Why The Digitization Of Malls Is Vital To Their Survival
Consumer data collection has become a necessity in e-commerce, both for economic success and to provide shoppers with personalized experiences. According to a recent report by the Capgemini Institute that surveyed over 10,000 consumers across ten countries, 45% of shoppers are willing to share data on how they consume or use products. In addition, the younger generations, including 68% of Gen Z and 58% of Millennials, prefer buying products directly from brands due to the better buying experience. Therefore, a big part of direct-to-consumer success is the brands’ ability to use consumer data to enhance the shopping experience.
It’s become evident data is key to the future of e-commerce, but it’s also key to the future of physical retail. Traditionally, tenants and landlords had little data beyond traffic counts for physical locations. But, with malls now building apps and providing wifi, the opportunity is significant.
Unibail-Rodamco-Westfield, one of the biggest global mall landlords, is working on using data from its 550 million visitors to sell targeted advertising to its retailer tenants as added revenue. The e-commerce experience has become incredibly refined and personalized, and there’s a huge gap and opportunity for the physical experience to mimic it.
Shopping malls need to have a digital presence to compete with e-commerce.
According to Placer.ai’s latest report on mall foot traffic in the US, malls have yet to recover to pre-pandemic traffic levels. For example, when looking at a year-over-year three-year comparison for March (the most accurate given the pandemic’s start in 2020), foot traffic was down 9.5% for indoor malls, 9.7% for open-air lifestyle centers, and 15.4% for outlet centers. These numbers, in addition to the JLL’s report of an 8.3% mall vacancy rate in Q4 of 2021 and net absorption of -4.9 million square feet for the year, indicate a need for a change in how the commercial real estate industry runs malls.
“Shopping malls need to become part of the e-commerce economy to the benefit of their tenants; if they don’t, their relevance will further decline over time as the share of consumer spending online keeps growing at the expense of the spending in physical stores,” shared Peter Tonstad, CEO of Placewise, a cloud-based platform that connects data points for shopping centers.
Data collection brings in revenue and creates a better shopping experience.
In describing the kind of digitization needed in malls, Tonstad stated, “executing a digital strategy starts with anchoring all digital activities up against consumer profiles in a data layer. These consumer profiles then become the first party digital reach of the mall that then again delivers digital footfall to the tenants.” Essentially, the data allows malls and landlords to gain insights into shoppers and translate that into earned revenue for tenants and a better customer experience.
Another company working on digitizing malls is Coniq, a UK-based customer engagement platform that creates values for malls and retailers through data collection. They work with many landlords and developers across Europe, including Westfield. In addition, there has been a rise in AI-based facial-recognition companies that track shoppers’ facial expressions to share data with malls and brands regarding customer behavior and satisfaction. However, this has been more controversial.
Although some digitization formats may cross the privacy line, there are ways to do it ethically and with the primary aim to enhance shopper experience. For example, connecting directly with a mall (e.g., in an app about reward programs, customer service, order online and pick-up, etc.) builds a direct shopper-to-mall relationship. As Tonstad shares, “rather than saying visitors will become advertising audiences for sale, they [mall owners] should build direct digital consumer relationships based on consents and added value to the shoppers. That then becomes first-party datasets and first-party customer relations.”
The future is omnichannel, and that includes real estate.
The digitization of malls is the beginning of the omnichannel real estate experience. It may seem like an oxymoron, but if retail brands are showing up online and in real life, real estate should too. In the future, that may mean the metaverse, but for now, enhancing technology and data collection in malls is key to their vitality.