The future of brick-and-mortar retail and the shape of the mall of the future
“With retail changing so fast, the idea really is to discuss the future look of shopping centres,” observes Amitabh Taneja, chairman & managing director of Images Group, setting the tone of the discussion on what will drive success of malls in future.
Silvio Liedtke, COO of Landmark Leisure, cites the example of North America where retailers and consultancies have been predicting the death of shopping malls in the near future. “There is immediate need for transformation. Malls have to totally reinvent themselves if they want to remain relevant,” he emphasises.
To begin with, it’s no longer a ‘shopping mall’ we’re talking about but a ‘mall’. The diminution in terminology is significant, reflecting a change in consumer mind-set, the space no longer being identified as a place to just shop, but a venue incorporating retail and leisure that increasingly draws visitors to socialise, have fun, dine – and shop. That’s the path new retail developments, mostly in mixed-use projects, are choosing to tread.
Lennard Otto, general manager, Wadi Adventure, takes the argument a step further, pointing out it’s no longer about malls but about destinations in the social life of people. “What I’ve seen over the past five years is that malls are becoming the focal point, the destination. Every shopping mall nowadays has a hotel wing linked to it as well as food and beverages facilities, entertainment and leisure facilities, and so on. If you look at Yas Mall, it has two mega theme parks. If you look at The Dubai Mall, it has several entertainment centres. Malls nowadays are more like a tourist destination and people visit them to have a complete immersive experience. That’s where I see malls turning to in the future,” he elaborates.
Transformation also means that existing, under-performing shopping centres across the world, the Middle East included, can expect to improve their footfall and sales only by adding this combination of three elements – food and beverage outlets, cinemas and family entertainment centres. And that’s what most of them are busy doing in their reworked retail strategies.
Burjuman, a landmark in the history of malls in the region and the launching pad for a large number of retail businesses, is currently in the process of completing a major redevelopment to stay ahead of the competition. “We’re introducing several new categories, including entertainment and cinemas,” confirms Leigh Regan, COO, Burjuman.
In all this, technology is emerging as the key driver of the evolving face of malls of the future, feel the panellists. “Malls have to take on the application of digital technology,” emphasises Liedtke.
“In the past, we would describe the relationship between retailer and developer as ‘sleeping with the enemy’. I don’t know how much fun it will now be sleeping with technology,” observes Mohammad Alawi, CEO, Red Sea Markets.
“I don’t think the problem is about how we’re going to adapt to the new format or the new way of retailing. The market has changed in the past from souqs to shopping malls and from sales to corporate retail … and we’ve been adapting to the change. I think the question now is about how fast this change is happening and how fast developers and mall operators are moving to stay ahead of the game,” he adds.
Rajiv Sangari, vice president-retail & licensing, IMG Theme Park, City of Arabia, believes entertainment will be the guiding paradigm of the future. “It’s not just for malls. It’s important to realise that entertainment and other factors are definitely going to play a crucial role in many other spheres as well,” he says.
Liedtke is equally forthright in pointing out that malls have to integrate the concept of a family entertainment centre (FEC) right from the start, at planning stage.
But what determines the form and nature of these component elements in the mall of the future? How do location, design and scale affect the mix of food, entertainment and retail options, queries Taneja?
“Malls nowadays bring every element into the mix. They bring in fashion, F&B and anchors. A mega centre break-up is usually, say, 60% fashion, 30% entertainment and F&B, and 10% services,” comments Gopal.
“If you look at examples from South Korea and Seoul, 63% is lifestyle and leisure and only 37% is fashion. If lifestyle choices are not included in the design right from the start, I feel the mall is already doomed to fail in the long run,” adds Liedtke.
Alawi claims the mix is a case-by-case or country-by-country scenario. “The mix should go with the culture of the country. In Saudi Arabia, for example, you have few entertainment and fine dining options available outside shopping malls, so you can see the ratio of food and entertainment to fashion is different in malls there than in other countries. In North America, entertainment offerings are the least in shopping malls,” he clarifies.
Regan feels the mix is linked to technology penetration. “Prior to Dubai, my experience was in Shanghai, a market with a shopping centre experience of, perhaps, 10 years. The city has the largest share of technology penetration in the world so online shopping has a material impact on how the mall mix is formed,” he points out.
Taneja steers the focus to location and size. “What kinds of location will be of importance in the future? Will it be small malls closer to the city centre or big ones farther away?” he asks.
“Of course, more land is better than less land. As we have seen, the evolution of shopping centres shows they have gone bigger and added more merchandising categories. The more you add and the better you do it, the more successful you are,” replies Regan.
Otto claims convenience is the key when it comes to location. “Time is limited and people don’t want to travel large distances mid-week to reach a mall. So convenience is a key factor to keep a mall busy seven days a week. Having access to public transport is important for the success of a mega mall,” he observes.
Liedtke also sees convenience of the customer as paramount for the success of a mall. “Convenience does not start and end with the choice of shops in a mall. It starts with how easy it is for me to find my way to the shop in that environment, how easy to park my car, or how close the public transport station is. And, quite relevant for Dubai, how easy it is to get a taxi once I finish shopping,” he avers.
There was general agreement among the panellists that experiential shopping will become more important in the future of retailing than the products per se. But if malls of the future stress on experiential retail and F&B offerings, do we really need mega malls or will smaller centres work better? asks Taneja.
“You really can’t choose one for the other. I think community centres will explode in numbers to fulfil the need of convenience while mega centres will fulfil the destination value,” answers Liedtke.
The discussion also veered to the kinds of entertainment demands the changing retail landscape is ushering in, considering that entertainment is a huge opportunity for malls of the future to get people to linger longer in their precincts. “Malls need to keep a close eye on where the entertainment industry is going and where the leisure industry is going,” says Otto.
“There was a time, say about a decade back, when things like multimedia and home videos used to be huge. But today they are almost zilch. It’s the same thing that’s gradually happening to video game centres because these games are now available to you at your home or wherever you are. So deciphering consumption patterns for the future is not an answer that can be arrived at easily because things are changing so fast. It’s difficult to put a finger on how things will be in the future,” notes Sanghvi.
Liedtke cites the example of cinemas to illustrate how they are adapting to change. “Nowadays, every release is instantly available for download, so how come cinemas in the UAE are still running full? It’s because many of them have evolved the customer experience exponentially. Like in Yas Mall, the latest cinema allows you the choice of watching a film in four different formats. This is a prime example of how, despite digital choice, despite the ability to get the same content free of charge, despite 85” HD TVs, cinemas have not lost their relevance. They are constantly evolving the customer experience and moving to another level. We must never underestimate the power of experience,” he elaborates.
Alawi feels entertainment offerings in malls need to expand further to include all age groups. “When we talk entertainment we think it’s something for 12 years and below. We often make this mistake. What we have seen in our centre is that planning activities for 25 years and below, or even 18 years and below, helps you get more attention. The new generation is into new forms of art like graffiti and digital art. I think malls need to absorb this type of knowledge. We’ve been promoting art over the past six years and have attracted more than 12,000 participants, over 3,000 of them regular participants. We have to go beyond and engage the community,” he explains.
Design was another element that the panellists agreed can really differentiate one mall from another. “When building a new mall, you should think five years into the future in terms of design,” observes Regan, adding, “Of course, the design inside the mall comes from the retailers.”
That’s something Alawi agrees with. “Format follows function. Function is the retail need while format is the design. Retail needs change so, inevitably, format changes as well,” he points out.
“Design will also reflect the needs of the country – like you have hotels linked to malls, or you might have a clinic linked to the mall. I see cultural design in modern style becoming more popular,” Alawi adds.
He foresees developers not going in for large area malls in terms of format. He also believes the future of department stores and multi-brand stores is not too bright, even though department stores are the current favourite for the purpose of anchor stores.
“The era of the solo brand is coming. How strong will solo brands be in the market, I don’t know. But the anchors in malls, usually department stores, will change. I think the future is for mono stores rather than department stores,” Alawi stresses.
Taneja posed an interesting question to the panel to gauge the importance of food offerings to a mall: If, say, The Dubai Mall was to decrease the number of its fashion retail outlets, would people still drive to it to eat at a restaurant there?
“Every food retailer is queuing up to get a space at The Dubai Mall, near the fountains. If you could eat at a destination like that why would you not? The Dubai Mall has nothing to do with shopping anymore. It’s more about spending your time in the environment it provides. Shopping is merely collateral damage out there. They’ve got it 100% right. We have right here the destination mall of the future in the shape of The Dubai Mall,” emphasises Liedtke.
Gopal points out that Mall of the Emirates has removed all its common benches to drive visitors into cafes to catch a break from walking, underling the fact that food offerings will always remain an integral part of any successful mall.
Liedtke believes immersion and digitalisation will be the drivers of malls of the future, whereas Alawi backs youth and local culture to play a major role. For Otto it’s variety and convenience that will play a key role in retail, while Sangari feels scale is important.
Regan bets on “technology and applying technology to challenges and opportunities, along with building better quality products that align better to our market”, with Gopal getting the last word in, “I think design and technology with convenience will be the key in future.”