Shopping — buying, acquiring, consuming — is as central to the human psyche as sex. It’s a need and a desire. And you can sublimate the desire, but you can never take away the need — it’s just a matter of what and how much. This is what great shopkeepers have always understood, in addition to the fact that for many throughout history shopping has been a cornerstone of social activity; it’s where we converge with our friends, neighbours, and peers to glean the latest gossip, learn what’s new and what’s next, or to simply while away a few hours in convivial surroundings. And interestingly, it is this highly social element that has underpinned the success of e- and m-commerce over and above its purely functional advantages.
Whether it was to open up a window to the world or to provide life’s essentials, great retailers — from corner shop owners to department store dynasts — have always understood one thing. Successful retail is all about neighbourhood. If you’re not relevant to your neighbourhood, you serve no purpose.
In the early twentieth century, the founders of modern department store retailing, like Harry Gordon Selfridge Sr in London and Sidney Myer in Melbourne, brought the world to the store, creating a mix of theatrics, luxury, the everyday, and the unobtainable all under one roof. Success was defined by the vast array of what was on offer — but it still had to sell. It had to service the needs and desires of the local customer.
Fast track to the 2020s, marked by the coronavirus pandemic, political uncertainty, public protest, and the demise of tired behemoth brands. The Covid-19 pandemic has revealed how poorly-prepared most modern retailers were for an unforeseen market force — despite the steady growth of e-commerce outpacing sales from bricks-and-mortar stores and talk of omnichannel activity at every retail conference for the past fifteen years. A recent report by the Centre of Retail Research forecast that over 20,000 UK stores will never re-open due to the impact of the pandemic on trade, and those brands without a robust supporting digital infrastructure have been particularly hard hit.
Covid-19 has been a catalyst for retail Darwinism, killing off those who weren’t nimble enough to respond to the crisis. Many others lost their relevance to consumers seeking essentials, support, and guidance. For those left fighting during this challenging inter-Covid period, it’s going to be critical to re-assess the purpose they fulfil as a retailer, both during and beyond this pandemic as the customer returns to stores — seeking excitement, experience and some much needed life-affirming retail therapy. And of course it would be churlish, and unrealistic, to assume that Covid-19 will be a one-off event.
In our increasingly connected future, epidemics will be a more common occurrence, according to the World Economic Forum. Retailers will need to establish a business model that can rapidly navigate periods in and out of lockdown while maintaining a consistent brand message. The visionary author Yuval Noah Harari notes: ‘When choosing between alternatives, we should ask ourselves not only how to overcome the immediate threat, but also what kind of world we will inhabit once the storm passes’.
But there is without doubt more than just a glimmer of light for the department store. The current crisis has harkened the downfall of the destination flagship store and shopping malls in periods of social distancing. Retailers have had to limit customer numbers in flagship stores, which are typically areas of high footfall, while maintaining sanitary and hygiene standards in such a high-touch environment. And consumers themselves remain concerned. In a recent US survey by First Insight, only 33 per cent of respondents said they would feel safe shopping in a mall, suggesting a lingering fear of some retail formats. ‘We are now expecting… a little more than half of all mall-based department stores to close by the end of 2021. Those numbers may seem startling, but the closures have already begun’, says Vince Tibone, senior analyst for retail at Green Street Advisors. Here, department stores can wield an advantage as experience hubs for the phygital (physical plus digital) moment of retail theatre.
Perhaps the more present danger for the department store is that Covid-19 forced consumers to shop closer to home, contributing to localism becoming a mainstream movement. Research by Kantar reports that 65 per cent of global consumers favour buying goods and services from their own country. An IBM study in the US reveals a similar preference for shopping locally, with 25 per cent of respondents indicating that they are now shopping at locally-owned stores more often.
We Are Locals recognised the opportunity to promote local high streets. The platform, launched at the start of the UK lockdown, creates one-stop e-commerce hubs for local retailers that bring together florists, specialist grocers, gift shops, restaurants, and bookstores on one interface. We Are Locals helps shoppers conveniently select items for home delivery or local collection, while driving spending back into the community. Helping high streets to compete in the ‘new normal’ and longer term, its successes to date include a platform for Bristol’s Bedminster neighbourhood, which attracted more than 13,000 visitors in its first two weeks, and more than £25,000 ($32,100, €27,200) in sales in the first month. According to co-founder Christian Shanahan, ‘Our mission is simple: no rest until traditional high street businesses have the tech capabilities of Amazon’.
The notion of our local high street or strip mall becoming a rethink of the department store model is of course retail coming full circle. It’s retail relevancy in action, where we value experience, availability, loyalty, recognition, and function in equal measure. So what can we expect from the next decade in terms of retail development?
My money would be on the fact that the branded flagship store as we currently know it will not exist in 2030. This temple to single name status brands will give way to a far less brand-focussed view of shopping. Instead, a network of smaller, decentralised hubs will serve customers in the community, close to where they live. During future periods of lockdown, neighbourhood stores will switch from servicing consumer face-to-face to becoming fulfilment spaces that purely support digital sales. Stores will use the wealth of data points they have on local customer behaviour following the meteoric rise in e-commerce , while machine learning will monitor local sentiment to provide a curated selection of hyper-local products and services. Part media centre, part warehouse, these stores will also be used to create digital content for brands’ channels. Meanwhile, automated supply chain systems such as Attabotics will store popular products closer to consumers to deliver at speed.
The department store will need to balance tactile experience with increased requirements for hygiene. Tech-enabled queue systems like Philips’ PeopleCount will track and automate customer levels, allowing customers entry through full-body disinfection chambers. Shoppers will then view goods via immersive installations and displays, scanning a QR code for additional information in order to restrict their contact with sales associates. In fashion stores, people will try on products virtually via AR (augmented reality) smart mirrors in the fitting rooms and retail space. After mobile checkout, they will leave empty-handed; a sterilised physical product will be delivered to their door on the same day using autonomous delivery vehicles for an entirely touch-free transaction.
As we’ve all come to realise by the stark lessons of 2020, there’s little within retail that the pandemic has left untouched, from bricks-and-mortar stores to online sales and marketing. The situation is no different for department stores. Facing continued pressure from coronavirus, many are exploring ways they can repurpose their square footage to offer something more suited to the current climate. And in my mind, this will favour the department store over the mall.
As Neil Saunders, managing director of consultancy GlobalData Retail, puts it, ‘The whole business model of a mall, which is about pulling in as many people as you can and getting them to stay for as long as you can, has just unravelled.’
It’s no secret however that both malls and department stores have, for a number of years, been on the brink. In an attempt to turn the situation around, a number of malls are looking at how they can repurpose their space to become community hubs that align with the needs and new desires of local people — rethinking space to embrace the concept of neighbourhood and shared public amenities. In Taiwan, architecture studio MVRDC transformed a disused shopping centre into Tainan Spring, a sunken park and public pool. Described as a ‘lush lagoon’, it’s envisioned as a public green space that will develop over time.
Similarly in Australia, Savills reports that mall owners including Vicinity and Scentre are in the process of converting their shopping centres into offices, hotels, apartments, childcare facilities, and transport hubs. Another way that businesses are looking to recover from the ‘unravel’ is by exploring the potential of vacant storefronts and mall space as fulfilment centres. Whole Foods Market has opened a new online fulfilment facility at the Industry City campus, New York. The site is not open to walk-in consumers but will fulfil grocery delivery orders in the Brooklyn area. It’s also been reported that mall owner Simon Property Group in the US has been in discussion with Amazon about how to turn its department stores into distribution hubs for the online giant.
This comes at a time when online sales are on the rise throughout the sector. According to IBM’S US Retail Index, e-commerce will have grown by nearly 20 per cent in 2020, and brands including Walmart and Target have seen e-commerce sales jump a huge 97 per cent and 273 per cent respectively in the last quarter of 2020.
In the UK, John Lewis has voiced plans to become a digital-first brand, and will transform its empty stores into privately rented housing. ‘Retail profit margins are under pressure’, Dame Sharon White, chairman of the John Lewis Partnership, shared in a letter to workers. ‘For the partnership to be sustainable over the long-term, we need to expand beyond retail’. The brand also has also emphasised plans to make the properties affordable, so the unused retail space can be put ‘to good social use’.
US retailers are taking a similar approach, with developers turning a large portion of Alderwood Mall in Seattle into 300 apartments, complete with underground parking. There will still be retail opportunities within the complex, but the residential component will be the main draw. Move north to Ontario, and the situation is much the same. Oleg Rudnitsky, VP of Royal Courtyards Property Management, recently commented on this approach to repurposing. ‘The idea behind it is that we will build, inside, multi-residential units so that people would be able to live there and shop. Especially considering the winters, it’s going to be very convenient’. Once upon a time that used to be called a neighbourhood, and it was created organically, out of human need. Unless the live-in element considers the needs of the residents as the primary concern, it’s not creating a neighbourhood with any real chance of sustainability.
Without a doubt, in our inter-Covid era, we will see all sorts of schemes attempting to assuage the black hole of debt and empty space that the coronavirus pandemic has accelerated. But if, as retailers, we attempt to put profit ahead of people in an attempt to create neighbourhood, we’ll fail. Shops are there to service our need – not the other way around. If we decide to take on the mantle of town council or mayor, we take on the responsibility of civic duty. What long-sighted retailers can do is proactively foster a neighbourly sentiment amongst both retailers and customers within a locale.
The founder of Australian upmarket skincare brand Aesop, Dennis Paphitis, does this brilliantly. He has mastered the art of adjacencies, rarely taking out a single store let, instead negotiating three adjacent properties which he then shares with like-minded brands such as Sunspel or ACP, thereby fostering a more sustainable environment for the growth of these lifestyle brands. He contributes to the burgeoning neighbourhood, often instructing store managers to fill the gaps in an area’s retail mix by selling flowers at the weekend if there’s no florist nearby or stocking the Sunday papers. It’s simple, but effective, and creates a sense of neighbourhood — a spirit of belonging.
Similarly, The Future Laboratory (the forecasting and foresight consultancy I founded in 2000) recently worked with Selfridges to consider the area adjacent to the Oxford Street store in London and what could be done to create a greater sense of neighbourhood and community. What became clear in the course of the research was that this was less about practical or tangible elements such as parking, street signs, or lighting but more about the intangibles that create a sense of what a neighbourhood felt like to those who lived there and visited. The purpose of place is paramount, its cultural identity, the values of that community, the relevance of experience and the power to engage with those who live and move through the environment. In essence — it is essential to create a spirit of belonging. Thus, successful retail today adds cultural value to commerce, creating places that are distinct and desirable, where people can have meaningful experiences.
Shopping is one of life’s essential activities — as a requirement, as a pastime, as an intimate pleasure. Through the action of consumption we confirm who we are, what we need, what we aspire to, and what we dream of. But it remains part of a bigger need, dream or desire — that for a life that is secure, sustainable and more often than not, part of a community. In other words, society, or neighbourhood, comes first. If we have learnt anything from the calamitous coronavirus pandemic, it is this.
And whilst retail as we know it might face an increasingly digital, solitary future, the need to trade, broker, barter, browse, and haggle is an intrinsic part of what it means to be human, to be social, to be connected — and that is where our shared opportunity lies.
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