The Retail apocalypse! – is the buzzword that I hear very often within my retail fraternity & in Retail forums while talking to brand owners as well as landlords (mall developers).
The panic words often said are: “Shopping is changing forever! ; Brick-and-mortar stores are dying! ”
This negativity in the retail sector prompted me to write & take a deep dive into the phenomenon that’s taking place in Middle Eastern Retail sector.
In my quest to embark on this challenging topic, I conducted face to face interviews with Retail industry Leaders, various telephonic interviews with my friends in Leasing fraternity and one to one discussion with my retail fraternity members as to how they feel about the challenges that new economy is going to pose and how their job profile would need to adapt to new economy.
I started asking each one of them about the challenges they would be facing in retail leasing in 2018. I got a mixed bag of responses:
Few Main Challenges:
- a)E-commerce is posing a severe threat to mall’s footfalls resulting in overall traffic drop which reflects in category decline in spends.
- b)Competition from other malls as they try to lure tenants/brands with attractive rent free period options in order to retain tenants in their malls
- c)Small retailers are shutting down, bigger ones are not expanding and new brands are being very cautious to enter the market in the current scenario. They prefer playing wait & watch game.
- d)Striking a good merchandise mix balance in maintaining a good brand/tenant mix within the mall despite various brand’s shop closures.
Let’s start with the definition of Apocalypse, as per dictionary it means “the final destruction before the end of the world”.
My sincere request to all my fellow Retailers and Retail fraternity members would be instead of thinking of it as the end of the world, we should really be looking at this as the natural evolution of life and business.
If stores can’t adapt to changing trends and technology, they will die of natural causes.If malls fail to impart an exceptional customer experience which millennials desire then they would too fail.
Oftentimes, you walk out of the stores empty-handed, frustrated, and feeling like you just wasted your time. These mass experiences with mediocre customer service are exactly what we are trying to get away from!
Instead, World is moving towards personalized experiences that are tailored to our every need.
Challenging times requires each one of us to do the following:
- a)First & foremost stay Positive.
- b)Adapt to the current situation & innovate in order to re-engineer your business model.
- c)Most of the industry leaders mentioned that 2017 was one of the worst periods and they all are looking forward to 2018 as there are signs of improvement for the economy
- d)Positive Economy indicators: Oil prices are becoming stable hovering around USD 62/- per barrel. New VAT implementation is a move to become less dependent on oil resource. Growth in tourist traffic.
All these positive indicators are good indicators for a Retail industry which thrives on customer’s spending and tourist’s inflow.
The retail apocalypse is simply an evolution of our society. People can buy almost anything online now and have it delivered within a few days—if not the same day.
Today, the role of leasing manager/Head has become more dynamic, it has transitioned from traditional property manager to Business Development/ Marcom Manager kind of role.
The new role demands Retail professionals to adapt to new thinking i.e. Instead of being used for the old way of shopping, perhaps malls should transition into venues for live events where people can come together. Closed stores can be put to good use such as exercise spaces, concert venues.
Basically, let’s get creative about how to use the physical space.
Categories that would drive growth in 2018:
- a)F&B – with an ever-growing list of innovative food /cuisine concepts this category would be most promising category from revenue generation point of view for malls. The trend of eating out amongst millennials is increasing day by day.
- b)Wellness – with more and more people becoming health conscious, the trend for wellness retail is increasing and can be targeted by malls. Hitech Gyms, swimming facilities inside malls, Ayurveda retail concepts and spas would be a growing segment in near future.
- c)Rise in speciality concepts like Daiso, Mumuso & other Korean, Japanese concepts would also contribute in helping malls to resist the retail apocalypse.
- d)A home segment including Home furnishing: This segment has always been underplayed by the majority of malls due to earlier space limitations, now with changing economy, I foresee this category to do well.
- e)Luxury Retail: Luxury is never impacted by any kind of downturn, this category remains evergreen.
- f)Family & Entertainment sector: Cinema would drive this sector’s growth especially when KSA has granted permissions to malls to build cinemas in the kingdom.
For Retailers, this is a chance to get creative in their approaches to customers. Clearly, the old method isn’t working, so now the retailers that are still around have a chance to innovate. They need to find new ways to be relevant and think about how they can make customers’ lives easier in our modern, connected world.
For malls & landlords, I have shared my wisdom i.e. on which segments they need to focus; I hope mall owners, mall CEOs would find my insights useful in developing their strategy and budgets for 2018.
I would like to close my article with special mention to Mr Marcello Larizza, GM, Line Investments (lulu group), who quoted “In order to succeed, the new upcoming malls have to be developed according to the customer needs and expectations. Online e-commerce business was never an issue”.
I would be more than happy to share more insights with my retail fraternity members who need cutting-edge solutions to their existing issues. You may feel free to contact me anytime as I strongly believe that by sharing knowledge and wisdom, we all can create a wonderful society and wonderful future. You can reach me firstname.lastname@example.org.