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By Yoram Kedem
A shopping centre is a far more complex and management intensive business than what meets the eye, especially in an era in which the retail industry is undergoing a profound transformation.
A shopping mall is traditionally viewed as commercial real estate with a cluster of retailers present in its interconnected walkways and the key fundamentals of a successful retail destination appear to be seemingly universal.
When studied more closely, shopping malls are in fact complex and management intensive investment products.
As an industry expert, who has held key leadership positions in commercial real estate projects in Europe and Asia, since 2005, to truly elicit what makes a mall successful, it is important to first identify the key metrics of success and the various forces that come into play.
The classic success indicators in the shopping centre industry are related to tenancy. The occupancy rate, minimum guaranteed rent, turnover rent, commercial income and rental arrears, serve as important checks of an asset’s performance.
One of the most important measures of success for this industry is footfall, as at the very core a shopping centre connects the consumer to retailers in a physical space.
The amount of traffic a mall can pull in is a proxy for success because traffic translates into an opportunity for retailers to convert visitors into customers.
Technology has been a critical enabler in establishing traffic as a success indicator. Sophisticated footfall counters now allow us to measure the number of visitors entering our property as well as to identify hot zones within the property.
Tenants are essentially constituent parts of a mall’s engine and by implication tenant sales data is a critical component in evaluating success.
Data on store performance allows a mall to gain a deeper understanding of the performance of the retail real estate.
With declared sales, we can calculate total sales volume, gauge conversion rates from footfall and calculate space productivity – namely sales per square meter.
The success of a mall is a complex process in which various elements, that are controlled and influenced by multiple entities, jointly shape the overall experience of a customer.
The quality of the asset, the ambience, the facilities and services interact with brand desirability, quality of products, stock availability, customer service and incentives. At the very core, the shopping centre industry is a social science.
We have to fully grasp consumer behaviour at every touchpoint in order to fully manage our assets.
Without an understanding of the customer, we cannot devise strategies and initiatives to deliver the right retail concept to the retail location. Our value proposition needs to be based on the needs of our target group.
Adopting a customer-centric approach has already proven a successful tactic at Nicosia Mall.
Its fine-tuned retail mix, unique facilities and overall strategy of differentiation, were defined by an understanding of the customer of today.
This is what has allowed us to achieve a high percentage rate of returning visitors in a very short period.
As consumers and the patterns of retail are ever evolving, the forces that define shopping mall success are never conclusively assessed.
Adaptiveness and responsiveness are necessary capabilities that need to be embraced by any business; shopping malls are no exception.
The retail real estate industry is undergoing one of the most profound transformations in its history as technology and a new generation of consumers are changing the world we know.
Albeit the changing nature of shopping habits and consumer trends, e-commerce and shopping malls are not mutually exclusive.
Consumers perceive the two channels complimentary. At the end of the day, consumers buy where they get higher value, at a given point in time.
It is noteworthy that, brick and mortar retail still accounts for the majority of all retail sales, despite the surge in online sales.
Irrefutably malls are part of a dynamic business ecosystem. In addressing the challenges posed in an industry characterised by constant transformation, we can learn from fast-fashion.
Fast fashion is more about responding to changing patterns of consumer behaviour rather than being bound to a set strategy.
Responsiveness is what we need to embrace both in measuring success and in our efforts to achieve it.
The writer is General Manager of Nicosia Mall
