Retail - Standing out in a room full of the 'new norm'.

My interest in the retail industry, and more specifically, retail and entertainment destinations, is the result of almost 20 out of a 25 year career in design, construction and project delivery. This includes 13 retail mall projects in different global geographies, as well as involvement in the operation and maintenance of retail assets, working directly with Developer and Consulting organizations.

What will the 'new norm' be for retail destinations?

Is it, 'New Norm' = The same retailers + More entertainment/attraction offerings + Omni-channel retailing??

It is widely accepted that the above constitutes the main points for the next phase in retail's evolution, but, when the retailers, retail mix and omni-channel/technology are mainly constant for several destinations within the same market, how can a destination create its own identity and points of difference?

The key is to create that point of difference from the competition. To deliver better, and greater experiential offerings that will attract the customer, which in turn will drive the footfall upwards, and therefore, provide the most attractive environment for the retailers to thrive.

For some Developers, this may require a mind shift towards, 'what is the customer looking for?', instead of, 'how can the potential rental income be maximized, how to make the project feasibility provide the best return'. It should be the drive to maximize footfall, that drives the creation of the destination.

Architecture, finishes, lighting, and technology such as A.I., omni-channel retailing, video mapping, among other technologies, all provide major experiences in their own right, as well as act as the glue that binds the rest of the destination's experiential/entertainment offerings, and the overall retail experience of the destination.

The new norm of maximizing EBIDTA trough sustainable and more efficient operating practices.

Actually, the whole issue of sustainability and reducing operating expenses and maximizing efficiency does not start with the asset operations team, but must be championed by the asst operations team . Success in such endeavors must always be as a result of considered and experienced design and construction with focus on the Developer and Design teams.

Right now, it sometimes feel like Sustainability is more of a marketing tool than a serious economic/financially driven decision.

Sustainability! The game the whole marketing team can play!

The reality is that adopting a truly sustainable approach towards every facet of the business does reap its financial rewards, but to get there, it needs education, training, constant review and monitoring so future process improvement decisions can be driven by real data. Then provide the marketing team with real results and data so they can join in the game.

Architecture is always the driving design force, providing a merger between creating an identity for the space, functionality and attraction. It is MEP and I.T. systems design and construction, that will contribute to comfort, new technologies, sustainability, ease of maintainability, and as much as practical and possible, contribute to the use of passive cooling techniques in collaboration with the Architect. i.e. efficiency in operating costs and a great benefit to that little thing called EBITDA.

There are many very good design engineers who are capable of fully addressing the design scope, but the great ones are the ones who design with knowledge and appreciation of, (a) Build-ability of the designed system, (b) The common practices and issues pertaining to the type of business operating within the asset being designed, and (c) Maintainability and operating costs.

Maximizing operating efficiencies; More entertainment offerings and attractions, as well as Technology and Omni-channel retailing.....Is that it??

In an evolving market, businesses must never rest. In an evolving retail market where your competitors are continuing to grow and improve, customer expectations are continuing to change, and new technologies are being developed, resting means your business is falling behind its competitors. How to better improve the performance of an asset?

So is there anything left in the Asset Owner/Operator's tool box? YES. Supporting your business partners! Is increasing footfall and adding a large pinch of marketing enough to support the tenants/business partners?

The brick and mortar retail market will contract both during the pandemic, and post pandemic. For many retailers this is due to e-commerce, the struggles of the last few years, and all of this being exasperated by the impact due to the current pandemic. When one side struggles, then so will the other side. Almost every market will lose some retailers and some malls. This is why I find the approach of many mall owners quite fascinating, because very few retail destination have the size, offerings, and customer pulling power to adopt a position of indifference towards the plight of many of its retailers.

Would you be surprised by an industry wide call from retailers for a shift towards a more sales based make-up for rental agreements? A much reduced fixed rental component? Such a move would reduce their risks, but at the cost of reduced net profit if good times returned and stayed for many years. Such a move would also place more emphasis and responsibility on the retail destination owners and operators to improve offerings, and marketing budgets in an effort to increase footfall, and hopefully sales figures. I am keen to see what will happen with regards to new leases.

It must also be remembered that mall owners are not immune from the financial strains of such an economic downturn. Many assets also carry dept which still needs to be paid, so it's easy to vilify the mall owners and feel sympathy for the retailers. In truth, the mall owners need their retailers to succeed, and retailer need customers, and all three of mall owner, and the customer needs to feel safe.

At this time, mall owners and the retailers need to be more supportive of each other, and look towards operating expenses and cash flows. This is made much harder for retailers if forced to trade within malls with very low footfall due to the customer's very low appetite for the current perceived risk.

The time to open should not be driven by mall owners or retailers. It should be driven by customer demand which will only really come once the element of risk is reduced further.