SAN FRANCISCO, United States — In mature markets, the future of the traditional indoor shopping mall looks more uncertain than ever and nowhere more so than in the USA, where malls were once a gleaming beacon of consumerism. Some high-end flagship malls are performing well. But almost one-fifth of America's enclosed malls have troubling vacancy rates of over 10 percent, while 3 percent are considered to be dying, with vacancy rates of over 40 percent, according to CoStar Group, a company which tracks the commercial real estate sector.
Real estate research firm Green Street Advisors predicts that 15 percent of malls in the US will close or be converted into non-retail space within the next decade. Meanwhile, retail analyst Howard Davidowitz expects half of America's shopping malls to fail over the next 15 to 20 years.
But the Westfield Group, one of the largest owners of indoor malls in the world, is fighting back with targeted investments in new technologies and digital strategies aimed at reinvigorating the shopping mall experience in America and beyond.
BoF sat down with Kevin McKenzie, global chief digital officer at Westfield Group, to discuss the shopping mall of the future, the soon-to-open Westfield World Trade Center and the role of the physical store in a digital world.
BoF: When transaction can happen online, what is the continued role and relevance of physical shopping malls?
KM: I think everybody in retail these days is really focussed on the consumer, on the consumer experience. There is a lot of belief that the consumer wants to shop their way, meaning if they want to buy it online, they can buy it online; if they want to buy it offline, they can do that. Most retailers these days offer either/or, to get the product to them any way they want.
Out of this came a lot of new programmes for retail, specifically ‘click and collect,’ where a consumer can buy online and pick up in store. We’re seeing a lot of excitement and growth around that. That’s a real example that’s happening today and in Westfield London we have a click and collect centre for the consumer that wants to buy online and ultimately pick up or even return in the shopping centre.
BoF: In many markets, shopping malls are suffering from plummeting footfall and sales. Does the concept of the mall need reinventing?
KM: With Westfield, we started to reinvent that experience several years ago. Our shopping centres, especially Westfield London and Westfield Stratford, are more than just shopping. They are a whole experience with entertainment, leisure, food, and shopping. I think that all came from our focus in creating shopping centres to become major destinations for the consumer and tourist. And now we’re at a point when we are beginning to layer on digital and technology to become very complimentary with that experience.
BoF: How can new technology help reinvigorate the 'user experience' of malls?
KM: First, it’s giving the consumer information about what’s happening inside the mall. More decisions are made online than necessarily offline. So we’re able to provide the consumer with more information about stores, offers, events, even products that are happening inside our shopping centres. In Australia, we have a pilot going on that we call ‘Searchable Mall’, where we aggregate product from over 161 retailers that trade physically in our shopping centres, so when a consumer goes to our website, they can basically find a Westfield and then search not only what stores are in that shopping centre, but what products those stores sell, and then map a journey on a digital map to locate that product in the shopping centre.
We have a great pilot in San Fransisco where we’ve expanded the reach of the food environment by enabling the consumer to pick from all the food we offer and order ahead and have the food ready for them when they arrive, to really combine that physical experience with adding a digital layer.
BoF: How will technology alter the consumer’s experience when they are actually inside the store?
KM: We’ve done a series of pilots in San Francisco on beacons and we think the best way to use a beacon is to welcome the consumer with a personalised message, based on their preferences and their needs. It’s very early, I don’t think anyone’s perfected the best way to use beacons in a retail environment, but as a company we’re certainly testing and trying to understand what’s the best way to use that technology for our consumers when they enter our shopping centres.
BoF: How is Westfield Labs doing this? What’s actually working?
KM: We’re really pleased with the consumer excitement about giving them information on not only what stores are trading in our shopping centres, but what products they are selling. That’s doing really well. Our traffic has grown quite a bit from when we launched it in Australia last year to this holiday season. You’ll start to see us do more of that in other parts of the world where there are Westfields.
We look at technology in two ways. One aspect is using technology to connect the consumer to our shopping centres. That is in the form of great experience on the web, good information and the ability to use our applications to enable the user to transact with our malls. Thanks to services like Uber, there is an on-demand expectation with the consumer now and so for us the more we can enable the consumer to transact and have product available for them when they arrive, like we’re doing with food and other things to come, the more we'll enable transactions to occur outside of our shopping centres.
The other thing we’re doing is parking. That’s always been a challenge for the consumer. We have a pilot in Westfield London right now, where consumers can actually sign up to control their parking experience when they arrive; they can see how many spaces are available and actually have the gate automatically open when they arrive, and that’s all done through technology.
BoF: What specific innovations we can expect to see at the new Westfield World Trade Center?
KM: The way Westfield labs works is that we pilot a new experience, like the searchable mall concept in Australia, personalised parking in London, and the ability to pick up your food when you arrive in San Francisco, and then you’ll see our learnings and those experiences all come together at a new development like World Trade Center.
Before a consumer gets to our mall, they will be able to search from the hundreds of retailers that trade on our platform, and understand what specific products they sell before they get there and create their shopping journey not just in the context of what stores they are going to, but actually what products they are looking for and want to browse. In addition to that, the consumer will be greeted at the parking lot or when they walk through our doors, using a technology like beacon. They’ll have a personalised greeting, where they can start the journey that they planned before they got there. What’s great is that you’ll have two modes of experience on our app; before you get there, and our app will help you navigate when you arrive. That, we think, will be unique.
The other thing that we’re working on that you’ll see at these new developments is completely rethinking wayfinding. Traditional wayfinding really just helps you get from point a to point b. The way we think about wayfinding is really more than that. It’s discovery. Most people we believe when they go to a mall, they pretty much know where they want to go, but they’re really not certain what’s happening all around them, whether that’s product trends, offers, deals, to even events that we’re hosting or our retail partners are hosting. That type of information can be injected into a wayfinding experience for our future developments.
BoF: Looking ahead, what technology trends will most impact shopping malls in the coming 5 to 10 years?
KM: Same-day delivery is a very big trend. Same day delivery and in store returns are big trends that are starting to be figured out and ultimately will be available everywhere, at every retailer.
It’s early days on something like 3D printing. I believe that 3D printing as a technology will not disrupt all sorts of shopping, but there will certainly be some products available through 3D printing. Nike is doing experiments around the ability to print shoes and those kinds of items. As far as how sturdy those shoes are and whether the experience works for the consumer, those things need to be worked out. But there’s enough innovation and enough attention paid to it that something’s going to come out of that, no question.
BoF: What does the 'mall of the future' look like?
KM: I think the mall of the future is really a personalised experience. Much like the web is becoming more personalised, I think the mall will become more personalised, meaning the consumer, when they walk into the mall, will know where to go. Not just by retailers, but by products, by events and by experiences for their own personal needs, which is much different from any experience that exists today. And the way that we are going to get to that is through technology. No question.