Technology, People, Retail & The Future of Shopping Centres

5 decades of Moore’s Law (which states that computing power doubles every 18 months) means that in the 2020’s we will experience change at a pace that makes the current decade seem positively sluggish. A Trinity of Transformation, involving more data, more compute power and more advanced algorithms is underway.

And this will have consequences, for us personally, and for the companies we all work for. How we live, work and shop will change, perhaps radically.

In a world where we all have a €30 million, 1980’s supercomputer in our pocket, where JD.com in China can run a warehouse processing 200,000 orders a days whilst employing just four people, and where we can have products and services tailored to our own preferences, we will see the meaning of ‘Shopping’ transformed. The notion of physical stores being the way we get goods into the hands of consumers will fade away, and whilst it seems clear that many will fail to adapt to this new world, the opportunity to stand apart, to create clear and strong competitive advantage, will be great.

The 2020’s will be the decade when the superiority of ‘Human + Machine’ working together will become clear. The best companies will use technology to capture, process and analyse data at an unprecedented scale, and at a level of granularity not seen before. Artificial Intelligence (designed and guided by Human Intelligence) will allow us to personalise product recommendations, optimise the assortment of goods each store holds, and adjust pricing to maximise sales, and profit.

The 2020’s will see the primary purpose of physical retail becoming a ‘Customer Acquisition Cost’. Stores will act like Media, being places where Brands can demonstrate their values, products, attitudes, and ethos. Compared to the cost of customer acquisition online (where the ‘Facebook or Google Tax’ has to paid) the very best stores and shopping centres will represent great financial value. Inspire offline, service online will become the norm. 

To get a preview of many of the changes coming down the tracks, look East, to China. Jack Ma, the founder of Alibaba, coined a phrase in 2016; ‘New Retail’ he wrote, was all about ‘making it easy to do business anywhere’. On the 11th of November this years ‘Singles Day’, the massive ‘New Retail’ extravaganza took in more than $38 billion in sales. That is nearly 30% up on last year and a triumph of the merging of Commerce, Digital, Media and Logistics. Physical shops were a major part of ‘Singles Day’ but Alibaba’s idea of physical shops is not what we are used to. They are part of a huge feedback loop where each touchpoint with a customer contributes to improving the experience that customer receives.

Different parts of the world are on different parts of the journey but the direction of travel is clear. Retail is not about ‘multi-channel’ or ‘omni-channel’, but is just ‘Retail’. Online and offline serve alternative purposes, but each has its place. Understanding what that purpose is is vital. Globally there are trends as to what works, and what does not. Retail is a very local business, but lessons can be learnt from across the globe.

Lessons can also be learnt by listening to the signals given off by the ‘digital exhaust’, that mass of data that is thrown off by the widespread and pervasive use of Social Media. We can learn a great deal about the wants, needs and desires of people within certain geographic areas. Every time you read a story, like a post, photo or video, you are contributing to a digital fingerprint of an area. By reading the fingerprints we should be able to better match the products and services we stock or provide. Why does something sell better in one area than another, even if the demographics of that area are similar? Because sex, and age and income only goes so far in explaining what people want. We may be similar, but we are not the same. In the 2020’s those differences will be something we can discern, and learn from.

Customers have not changed in many ways; they still want value, variety, and ‘Wow’. And there are a multitude of retailers, Brands, and experience creators who can help to provide a never ending supply of ‘Wow’ moments. Creating the systems, processes and collaboration required to enable this will be a major differentiator of retail real estate companies. The best will provide the physical retail skills many new or growing Brands are lacking. Landlords will be data and space providers, not just suppliers of ‘space’.

A lot of ‘space’ will be repurposed. A shopping centre does not have to be about shopping alone. Asset classes are merging: look out for eSports arenas, VR experiences, residential, co-working, urban logistics, hotels, medical, student housing and community uses. There is always a perfect use for any space. There are always options.

Marketing will also change; with much more, and better, data we can talk with, not at, our customers. Our job is to understand demand, and provide the supply to match it. We will market as if we were a consumer Brand, not a real estate company.

In a world changing as fast as ours is, being average is increasingly hard. There is likely to be a much larger gap between the best and the rest.