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Some of the biggest challenges for shopping malls

5/21/18 3:00 PM by Simon Staack

Many shopping malls of today are challenged by fluctuating visitor count and a decrease in tenant turnover. These challenges come with grave consequences, resulting in shops and even entire shopping malls closing down all over the world. The most recent exemplification of the severe consequences was when Macy’s closed down 68 of their shopping malls in 2017 and, according to themselves, Finding new directions for their remaining malls.

Was Macy’s a one-off in the industry or should other shopping malls be on guard? What is the reason for the fluctuating visitor count and the lack of tenant revenue?

In this article, we will make an educated guess.

Challenge #1 – Growing e-commerce

The average share of e-commerce in Europe has been growing year-after-year reaching its current high at 9%. There are no signs of this development turning or even slowing down. Not at all.

The UK has the highest share of e-commerce. In 2016 e-commerce made out 15.2% of all retail turnover in the UK. It is estimated that the number has increased to 17.8% in 2017.

This means that UK consumers are spending an estimated €76 billion online in 2017. This is turnover that goes straight to the retailers with an online presence, whether or not they have brick-and-mortar stores in shopping malls.

 

growing-e-commerce-emplate

 

The enormous online spend shows that more and more consumers have their shopping needs covered online, resulting in less frequent visits to their local shopping mall. This might be one of the reasons for fluctuating visit count and a lack of tenant revenue.

 

Challenge #2 – Lack of customer insights

Online retailers have the advantage of a range of unique customer insights. They know who their customers are down to each individual. They know what attracts different customer segments, how often they visit and what they buy. The comprehensive opportunities to gain customer insights enables the online retailers to communicate in a personal and relevant way with each individual customer, thereby increasing the impact and returns of their marketing budgets.

Compared to online retailers, shopping malls typically have very limited customer insights. They typically work with revenue numbers in totals or on a categorical level combined with visit counting hardware measuring the number of visitors but gather very little information about characteristics of the different visitors. Revenue and visitor counts are important indicators of how well the malls are performing, but it can be hard to convert the indicators to insights about how to improve their communication with their different customers, which is extremely important to make sure customers keeps coming back in the future to shop in their local shopping mall.

 

Challenge #3 – Marketing channels are loosing impact

A lack of customer insight limits the opportunities to be sufficiently relevant in the communication with customers. This is an important explanation of why traditional marketing channels are losing impact. Shopping malls, who have not yet managed to adjust their marketing mix to allow for the use of data driven marketing channels, are now at risk of facing a decrease in visitor count and revenue.

A study made for a Scandinavian shopping mall with 110 stores measuring the impact of a traditional printed magazine shows that the mall pays more than €66 per customer influenced by the magazine to visit the mall with an intention of buying. With an average basket size of €37 per customer in the mall, the business case is far from satisfying.

 

Skærmbillede 2018-05-21 kl. 14.55.23

 

Many shopping malls have reacted to the decreasing impact of traditional marketing channels, choosing to prioritize new, digital and cheaper marketing channels. Emails, social media and apps are taking up an increasing share of the marketing budgets. A sensible prioritization, increasing the chances for shopping malls to effectively stay relevant for consumers, attracting visitors and revenue to brick-and-mortar stores.

Simon Staack

Written by Simon Staack

Co-founder of Emplate. I'm an engineer by education and a doer by nature. I feel great out of my comfort zone in all aspects of life. Passionate about human behavior, building and understanding various businesses and everyday heroes.