Re-imagining retail destinations

Published 18 June 2020

COVID-19 is a powerful driver a change, but in many ways it is an accelerant of trends already underway. Re-thinking how the digital and physical realms co-exist and the subsequent increased use of technology in retail destinations could be the spark that ignites a re-imagined shopping environment. Alison Key, a partner at international law firm DAC Beachcroft, considers elements of the shift in approach.

Currently, UK ecommerce accounts for 19.2 percent of total retail sales. It is forecast to grow to 33.8 percent by 2024 and to 53 percent by 2028ⁱ. Some foresee the crisis strengthening the current 30 percent share of online non-food spend to around 50 percentⁱⁱ. 59 percent of consumers worldwide reported high levels of interaction with physical stores before COVID. This is anticipated to drop to 39 percent in the next 6–9 months, clearly below the pre-COVID levelsⁱⁱⁱ.

Technology presents an opportunity to revitalise the experience once the acute phase of the crisis has passed and/or when a vaccine is found. If the future is about shoppable video^iv, innovative landlords and retailers could prosper as consumer attitudes shift. Close to 75 percent of consumers expect retailers to offer an instore augmented reality (AR) experience. The more retailers experiment with the technology, the sooner AR will become an integral part of the physical shopping experience^v. The development of tech rich offerings – or an architecture - that can then be customised by tenants would appear to be a significant step towards developing a closer and more relevant customer relationship.

Localism is another driver. Demands for shopping centres to better serve their communities, to be curated and to better account for how people want to live and indeed, what they want, will all likely rise. ‘The spaces,’ notes the FT, ‘...have to become social, connecting us as well as delivering surprising, innovative retail and leisure^vi.’ Obviously the duration and nature of the COVID threat will shape what is meant by ‘social,’ but the human desire for connection will outlast the threat. Indeed, and perhaps in keeping with a sense of de-globalisation and enhanced localism that COVID may reinforce, some 69 percent of UK consumers want to see their retail environments reflect their local community.

This in turn will require a new level of collaboration and partnership within the supply chain. Some 85 percent of IT leaders and other executives believe that competing successfully in the 2020’s will require organisations to elevate their relationships with customers as partners^vii. Traditional roles will change and flexible approaches will become even more important for both landlord and tenant to thrive. Technology can provide the analytics and modelling in support of rapid space reconfiguration.

Such solutions could go beyond providing a new value proposition for retailers and landlords to building new sources of revenue. ‘Repurposing underutilised shopping centres or abandoned stores for urban workspaces could bring talent and customers to towns in need of new business^viii,’ and form a potential new revenue stream in the post-COVID environment. It is likely that new ecosystems will form to encourage such repurposing. Examples are emerging for how such repurposing could occur, with the insurer L&G planning to turn a former Homebase in Bath city centre into a retirement village^ix. Stakeholders will include local, regional authorities and perhaps even universities or startups given the potential social-value at stake.

Innovative financing will be needed to support change. For example, ‘...blockchain may provide the transaction platform which allows for real estate and cyberspace to converge, allowing shopping centre owners to capture on-line expenditure, helping digital twins within larger virtual smart city platforms to generate revenue, or to facilitate the collection of ‘rent’ from the digital augmentation of an asset. It should also be noted that tokenisation enabled though blockchain can be focused on building use rather than ownership, allowing such ‘utility tokens,’ to be used not just to say, buy a share in your local coffee shop or favourite local clothes boutique, but also get free or discounted products too^x.

For further information on how we can support your strategy please contact Alison Key at akey@dacbeachcroft.com or on 0161 934 3166.

References

ⁱSource: Ecommerce News, 2019 https://ecommercenews.eu/ecommerce-uk-accounts-for-53-of-retail-sales-by-2028/
ⁱⁱSource: The Guardian, 2020 https://www.theguardian.com/business/2020/apr/25/will-shoppers-return-to-the-uk-high-street-after-lockdown 
ⁱⁱⁱSource: CapGemini, 2020 https://www.capgemini.com/wp-content/uploads/2020/04/Covid-19-Consumer-Behaviour-in-CPR.pdf 
^ivSource: VentureBeat, 2020 https://venturebeat.com/2020/03/08/the-future-of-commerce-is-shoppable-video/ 
^vSource: Forbes, 2020 https://www.forbes.com/sites/forbesbusinesscouncil/2020/03/10/the-future-of-augmented-reality-for-retailers-and-brands/#786c04e4145a 
^viSource: FT, 2020 https://www.ft.com/content/1d14b976-7ff6-11ea-b0fb-13524ae1056b 
^viiSource: ZdNet, 2020 https://www.zdnet.com/article/accenture-can-your-enterprise-survive-the-tech-clash/ 
^viiiSource: Raconteur, 2020 https://www.raconteur.net/business-innovation/urban-workspaces-revitalising 
^ixSource: FT, 2020 https://www.ft.com/content/b907cb47-1544-4228-a3a0-e21c87576859 
^xSource: Said Business School, 2020 https://www.sbs.ox.ac.uk/sites/default/files/2020-02/proptech2020.pdf