Retail 2.0: Can Data Technology Save Bricks-And-Mortar Retail?

The retail ‘e-pocalypse’ continues to make headlines with the ongoing string of retail bankruptcies and mass store closures by some of the biggest brands in the U.S. Competition with online retailers is often blamed for the market’s decline. But e-commerce should not be the only concern retailers and shopping center landlords have on their radar. Factors such as consumer demand for better retail experiences and broader economic forces are contributing to store shutdowns and the emergence of new players.

Furthermore, the notion that pure-play online vendors have become the new kings of retail may be a widely held perception, but the data tells a different story. A recent report by CBRE reveals that online-only retailers currently account for just 10 percent of transactions, while sales from physical stores make up around 50 percent, so the in-store transaction is alive and well, if under pressure, in the age of the omnichannel retailer.

Instead of worrying about the potential negative effect of new technologies, companies operating across the retail sector, both brick-and-mortar brands and the companies that own the shopping centers in which they operate, need to look at how leveraging data and technological innovations could prove to be their salvation. And with a much-anticipated downturn on the near horizon, they need to do it fast.  

Technology has actually made data more accessible and usable than ever to both the landlords and tenants of shopping centers. The next step is for them is to analyze consumer data to unlock valuable insights.  By doing so, they can alleviate risk, protect profits, weather continuing changes in consumer habits, the give and take of a competitive marketplace and the next downturn.

Technology has put more data than ever at the fingertips of retailers and the operators of shopping malls and other retail properties. The data can be captured, consolidated and analyzed. What it takes is the will to do so. Making use of the available information on where visitors to a mall are going and when is critical to understanding consumer patterns, interactions and dwell times.

This sort of information helps both retailers and shopping center owner/operators. For instance, both a mall landlord and an anchor department store can benefit enormously from insights on the traffic in and around the shop such as which entrances consumers are coming through, where they are coming from, how long they are staying and how much they are spending on average.

What can one do with this information? This data can be used to correctly alter the mix of merchants or products and services for a shopping center or determine whether a redesign, renovation, or repurposing is required. It can help acquisition teams choose the right locations and leasing management teams structure logical rental agreements and leasing teams develop sound marketing strategies.

Shopping mall landlords are beginning to use anonymous tracking via wireless technology and access points to understand consumer foot traffic patterns in ways that were previously not possible. For instance, many can tap into geolocation data via consumers’ smartphones through WiFi access and Bluetooth Low Energy beacons. This information can be complemented by “sensor data,” which can include thermal imaging and video.

Having more data enables mall landlords to do more granular analysis of the pathways visitors take and how retailers and other tenants might take advantage of that information to get them into their stores. Landlords need to work with tenants to also understand how individual businesses within a mall are performing–and why. For many, this requires working together with tenants to find creative ways to share anonymized data such as correlating aggregate Electronic Point of Sale (EPoS) information with traffic and visitor insights. It also involves comparing that information with similar data from other comparable rental spaces they own and/or manage to better understand where to locate tenants, what to put around them and how to get the mix right.

We are already seeing the emergence of successful malls with mixed shopping, services, entertainment and dining, moving beyond food courts and department stores to include cinemas, comedy clubs, live theater, upscale restaurants, health chains, hairdressers, dry cleaners and experiences such as cooking classes. A good example would be a mall where a consumer might get a haircut, buy shoes and attend a food demonstration at Sur La Table in a single afternoon, all while enjoying live music in the common areas.

Landlords are also increasingly analyzing the data to identify natural traffic for retailers and other tenant businesses. For instance, does the tracking data indicate customers are coming from, say, the hospital across the street, or the apartments built above the shopping levels, or an adjacent tourist site, or those heading to an on-site cultural attraction such as a gallery or cultural center? Are seasonal initiatives such as a Christmas village, an Easter egg hunt or a free local music fest in the summer driving sales?

These are market dynamics landlords need to understand and capitalize on. The findings may lead some to major changes such as redesigning mall spaces and restructuring tenant/category rosters. The effective use of data has paved the way for a broader mix of retailers and complementary business. Landlords are also demonstrating a more open approach to kiosks, seasonal and pop-up stores and flexible leasing arrangements that often take into account sales and business growth, not locking anyone into a deal they cannot perform to.

Retailers have a good handle on their sales data but need to better understand other empirical data relating to consumer patterns within malls, how their business specifically performs in context with the rest of the mall. That means they need to work together with landlords to tap into the right data to better understand the footfall patterns around their stores, evaluating the routes consumers are taking and using that information to find ways to engage them.

To maximize their use of data, gain insights that drive positive changes to their business and effectively act on these, both those running shopping centers and those operating out of them need to deploy the right technologies. These include cloud-based tools that enable landlords and/or tenants to create a repository for footfall data, recording details of traffic at all levels of the center – used to drive performance reporting.  By integrating data from existing EPOS and Building Management Systems, it’s possible to capture store sales and other information. Integration of data on a single, open platform yields especially useful and actionable insights.

Furthermore, landlords can use data to identify which units are performing well to drive important management decisions and determine the right mix of tenants. Data also informs the selection of appropriate tenants, while technology facilitates management of each stage of the pre-leasing process, ensuring an approach that results in the most suitable occupiers. Eventually, landlords can compare trends over time and between sites for year-on-year performance analysis and forecasting.  

Technology also helps simplify the management of complex leasing arrangements that encompass greater flexibility, such as concessions, shorter leases, break clauses, and rents that include a component pegged to sales and/or growth. Mixed-use space adds complexities that are well suited to technological solutions. Whatever the leasing mix, landlords will be able to easily access full details of each unit’s performance and lease expiration for every location.  

In addition, technology plays an important role in site selection by offering models of retail feasibility through comparisons of one geography versus another based on stats.

The main hurdle to achieving the level of collaboration needed to fully leverage the shopping center data that’s out there is a reluctance to share information – particularly by retailers. They need to get past that and realize that bringing together and analyzing daily, aggregated, anonymized data is an essential starting point.

Landlords and retail occupiers have to cooperate in using data to meet the expectations of modern, digitally savvy consumers. Retailers have to understand what gets these customers out from behind the screen and into their stores, while the shopping center owners need to think strategically about how to get the mix of tenants right and the types of customers the optimum blend can attract.

One of the big lessons of the last major economic downturn was to not wait for things to go wrong before you act. Whether you are a retail landlord or an occupier. For malls and other retail spaces to survive continuing growth in e-commerce and what has become the most anticipated economic downturn in history, they must provide unique and convenient consumer experiences. And they have to start working towards that now.

If they do that, together, everyone will benefit as they use data to guide them in transforming physical retail spaces from places to buy things into places that offer amazing experiences and will keep drawing consumers even through the tough times.  

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