Engagement Rules

Shopping centers pivot towards experience and community

Photo: YIT

Facing stiff competition from e-commerce, shopping centers are looking to reinvent themselves in a variety of ways. While well-established as community meeting points, the shopping centers are eager to bring something extra into the equation. New shopping centers such as Helsinki-based Redi and Tripla, for example, want to take their patrons flying and surfing, respectively. Development towards Consumer Engagement Spaces (CESs) is transforming mixed-use commercial space to meet the needs of future generations of shoppers.

Finnish Council of Shopping Centers released its latest business barometer report in October 2018. According to the report, the shopping center executives are facing the future with good cheer: 75 % of the respondents said that the booming economy will have a positive impact on the business during the next three years. Furthermore, the ongoing megatrend of urbanization – in its Finnish form – was seen to support business (90% of the respondents). The shopping centers are of the opinion that both sales and number of patrons will keep increasing in the future, too.

Photo: YIT

That’s not to say that the threat of e-commerce is not taken seriously. 86% of the respondents viewed that the growth of online retail definitely throws some shade on shopping centers. Still, Johanna Aho, COO of Finnish Council of Shopping Centers, says that it’s hard to say how much exactly.

“Currently, perhaps 10 % of all consumer purchases are made online. It’s difficult to pinpoint the actual impact on shopping centers,” she says.

Food is the New Fashion?
According to Aho, however, businesses such as fashion stores – where a consumer can go try a dress on at the store and then order it online – may be decreasing their presence in shopping centers while cafés and restaurants are perking up.

Photo: Helin & Co Architects, Voima Graphics Oy

“In addition to food and beverage, also all types of experiences are very much a trend as REDI and Tripla are demonstrating. Still, also smaller centers can boost their experience by offering various events, for example.”

Aho believes that people will still enjoy going somewhere where there’s other people and activity – whether it’s a cup of coffee, going to see movie or doing some Christsmas shopping, shopping centers simply “meet the need” in many regards.

“I don’t think that we will ever witness a situation where actual, real-life retail completely disappears.”

Photo: Helin & Co Architects, Voima Graphics Oy

Destination Driven
Internationally, there are even widely recognized “destination centers” – such as Xanadu in Spain or the Mall of the Emirates in Dubai – which offer compelling attractions such as theme parks, indoor ski slopes, large cinemas and theaters, museums and art galleries, event space for concerts, food festivals...

According to American consultant agency A.T. Kearney, future CESs will be environments where people gather to engage with friends, seek out unique experiences, reaffirm values, and interactively relate to brands; commercial transactions will be a by-product of socialization and engagement. A.T. Kearney argues that CESs may resemble today’s shopping centers and malls or look quite different, but their common focus will be on creating platforms that facilitate sales by recognizing, understanding, affirming, and connecting individuals.

Shopping center owners must, however, learn to embrace new technologies to reach this new golden age. For stores, there are handy e-tools to identify individual shoppers, track purchases, analyze behavior, communicate with customers, and create real-time commercial opportunities. More and more, consumers will expect – and demand – highly curated, frictionless shopping experiences.

Photo: Helin & Co Architects, Voima Graphics Oy

Action Agenda
According to A.T. Kearney, some physical retail spaces will take the form of smaller, “smart,” dynamic formats serving as hub for interactive brand experiences. Others may be “inventory-light” retail environments for showrooming brands, products, and services that support and complement, rather than compete with digital businesses. Pop-ups will offer CES operators an easy way to change their vendor population, providing consumers with unexpected “treasure hunting” experiences.

A.T. Kearney also finds that new consumers have an expressed preference for “doing” over “owning.” As a result, the consultancy anticipates the emergence of rich experience hubs: physical spaces inside CESs that use immersive technologies such as virtual and augmented reality to create unique environments.

Nevertheless, even the most mindblowing experience hubs need great connectivity. Johanna Aho points out that a central location with good connections goes a long way in today’s shopping center business.

“You need a place that is easily accessible to great volumes of people – that’s becoming even more important, especially in the Helsinki Metropolitan Area,” she says, making a reference to the barometer findings. Both Redi and Tripla, for example, enjoy superb connections and are likely to attract plenty of curious patrons for that reason alone.

Eastern Promises: Itis
The “old” shopping center market is not stagnant, either. It was announced in October 2018 that Itis, Finland’s largest shopping center located in East Helsinki, is changing ownership. Dutch property investor Wereldhave sold Itis to a fund advised by Morgan Stanley Real Estate Investing for EUR 516 million, making the transaction the largest single asset transaction in Finland ever.

The first part of the center was built in 1984, and it has been extended and redeveloped several times. Wereldhave acquired the shopping center in 2002 from Sponda for EUR 317 million. At that time, the transaction was one of the first major acquisitions of the foreign investor in Finland.

With this transaction, Wereldhave now exits the Finnish property market, citing desire to realize its strategic agenda by focusing on “convenience centers”. According to Wereldhave strategy, this means zeroing in on shopping centers that “strike a balance between convenience and shopping experience”.

Writer: Sami J. Anteroinen