Written by Mark Dailey, Partner
For once the big story was not about China. Yes, the latest international summit of shopping centre operators, owners and retailers was held in Shanghai (ICSC RECON China event) and some of the stats about China were as impressive as ever:
- Highest level of e-commerce penetration in the world at 19.8%
- 2 of the top 6 data companies in the world (Alibaba and Tencent)
- China fuelling Asia-Pacific’s eclipsing of North America in total consumer spending by 2023
But the big story was about retail itself. Old fashioned bricks and mortar type retail where you actually go in a shop and buy something.
Two massive pieces of received wisdom have dominated the retail world in the past decade. First, that e-commerce, digital online sales, is ravaging old style retail. That store-based retail is dead, a fading business model being rapidly replaced by delivery drones speeding from huge Amazonian warehouses on the edge of town and funky neighbourhood click and collect centres.
And secondly that the industry is still reeling from the advent of e-commerce, the ultimate disrupter – and hasn’t yet come to terms with what this emerging digital business model should look like.
Like many things in business, the reality is far different from the headlines turned out by journalist’s too busy surfing from their sofas to wake up and smell the retail therapy going on.
The shock effect of e-commerce on retail is over. Most retailers have learned how to cope with and integrate digital sales into their overall business model. The key watchword in retail now is convergence – online converging with offline shopping in a seamless, integrated offering to the customer. Retail isn’t dead – bad retail that cannot offer all the benefits of online but with a great customer experience is dead.
But there’s more going on than just coping and integrating. Bricks and mortar retail is making a comeback. Sales of real books have overtaken kindle e-readers. Amazon, Alibaba and Tencent (in Asia Pacific) are opening real stores in response to customer demand.
Word at the International Council of Shopping Centres (ICSC) conference in Shanghai is that China at just under 20% of online sales is probably topping out and that this figure may be something of a natural overall ceiling on e-commerce. Countries like the U.S. at 10% have room for growth, but moving country stats and key segments like electronics, much beyond 20% will be difficult.
In fact, the three fastest growing trends in retail right now have nothing to do with e-commerce. They are:
- Growth in food and beverage – now representing over 40% of gross leasable area in most modern malls
- Experiential retail – not buying stuff but having an experience, whether that is hot tub cinemas on mall rooftops, in-mall mobile basketball courts and ice-rinks or baby canteens, where toddlers belly up to the bar to get served
- Healthcare – for aging baby boomers keen to check pacemakers and stock up on pharmaceuticals while doing a little window shopping
If 2008-2012 was about economic recovery and 2012-2017 about coping with the tsunami of e-commerce, the new challenge from 2018 onwards is about harnessing the power of big data to more deeply understand customer needs and wants.
The cutting edge retailers have moved on from figuring out how to work with digital sales. Like many businesses, they are now deeply into you. Using all kinds of data to predict what you want, proactively offer it to you and make it easy-as-pie to buy.
This is the real retail therapy going on right now. The story of how your friendly neighbourhood retailer is moving way beyond the digital selling platform debate of a few years ago. And getting in your face – literally.
As usual it’s Asia-Pac we need to look at to glimpse the future and here are some of the techno-trends soon coming to a mall near you:
- Facial recognition is well advanced in Asia-Pacific. If you hesitate on your purchase – they see it and are fast working out why
- Voice recognition and smile-to-pay systems where you literally ‘put your money where your mouth is’
- Virtual changing rooms – why bother trying the outfit on when you can save so much time by having the outfit projected onto a screen-grab of you
- Robot trolleys – no not bored husbands but real robots that take your shopping to your car for you and return themselves to the trolley park
Thirty years ago, six of the world’s 10 largest companies by market cap were energy firms. Now they are data firms – 4 in the U.S. and 2 in China. Data is the new oil.
And it is this focus on data and what it can tell retailers about what we want and why, that is the real retail therapy going on right now. Not some already settled debate about on-line or off-line.
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