The Future of Retail: CEO Outlook 2018

27 Mar 2018

I am feeling optimistic about our retail industry. ‘Bricks and mortar’ has withstood the test of time and will continue to play an extremely prominent role in connecting with customers.

Gary Horwitz

Managing Director, Retail

Ultimately, satisfied customers create loyalty to precincts ensuring the sustainability of the mix and the longevity of the asset life. New services and experiences will provide a strong platform to boost sales and performance for all of us.

There is no doubt Amazon and other e-commerce businesses will disrupt the market competing for retail dollars, but this only drives us harder to adapt and evolve with the changing environment. 

The opportunities to further harness product creation and exceptional experiences are achievable for both retailers and landlords.

A shopping centre’s evolution is an ongoing process and in 2018 we will continue to encourage this cycle. There is a beautiful phrase from French intellectual Jean-Baptiste Alphonse Karr, “Plus ça change, plus c'est la même chose”, and translated it means “the more things change, the more they stay the same”. For me, this is the future of retail. We will constantly evolve and adapt to always meet the customer’s expectations. 

Lessons from the past  

Retail is an exciting industry full of complexities, passionate people, enriched with creativity and consistent product evolution led by innovators and bold entrepreneurs. Turning the history pages of our rich, global industry, it becomes apparent that markets are a vital component to the ecosystem of life. 

For me, there is no better experience than arriving in some of the great cities of the world and spending a few hours walking, touching, smelling and tasting the offerings in a bustling, vibrant local market. At Barcelona’s Le Boqueria, one can enjoy seeing the jamon iberico being freshly sliced, the aroma of smoky paella along with the vision splendour of fruits and vegetables arranged in perfect colour blocking. 

This desire to meet, touch, feel and smell life has seen people experiencing physical shopping precincts for centuries. For example, Leipzig’s Market Square in Germany celebrated its 500th birthday last year and remains today intact with the very bastions of commerce that encouraged communities to gather and exchange goods with the goal of creating a better life for themselves and their families. 

The opportunity to be entertained by product display has been, and will be, around forever. Markets are beautiful places, places to be respected and treasured forever. It pleases me to see the emergence of many new formats of the market concept globally.

In 1852, Le Bon Marche in Paris was founded by Aristide and Marguerite Boucicaut. It is the grande dame of department stores, and translated it means The Good Market. It has survived for generations by providing shoppers pulsating visual experiences, aggregating some of the world’s most luxurious brands that people must have, along with an incredible array of customer services. It is experiential retail at its best! 

Selfridges in London is a department store transforming and adapting to meet the changing needs of its customers. The only department store to be recognised as the Best Department Store in the World three times, Selfridges is a shopping experience that surprises, amazes and amuses visitors with extraordinary customer experiences. 

Bergdorf Goodman on Fifth Avenue in New York, made famous by Carrie Bradshaw in the TV series Sex and the City, is another department store constantly evolving. Its upmarket store boasts a range of personal shoppers, including 88-year-old Betty Halbreich. Not just a mecca for fashion, Bergdorf Goodman has departments dedicated to home, books and children plus several fine restaurants. 

Interestingly, the retail high street evolved out of the need to create individualised spaces for brand creation. The opportunity to advertise a brand above a shopfront and to fill the windows with the shopkeeper’s wares created an active vibrant street front. There is no better experience than to visit your local butcher or barista who greets you by name and knows your favourite cuts or coffee order. 

Today, international and national brands are increasingly capitalising on this value and opportunity. Our Pop Up division has seen a twenty-eight percent year on year increase in spend by brands on digital advertising and experiential activations across our shopping centres. Our media partners are forecasting this trend to only grow further. 

The evolution from markets to high streets to department stores culminated in 1956 when Victor Gruen designed the first enclosed mall in Minnesota. Being a socialist, Gruen wanted to design a building where people could shop, drink coffee and socialise just as he remembered his life in native Vienna. No one could have guessed at the time an enclosed mall surrounded by convenient parking would grow to become a social gathering place employing millions of people around the world.

These historic and modern-day examples demonstrate the evolution of ‘bricks and mortar’ retail, constantly rejuvenating itself by adapting to the market and desires of the customer.

Creating impact

History teaches us valuable lessons. For retail to survive the test of time, you need to make a difference in people’s lives. Additionally, it means having an impact in someone’s life so much, they will want to repeat the experience. It could be saving a busy parent’s time parking, helping someone find that all important outfit for a special occasion, offering a cool place to have a meal with friends or simply creating a place that entertains after a busy week at work.   

It is the emotional connection that experiences create with people that brings the true value to our retail places. Over time this social or emotional connection can extend to an entire precinct. Positive, memorable moments are remembered, shared in person or online via Snapchat or Instagram, repeated, and ideally shared with someone else in the community, again and again and again! 

Vital to place is that people love the experience of a place. Great experiences from around the world are sought after by tourists. No better example of this is one of the great high streets in the world Abbot Kinney Boulevard in Venice Beach, California. This shopping precinct has a unique identity and history, along with a closely connected community that visitors from all over the world seek to experience. 

At the end of the day customers are people with interests, values and a need for human connection. We will never compete with our e-commerce competition on product alone. Our success lies in combining outstanding product curation, exceptional service and place to create a memorable experience.  This is the formula that creates the magic in retail precincts and the difference in people’s lives they seek. Creating a sense of community, belonging, personalisation, collaboration or point of difference will win their hearts and in turn customer loyalty now and into the future.
 
The Future of Retail: CEO Outlook 2018
The Future is Bright

Lendlease is at the forefront of creating the best places. Our success is ultimately measured by how people use, experience and enjoy our precincts. 
Our shopping precincts are focussed on delivering exceptional experiences.  We have several urban retail and shopping centre developments currently underway and many more in the development pipeline.

Curating the ground plane at Barangaroo South has been an amazing journey for our business, bringing many lessons that will drive change in our shopping centre developments.

The streets are simply buzzing with activity. People head to work, others visit for the day, and residents have made the place feel like home. Communal spaces are enriched with public art and cultural programs, a vibrant mix of boutique stores and restaurants extend the city westward, with a new neighbourhood in full swing, day and night. Barangaroo South is now playing an integral part in the economic and social life of Sydney. It has become a place where people want to be, and we could not be prouder. This world class precinct has captured the hearts and minds of commercial tenants, residents and tourists alike.

The precinct-wide approach to sustainability has been recognised with a 6 Star Green Star Communities V0.2 rating—the first precinct of its kind to receive this rating. Barangaroo was selected as a C40 Cities Climate Positive Development, one of only 19 projects worldwide. To date, Barangaroo South has won 43 awards nationally and internationally. This industry recognition acknowledges the importance of this development to the city of Sydney and the key role sustainability has played in its success.

Just north of Brisbane, we are bringing the best of the market, high street and retail mall formats to create the shopping experience of the future. Arguably, our most successful centre in the portfolio, Sunshine Plaza is capitalising on its existing market strength and riverfront beauty. 

The circa A$420 million redevelopment will transform Sunshine Plaza into a super-regional centre. It will deliver a powerhouse of fashion, leisure and entertainment with the region’s first David Jones department store, a new BIG W, a refurbished Myer, over 100 new specialty stores along with the first and largest high ropes course at a shopping centre in the country. The high ropes course incorporates a 21-metre-high viewing deck and 10 zip lines with the longest one at 130 metres across Cornmeal Creek.

The delicate design balance of indoor and outdoor will achieve a futuristic dimension to the Centre transforming Cornmeal Promenade into a stunning outdoor waterfront dining and leisure experience where customers can enjoy a range of restaurants, social and public spaces along a connected pedestrian pathway.

To summarise my outlook on 2018, I am excited about the retail evolution occurring in response to technological disruption. Taking the lessons from our history pages to incorporate the best of markets, high streets and retail mall formats in our retail precincts will deliver the best experiential retail our customers want and expect. It is a bright future, a future where “the more things change, the more they stay the same”.