22 January 2013 — Malls are disappearing and retail is transforming. Retail is likely to head back to its roots, to the days when it was about a relationship between the retailer and the buyer. That will change shopping malls and centres forever. Potentially, it could transform cities, end hyper-consumerism and create environmentally sustainable commerce.
Writing in New Geography, Richard Reep says the rise of internet commerce, and the long-term slowdown in consumer spending means that the mall seems destined for a major makeover in the coming decade. Some will survive because the mall, for all its problems, delivers a safe, secure environment for its inhabitants. But the ones that do will be ingrained in the local culture. To do that, they will have to adopt new business models. They will have to be about much more than stocking a store with stuff. They will have to be about an experience superior to shopping on the Internet, about entertainment, not simply commerce which you can do at any website.
- Photo: Kalamunda Farmers Market, in the Perth wine region
I touched on that a few weeks ago when I wrote about the collaborative consumption model of traditional sharing, bartering, lending, trading, renting, gifting, and swapping. These sorts of market behaviours come from the old days, but they’ve been reinvented through technology and social networks on a scale and in ways never possible before.
This is the sort of stuff that will change shopping centres and malls. Then again, retail is forever changing, it’s a dynamic industry.
Writing in the Harvard Business Review, Darrell Rigby says retail goes through a major disruption every 50 years. The rise of urban centres brought us department stores. Automobiles and the rise of railroad networks created suburbs and shopping malls. Then category killers and discount stores like Kmart challenged that status quo. Now retail is being reinvented all over again.
Retail might well head back to its roots, to the days when it was about connection and conversation between buyers and sellers at bazaars and markets.
Farmers markets rule OK
One example is the growth of farmers’ markets around the world where customers meet and talk to the producers of apples from Wandin, olives from the Mornington Peninsula and red organic potatoes from Warrnambool. It’s an old style connection. Retail is not dying there.
As reported here, Federal Agriculture Minister Joe Ludwig has released a vital Australian Food Statistics 2010-11 showing some extraordinary figures.
- Farmers markets (along with other alternative fresh food markets) are reported to represent 7 per cent of all fresh food sales
- Market numbers have more than doubled between 2004 and 2011 to 150-plus nationally. And it’s growing
- 69 per cent of all markets surveyed reported increased stall-holder numbers
- 64 per cent of all markets surveyed reported increased shopper numbers
Farmers markets are a great opportunity to reinvent retail spaces.
According to Urban Ecology Australia, they revitalise public spaces, regenerate the community spirit of the host community, make rural and urban links, make for healthier lifestyles and are easy to set up. Most markets are conducted on a Saturday. Most operate over a four to five-hour period and are held in local showgrounds, a park or town square area. Most stall-holders are charged for using the site. Most markets have car parking, access to public toilets, electricity available.
“Local government input to farmers’ markets has been variable. Some councils see the markets as an important community innovation and have provided physical facilities, staff, promotional funds and a public liability insurance facility,” Ludwig said.
“Other councils have been suspicious of the motives of groups wishing to start a farmers’ market and are reluctant to lend their support, fearing criticism from existing businesses and farmers not included as suppliers to the markets.
“Market organisers who have had strong backing from their local council
appear to be more connected to overall economic development strategies being
pursued by their region, and have been more
innovative in promotion.”
The Chicago Tribune reports that farmers’ markets have really taken off in the US, increasing by a hefty 16 per cent since 2009. And farmers love it. Edward Avalos, the under-secretary for Agriculture in the United States quotes one Virginia farmer on the US Department of Agriculture blog site:
“In a practical sense I benefit most from our farmers market simply because it provides me a setting for the sale of my products at retail prices. For the most part, we farmers are very good at aspects of our operations related to production, but somewhat less so at marketing and sales.
“My farm is located outside the most heavily populated areas of our county and on roads which don’t bear enough traffic to support a significant retail enterprise. The market affords me access to people without having to expend time, money, and intellectual energy (all of which are in short supply much of the time). The market creates a venue for them to come to me.”
And these farmers’ markets are part of a trend that’s changing retail. In Texas, the Austin Post reports that the Highland Mall, the city’s first mall which opened 40 years ago, is now reinventing itself starting with a farmers’ market.
They are turning a former JC Penney store (closed since 2011) at the mall’s northeast corner into a 20,000-foot educational space. It will include an open math lab, as well as classrooms, science labs, a bookstore, library, student lounge and support services.
This is actually how farmers’ markets could change public spaces. Writing on the Foodarian site, Raymond Saul, who founded the Hollywood Farmers’ Market, says farmers’ markets can be community-building, community-defining and community-sustaining institutions. If they are community-organised, they may be operated by a local council, an independent non-profit corporation or as an adjunct activity of a business or civic group. If they’re farmer-organised, it may be an informal or formal legal relationship.
He describes how the model would work economically.
“To locate a market in an out-of-the-way location limits convenience and visibility. In contrast, locating in a central business district or neighbourhood business district increases convenience and visibility. By convenience, I mean both proximity and synergy with area businesses.
“When a market is located in a functioning business district, customers can accomplish multiple tasks, such as a library, banking, pharmacy, etc. in combination with a visit to the market.
“What I do not advocate is locating a farmers’ market in a dead or dying business district with the hope that the presence of the market will revive it. Dysfunctional business districts generally have many problems that need to be addressed before starting a farmers’ market.
“To attract and keep farmers, farmers’ markets need to be a success from day one. Like it or not, operating a farmers’ markets is in many ways analogous to designing and managing a shopping mall. And, I think farmers’ markets can benefit from the research that has been done to develop economically successful malls. Specifically, I am thinking about things like securing ‘anchor stores’ at each end of the mall; a layout that provides a circular pedestrian route; a carefully selected mix of stores; a central food court; and public toilets! I think all these lessons are applicable to farmers’ markets.
“Mall operators encourage customers to linger because they understand that increasing time spent increases money spent. With respect to farmers’ markets, I contend that encouraging people to linger serves all three purposes of the market mercantile, social, and civic.”
That means the farmers’ market would need to have a circular path that encourages strolling and recirculating, aisles that are sufficiently wide to permit people to pause and chat without interrupting the flow of pedestrian traffic, tables and chairs, coffee and a few healthy drinks. Live music and food demonstrations and portable toilets or secure access to restrooms in nearby buildings.
At the same time, retailers and retail developers will have to look beyond price points to give their customers unique shopping experiences — which, in turn, will drive the trend to integrate retail and entertainment. As the Urban Land site says, pedestrian-friendly mall alternatives are on the rise, and, like every other industry sector, retail brands are looking at global markets. Judith Taylor, a partner with Pro Forma Advisors, a land use consulting firm in Hermosa Beach, California says: “There’s going to be a focus on upgrading and repositioning. You’re seeing other kinds of uses moving into shopping centres, such as institutional uses — libraries, schools, medical services. For both retailers and consumers, it’s about making more with less. It’s about getting [consumers] to leave their home, exciting and enchanting them.”
|A sample of Australian Farmer’s MarketsVictoria
Australian Capital Territory
New South Wales
Similarly, Matthew Yeomans at The Guardian describes how two outfits, FoodHub and FoodEx are bringing artisan cheeses, microbrews, good wines, quality meat and fish to consumers in the market place, creating a sustainable regional food system.
Yeomans writes: “Funded by the EcoTrust, an incubator for social enterprise, Foodhub has created an online B2B marketplace for professional food buyers and sellers – akin to Match.com or Craigslist – where members post descriptions of products they need to purchase or need to sell. Retail grocers, schools, restaurants and caterers can research social and shareable profiles of manufacturers, farmers, ranchers, fishermen, winemakers and artisan producers and vice versa.
“Foodhub’s goal is to provide the framework for sustainable regional food networks and provide a useful service that meets the aspirations of its members. Take the growing trend of schools that have a mandate to buy direct from area farms but don’t know how to make that mandate a reality, for example.
“At present Foodhub serves buyers and producers in Oregon, Washington, Idaho, Montana, Alaska and California but, as the non-profit organisation is keen to stress, its tech platform is open for anyone to use with the big idea that Foodhub’s model will spread across the US and, conceivably to other parts of the world too.
“FoodHub has now entered a joint venture with FoodEx which will develop the distribution backbone for Foodhub’s online marketplace. FoodEx has its own trucking fleet, warehouse capacity and an online transaction platform that allows wholesale food buyers to order from a number of different regional producers and then have product delivered through one fulfilment and invoicing system.”
And supermarkets fight back
CNBC reports that American supermarkets are now expanding their fresh food aisles to compete, or co-opt the farmers’ markets phenomenon. Whole Foods Market has grown up on this, but Wegmans, the northeastern US food chain of 80 stores, has an explicit mission to provide local, healthy food for “everyday families”.
The farmers’ market turns shopping into experiential entertainment. You get the same thing when you walk into an Apple store with its array of web-connected computers that anyone can use, gadgets that you can try out and sales staff who don’t work on commission and who are there to help when needed. When you walk in, you’re greeted by a concierge with an iPad who directs you to a spot and then contacts someone from the Genius Bar, Apple’s expert assistance service, telling them you’ve arrived. The geeks will fix your product and answer any questions, no matter how dorky. Unlike what you experience at other stores, Apple sales staff, some with piercings and tattoos, will help but otherwise hang back, no pressure at all. According to Apple’s official data, its 375 outlets had 300 million visitors in 2012, with 50,000 a day dropping into the Genius bar. The annual retention rate for Genius is almost 90 per cent. That’s unheard of in the retail industry.
Randy White, the chief executive officer of urban specialists White Hutchinson, says studies have found that entertainment-seeking customers skew higher in education, incomes and professional jobs, and travel further than customers primarily coming for shopping. The majority of entertainment visitors also cross-shopped in stores or dined in restaurants which means more earnings for the shopping centre. Entertainment and dining increases the overall appeal of shopping centres and shoppers who derive pleasure from visiting a shopping centre are more likely to visit again in the future.
Mall of America
Some developers in the US have started doing this. For example, the 4.2-million-square-foot Mall of America in Minneapolis, Minnesota features Nickelodeon Universe, an indoor theme park located within the common area, not in a store.
The mall reports that in 2009, 30 per cent of the mall’s visitors came specifically to visit the park, not to shop. In addition to the draw of Nickelodeon Universe, the mall held 400 special events during the year, including celebrity appearances, cooking demonstrations, book signings and even a cheerleading competition.
In 2009, in the heart of the recession, Mall of America’s customer traffic rose 3.5 per cent and sales rose 1.5 per cent.
White writes: “It is amazing how, in around a decade, what used to be the dominant formula for retail and shopping in North America has become obsolete. Now, if bricks-and-mortar retail shopping centres and malls are to succeed, they have to evolve into a new experiential model.
“The consumer has become the grounded consumer, and with that, shopping destinations need to change to continue to attract consumers. For retail stores, it’s retail as entertainment rather than simply as commerce. For shopping centres and malls, entertainment, eatertainment, dining and other leisure destination venues, once of minor significance, are now essential parts of the mix to create a unique and appealing sense-of-place and create traffic.
“Today, shopping centres and malls are in the out-of-home entertainment, dining and destination leisure business as much as in the store leasing business.
The successful malls and shopping centres of the 21st Century will be
run by placemakers, not landlords.”
To create a more sustainable business model, and because brands are now available on the Internet, smart retailers will become a destination and offer a social experience. For example, instead of trying to get someone to simply buy a cutlery set, they’ll offer a cooking class first while promoting the cutlery. This is similar to the farmers’ market and collaborative consumption model.
Ron Johnson, who created the Apple stores, explains how they could do this when he talked to the Harvard Business Review.
“A store has got to be much more than a place to acquire merchandise.
It’s got to help people enrich their lives.
“If the store just fulfils a specific product need, it’s not creating new types of value for the consumer. It’s transacting. Any website can do that. But if a store can help shoppers find outfits that make them feel better about themselves, for instance, or introduce them to a new device that can change the way they communicate, the store is adding value beyond simply providing merchandise. The stores that can do that will take the lead.”
Retail is already heading that way. In America, My Best Fit does full body scans to suggest the optimal size in various brands. Kraft is looking at face-scanning technology that can suggest what you might want to buy for dinner. Disney has an augmented reality mirror that lets kids try on virtual outfits.
Can we expect this to become the norm? Probably not. It wouldn’t work in every location. But I suspect we are in for a period of intense experimentation. And certainly farmers markets and collaborative consumption are pointing the way to a more sustainable retail model. Exciting times ahead.