Alan Treadgold, retail expert at PA Consulting, participates in a Q&A on the challenges retailers and retail center operators may encounter in the year ahead.
Chain Store Age (CSA): Retail square footage per person in the United States is twice that of the square footage in the United Kingdom. Is there anything American retail should emulate about retail in the U.K.?
Alan says: "Actually, it’s pretty much the same story here, and it’s a story of polarization where malls in the best locations are still attractive to retailers and ones in poorer locations are not very differentiated for either shoppers or retailer tenants. Westfield’s malls in East London and West London are both incredibly successful still. But step outside of London and there’s a lot of undifferentiated and undistinguished space. Tenancy rates are at historic lows, between 80% and 90%. Also, there are a lot of secondary use tenants. It’s about the quality of the space, not the amount of space."
CSA: A recent study said people actually prefer the experience of shopping in-store to shopping online. What do retail centers need to do to get them into stores more often?
Alan says: "The role of the store has changed enormously over the last eight years or so. Retailers have to rapidly rethink their stores. A lot of their rationale for stores is to deliver an experience online can’t—stores as places of entertainment and experience. They need to keep refreshing and evolving stores, and I think this will culminate in smaller stores more aligned with e-commerce."
CSA: Are traditional retail chains lagging in their efforts to redefine themselves in brick-and-mortar?
Alan says: "They are indeed lagging. But I sympathize with established retailers that don’t have the ability to change as much as they need to change. It’s like trying to turn around an ocean liner to service the debt and restructure the business at the same time. You do have big retailers doing good things. You have Ikea with smaller footprints in urban areas, engaging people with edgy designs that they can purchase online. And you have the H&M store in Times Square engaging people with social media."
CSA: What are the two most important things they must do to align themselves to customer needs and expectations?
Alan says: "First, you cannot have your store and online channels competing with each other. The second is dealing with the fact that the e-coms have an advantage in the use of real time data. Stores have legacy IT systems that are more about controlling systems than they are about customer insights. Retailers tend not to have access to the immediacy of data. They need to build out from the customer. Make it as easy as they can to engage with customers in the ways that they want to be engaged. Put the customer at the center of the conversation, not the channel."
CSA: Name me one mall developer that you think is creating a positive environment for retailers faced with an omnichannel world.
Alan says: "I’ll nominate Westfield, because I have no client relationship with them. I think they genuinely do get this. I find myself surprised to be saying this, because they’ve been in big mall development in a big way. But over the last five-six-seven years, they’ve introduced Westfield Labs, they’ve implemented digital technology, they’ve put the big video screens in their malls. They’re making the effort to connect with a customer that lives in a very connected world. You can’t see your malls as fortresses that exist outside of the digitally connected world that we live in. We have to look at how we can make shopping centers complementary to digital options."
Helping retailers reimagine and reinvent