an exciting experience with friends and family.
Evolving demographics such as increased urbanization and an ageing population means more people are living in smaller spaces. Hence, there is a greater need for public spaces where the masses can spend their leisure time in.
Shopping centres will have to shift gears and align accordingly to these rising trends and demands. Here are 3 key strategies mall operators should or could adopt:
1. Differentiate offerings and focus on the experience
Rule 1: Malls should never try to compete with the endless product selection and price comparisons offered by online shopping. Instead, malls need to move in the opposite direction towards a broadened value proposition that will engage consumers’ senses. Incorporate value-added elements that attempt to recast the mall as the new downtown such as concerts, spas, fitness clubs and artisan’s markets. These services provide a level of leisure and entertainment that can never be satisfied online.
For instance, Sunway Pyramid boasts an ice skating rink (pictured below); The Parenthood, which has a huge playground for children; a TGV cinema with an IMAX screen and the Sunway Lagoon theme park is located just next door. Can you experience any of these recreational delights online? No, you can’t.
Rule 2 – Have a strategic tenant mix, anchor tenants that drive traffic are still key. These include Everrise, Giant, Parkson and my current favourite, Bataras. Introducing a mix of unique stores that add a sense of novelty to the mall’s offering is also critical. Think Vern’s, Sangkaya, Espressolab, Pets Wonderland, among others. Moreover, upcoming “exciting” brands to look out for include American Eagle, Lululemon and Under Armour.
Rule 3 – Making greater use of temporary, flexible spaces that can accommodate different stores over time. Pop up stores, showroom spaces and kiosks provide customers with a sense of the unexpected and give them a reason to “treasure hunt”. There’s a reason why Pokemon Go was such a huge hit!
Rule 4 – Focusing and compartmentalising specific consumer segments within the mall, thus allowing consumers to lose themselves in an area that will cater to their every need on that certain day. Segment examples include Fashion Avenue, Digital World, Food Central or Entertainment Hub. However, this can only be done if the mall management has full leasing control over all the units. If the developer sells all the retail lots, this will no longer be feasible.
2. Leverage on technology
The digital transformation of retail presents new opportunities for malls to engage consumers throughout their decision-making journey. Relationships with customers can be extended to before and after the mall visit. This can be done by engaging customers and nurturing a bond with them through compelling content on social media, proprietary sites/apps as well as loyalty programs. Not only do loyalty programs provide the means for malls to establish a direct relationship with customers, but it also allows malls to collect precious information about customers.
How can malls do so?
1. Firstly, malls should reach out to their customers with customized offers, gift ideas and targeted advertisements using location-based marketing and real-time intelligence. While malls face the challenge of not having direct access to shoppers’ purchase data, this can be overcome by inducing shoppers to use their smartphone to scan purchase receipts in exchange for points that can be redeemed for discount vouchers, free parking or exclusive invitations to events.
2. Alternatively, technologies such as face recognition and location-based mobile ads can be applied to identify and establish targeted contact with repeat customers. Such technologies are also valuable for gathering consumer behavioural data.
3. Thirdly, malls are using technology to transform mall usability as a means of improving customer satisfaction. There is ample opportunity for malls to decrease customer pain points and increasing customer delight points. A good example is using technology to address one of the biggest challenges shoppers face – finding parking in the mall.
Sensors located in parking lots detect how many spots are available on each level and give visual indicators to drivers. Once within the mall, mobile apps can offer quick, easy guides to help shoppers find what they’re looking for at today’s increasingly large and multi-level malls.
3. Explore new mall formats
The most innovative malls today look nothing like their predecessors. Although location remains the key real estate consideration for malls, a differentiated design and structure are increasingly important.
1. Many of the malls being built in urban areas now have open-air areas and are fully integrated with the external landscape. Malls that were enclosed before are now injecting a sense of ‘hominess’ by weaving nature into their design blueprint – installing plants and trees, wood walls and floors, waterfalls, and lots of glass to let in natural lighting. Take Suria KLCC for example, the 50-acre KLCC park behind the mall provides respite and a place to wind down to shoppers and families.
2. It is critical for malls to be so much more than just retail stores. I see the mix of tenant/public space moving from the current 70/30 to 60/40, or even 50/50. When this happens, these expanded public spaces will have to be utilised accordingly. There must be a proper plan in place for programmes and events to take place throughout the year – exhibitions, concerts, art fairs, family days, you name it.
3. Mixed used developments offer consumers an attractive, integrated community in which to live, work and shop. They also serve to generate additional traffic for the malls while maximizing returns on invested capital. Other commercial real estate opportunities that can add alternative revenue streams are hotels and office buildings.
Shopping malls have the potential to play a central role in urban and suburban societies. Mall operators must expand their horizons when envisioning a mall’s purpose – they are no longer just real estate brokers, instead, they are now providers of shoppable entertainment.
*This article was repurposed from Dr Victor’s Gan Facebook post, Mall surviving tips in the online shopping age.