Boosting customer attraction
Under pressure from e-commerce, many shopping centres are updating their business models. By offering new experiences and services they are now building loyalty and reaching out to local online shoppers.
In summer 2019, shopping centre operator ECE embarked on a major joint venture with retail giant OTTO. As a result, tenants in ECE shopping centres can now showcase their products not only in the ECE Digital Mall but also on OTTO’s online platform, otto.de. Using connected commerce, ECE and OTTO are creating an omnichannel blend of online and offline shopping. Customers can now reserve products in a brick-and-mortar outlet (“Click & Reserve”) or buy online and collect in store (“Click & Collect”).
The changing role of shopping centres
So, are shopping centres losing their traditional role and evolving into local logistics hubs? Not at all: they are now an increasingly important element in the omnichannel continuum. It’s also true, however, that they are expanding their activities beyond the product retail model. “Shopping centres are becoming multifunctional social spaces and have to adapt accordingly,” says Jens Horeis, General Manager at Sonae Sierra and head of property management in Germany. “Customers want a venue that combines a wide range of everyday activities – shopping, work, leisure, sport, food, socialising, networking, entertainment and events.”
The goal: an urban-style occupancy mix
Steffen E. Friedlein, Managing Director Leasing at ECE, has also observed this growing diversity and is driving the trend in his centres. To enrich the visitor experience, operators can add attractions such as selfie booths, inflatables and karaoke machines. In addition, Friedlein is using complementary occupancies such as co-working spaces and gym facilities – increasingly prevalent in centres today – to create an urban-style mix of tenants. As managers and owners recognise the value of their centres as social hubs, they are obviously not doing so for its own sake. Their primary motivation is to build customer loyalty in what is an increasingly hard-fought market.
Strengthening loyalty by modernising stores
This potential to attract customers is also noted by Ralf Schaffuss, Head of Asset Management Retail Germany at Union Investment Real Estate GmbH. Schaffuss rejects the idea that retail space in shopping centres is being reduced to a mere showroom role, with actual purchases taking place online. “Tenants have to invest more than ever in store design to present their products properly. That includes high-end fixtures and fittings, high-quality lighting and – where appropriate – digital equipment such as tablets and displays."
Zara store in Berlin
Schaffuss points to the new Zara store in Berlin’s Alexa shopping centre as a prime example of a successful modern outlet – and the company’s first model flagship store in Europe. Occupying an impressive 2,500 square metres, it aims to stock the same range of products as the online store. Accordingly, Zara has a further 500 square metres of storage space in the centre – significantly more than the usual storage-to-retail ratio of approximately 10 per cent. The store itself is attractively fitted out and includes self-checkout facilities to reduce waiting times for customers.
Attracting tenants from new sectors
Shopping centres are increasingly important venues for showcasing products and brands. ECE is now actively welcoming showroom-type occupancies – in part to attract tenants from new sectors. As Friedlein notes, one of these sectors is automotive: “Tesla and VW have already opened stores in our centres,” he explains. Whatever the concept, the market is now ready for new ideas and greater diversity in terms of occupancy mix.
Enriching the customer experience
Sonae Sierra is one shopping centre specialist that is diversifying its tenant base to optimise the customer experience. In addition to conventional retail, it provides temporary rental solutions with flexible agreements and offers short-term use of selected areas. Tenants can now create pop-up stores for seasonal sales or run “lab stores” to test new products and concepts.
While online commerce is clearly a major challenge to shopping centres, the more successful operators are responding well by diversifying their offering and enriching the customer experience. Through connected commerce, they are bringing together online channels and brick-and-mortar stores in more effective and complementary ways.