Two iconic cinematic scenes come to mind when imagining the near-term future of retail: The first is from 2001: A Space Odyssey when Hal says, “I am putting myself to the fullest possible use, which is all I can think that any conscious entity can ever hope to do.” The second is from Jurassic Park when Robert Muldoon stated that the genetically engineered velociraptors “never attack the same place twice.” They were testing the fences for weaknesses, scientifically. “They remember.”
Technology has finally surpassed our expectations of product performance while experiential design has been weighing down pro formas and scrambling site plans for the past decade. The deployment of technology to its fullest possible use has freed up designers and developers to test the fences for weaknesses in their retail offerings, amenities and customer experiences. Technology gives retailers more sales tools than ever before and experiential design requires more meaningful placemaking. I expect that dichotomy to heighten in 2019.
Putting Hal To Work
The retail industry has entered a level of algorithmic learning and a culmination of mass data-gathering from which it will not retreat. The collection of massive amounts of data is now possible through an increasingly limitless cloud storage capacity. This development has finally opened the floodgates of AI to guide consumers’ purchasing decisions.
Advertisement
For example: LED bulbs in retail spaces can now track every smartphone’s location and movement patterns within a few inches, allowing merchants to engineer product placement to an almost-exact optimization of physical space. Facial recognition and algorithmic preference sorting can identify specific customers’ past shopping history and guide them to new or personally nostalgic products, whether online or in-store. Products like Google Lens allow the customer to identify virtually any product and opportunity for in-depth research and/or instantaneous purchase online. Amazon 4-star stores only sell items that are proven to be customer favorites through algorithmic data gathering. Innovative product brands like b8ta, which was founded by early-entry IoT player Nest, has garnered funding from Macy’s, of all places! The digital and analog are increasingly inseparable.
Testing The Fences For Weaknesses
Within the analog reality of physical planning, reverse engineering of retail real estate continues apace. Besides the reversal of the “bricks-to-clicks” phenomena, which has seen a new raft of digital retailers supporting and growing their brands in shopping centers, new uses and concepts continue to be tested by the major CRE players.
For example, Simon Property Group is developing its Edit concept to introduce international e-Commerce brands to a physical locale at Roosevelt Field on Long Island. Brookfield Retail’s Water Tower Place has introduced In Real Life, a digital-to-physical retail concept store. Macerich is testing its Industrious concept at Scottsdale Fashion Square in a former anchor space to allow for a WeWork-type use in a mall setting. Perhaps the most experimental and costly investment currently on drawing boards across the industry are the myriad housing developments on former Black Friday parking fields across the country.
But do young entrepreneurs want to work from a mall? Will the housing crisis in many metropolitan markets smooth over the potential friction of Millennials actually living at a mall? When the necessary open spaces, cultural and civic buildings (not to mention public schools) are included, can the ROI support the investment on these fallow parking fields?
Fullest Possible Use
Alternative anchors also continue to infill the vacancies left from the spate of failures of the past decade. Fitness brands like Barry’s Bootcamp, Equinox and Soul Cycle, data-driven bookstore Amazon Books, luxury cinemas like Cinépolis, iPic, Alamo Drafthouse, the Museum of Ice Cream, Hello Kitty Café and many other peripheral drivers of retail traffic are being introduced to traditional shopping centers, with varying degrees of bottom-line impact. Filling up vacant space with all of the above uses is the first-generation of this metamorphosis, but ground-up developments like Related Santa Clara, with its Equinox Hotel, extensive cultural agenda as well as office, residential and luxury retail, will test many of these nuovo-lifestyle concepts in real life.
Can high-tech gadgets, food and fitness fill the gaps left by so many dying consumer brands? Or will the intelligence of the IoT render these physical manifestations of trend-gathering as much of a dinosaur as the suburban mall?
The coming year should start to answer these questions. June 2019 will mark a decade since the statistical end of the Great Recession, and an expected pullback in consumer spending in the coming year will vet the staying power of physical retail yet again. We predict that only the meaningful will survive. Brands and properties that establish a meaningful connection to their customers through both physical and digital integration have the opportunity to grab market share, while generic, fast fashion and fast food struggle to capture the imaginations and loyalty of discerning and technologically diverse clientele.
As a reminder of how the retail industry got to this point, a recent segment that aired on CBS Sunday Morning documenting the rise and fall of the Sears brand reminded viewers that being early doesn’t always translate to winning a category. Sears and its partners IBM and CBS created Prodigy, an early online shopping and Internet access provider well before Amazon. Prodigy functioned from 1980 to 1999 before becoming part of Telmex, and not long after abandoned the online shopping component of the business model. Amazon was founded in 1994 and is now the world’s largest retailer by value, surpassing Walmart in 2015. Will Macy’s survive due to the investment in b8ta? Can WeWork or Industrious revolutionize modern workspace, and coincidentally drag the retail sector into growth and profitability over the next decade?
The answer, as previously mentioned, is in meaningful connection. It is imperative that business leaders today invest in long-term technological innovation while simultaneously catering to the psychographic and demographic evolution of their customers. Creating meaningful places both online and on the ground will increase and be inextricably linked, as will the ultimate financial success for owners and landlords.
Sean Slater is Retail Design Collaborative’s newest Principal, after spending more than 20 years practicing architecture in Berkeley, Calif., Atlanta and Austin. He has been a leader in nationally recognized firms including four years at ELS Architecture and Urban Design, seven years at tvsdesign and five years directing his own firm. With Slater’s extensive experience in the domestic retail market, he will continue to further develop new business endeavors for Retail Design Collaborative. Slater was recently honored with the Urban Land Institute’s prestigious Apgar Award for co-authoring “New Suburbanism: Reinventing Inner-Ring Suburbs,” and his article “Crafting Authenticity” graced the cover of the magazine’s June/July 2015 print and web edition.
