CREJ - Retail Properties Quarterly - February 2015
The Great Recession had a tremendous impact on our economy, retailers, shopping centers and consumer habits. We have seen the impact of e-commerce and the ripple effect it is having on bricks and mortar. Consumers are savvier and demand more from their retailers, resulting in greater competition and reduced margins. There is still much to be worked out with e-commerce, but I believe there is a force to be reckoned with that will influence the retail marketplace and it has nothing to do with Treasuries, oil prices or interest rate – millennials are rising! Those born between 1980 and 1995 cannot be overlooked. Boasting a population of approximately 75 million, they are quickly becoming the most influential group of consumers. The Great Recession and technology have reshaped the marketplace, but I believe the next shift will be driven by the millennials who are looking for brands that are high quality, fit their personality and incorporate social responsibility. Even if millennials have become accustomed to “window shopping” in an electronics store like Best Buy to find the laptop they want, then later buying it online at Amazon, thus delaying the instant gratification for two days, there is still a competitive advantage bricks and mortar offers – experience. The right experience can evoke emotion and spur loyalty. In order to offer this experience, retailers need to grab the attention of millennials. Economic breakthroughs often are driven by real or perceived scarcity in the market. For a period of time during the industrial revolution, the scarcity was labor. We needed people to run machinery to keep up with the demand for goods. Then, as we began to produce incredible amounts of goods, the scarcity became knowledge. Our production was so good, now consumers had options and choices. We are inundated with choices, from deciding which car to buy or which food is the healthiest, to which smartphone can handle email updates, GPS needs, social network posts and take good selfies. Today the scarcity is attention. Take a look around and observe how many people in our society have their head down focused on their smartphone. Our phones follow us everywhere, and with all the information we have available at our fingertips, our immersion in technology takes our attention away from the real world. Despite this, I believe that a desire for meaningful relationships and experiences still exist. So how do retailers capture the attention of the selfie-taking, Instagraming, Twittering, Facebooking millennials who are the next generation of shoppers? Tenant mix. Give them what they want. The right tenant mix, as well as offering options that cannot be replaced by e-commerce, are key in creating an incredible experience. Retailers are realizing that they have to offer more to be competitive. Retailers like Whole Foods and REI focus on creating an experience while shopping. The staff is trained to take a typical shopping visit and transform it into an educational, inspirational and gratifying experience that creates value for and loyalty from the shopper. Technology. Embrace technology instead of fighting it, and use it to your benefit. If millennials want to post photos and add hashtags, why shouldn’t they be doing it at your shopping center? Technology has moved social media from a static place – either at home or office – to on-the-go where people can engage in real time. Beacon technology is one of the latest trends hitting the shopping center industry, which takes advantage of the signal a cell phone emits and collects data that can be used to optimize retail centers. Look for this technology to change how tenants and owners engage with their shoppers. Third place. By encouraging shoppers to stay a while and come back frequently, retailers are creating a “third place,” a place to go besides home and work (first and second places). In order for this to be successful, retailers must capture their attention and give them a reason to stay. Free Wi-Fi is not only expected, but also presumed at high speeds. It pays to be ahead of the curve when it comes to Wi-Fi speed. The next generation is going to expect Wi-Fi wherever they go, so retailers might as well offer it now. This also creates another opportunity to gather additional customer data, which can be used to benefit the store. Simple things like charging stations help as well. Anyone who owns a smartphone can understand why this is important. Retailers shouldn’t want potential customers leaving a store to go charge their devices. Immerse the senses. Create a stimulating atmosphere to draw attention from the soft glow of phones. Lights, seasonal floral color, water amenities and music are simple additions that engage the senses. There are even technologies that exist today to infuse fragrances into an environment. Food retailers like Cinnabon have their ovens placed toward the front of the store so the aroma of freshly baked cinnamon rolls escapes into the shopping center every time the oven is opened. Host events. Events are an incredible way retailers can generate experiences and create positive memories for shoppers. Low- and no-cost events, like a concert series, car shows, cooking exhibitions and action sport demonstrations, welcome the community to your center, promoting community involvement and camaraderie. Creating a diverse calendar of events can take a lot of thought and preparation, but the outcome can rally a community around your center and give customers opportunities to live experiences right in their own backyard. Give back. Social responsibility is no longer just a trendy term that is thrown around. Get involved in the community you serve. Shopping centers have a tremendous impact on the sales tax base of a municipality, and they can also engrain themselves into the fabric of a community. Millennials are drawn to a brand that stands for something and, by doing so, shopping centers can do right by doing good. To have a successful project, you need successful tenants. The days of passive ownership are over. As developers, we typically shudder at these ideas because they can drive up development costs, and the ongoing programming comes out of the bottom line. But with customer expectations continuing to evolve and the millennial generation representing shoppers of the future, retailers can’t afford to ignore these trends.