How to use Amazon experience in the shopping center?

Introduction

America is currently facing a "retail apocalypse". According to forecasts, approximately a quarter of the 1,100 shopping centers operating in the United States will be closed. Most of these shopping centers depend on so-called “anchor stores”, well-known retail chains, to attract customers. However, according to the leading financial services company Credit Suisse, these anchor stores are currently closing hundreds of individual locations. 9 of these legacy businesses have declared bankruptcy. According to the US Department of Labor- America’s federal agency responsible for measuring the country’s labor market performance, working conditions, and price changes in the economy—shopping centers lost 44,000 employees in 2017 alone. Additionally, about 9,000 stores are set to close in 2018. Why?     

A key cause is the massive expansion of shopping mall locations between 2015 and 2017. Shopping centers grew twice as fast as the human population in the United States during these years. This incredible expansion completely ignored emerging trends in consumer behavior. Consumers, especially the financially-significant Millennial generation, are spending more of their discretionary income on experiences and less and less on material goods. Speed, convenience, and cost are more valued than brand names. The fact that the market is changing and companies will have to adapt is clearly illustrated by not only the struggle of shopping centers, but also by the success of e-commerce platforms. The tech giant Amazon, in particular.  

Let’s take a look at Amazon to get a better understanding of these market changes. In 2017, the company organized one of the world's largest recruitment events, during which it created 50,000 new job offers. Hiring this many people in a single day is unprecedented. This is a testament to the increasing dominance of e-commerce, and shows that the survival of shopping centers is already an uphill battle in America. It’s also a preview for the challenges shopping malls in Eastern Europe will soon face.  

Despite these formidable obstacles and grim predictions, some supermarkets are able to not just survive—but thrive. This article will analyze the components that determine the success or failure of a shopping mall and show what can be learned and adapted from our experience in e-commerce.

E-commerce

The Internet has revolutionized the world’s trading markets. It’s become an integral part of modern human life for virtually every person in developed nations. Therefore, it’s important for companies to have a good understanding of the Web. This can only be accomplished by understanding the basics of e-commerce.

The move to digital comes with a variety of interrelated benefits and challenges. Startup costs are very low. Distribution that would have cost millions only a couple decades ago can now be implemented for free. This affordability makes it much easier to reach your target market; however, the elimination of cost barriers to entry has given rise to much more competition. The online space is flooded with brands trying to share their stories. This information overload makes it difficult for companies to stand out. Luckily, electronic commerce gives merchants the ability to quickly adjust their strategies using real-time data. This is the main benefit of e-commerce: fast adaptability.    

Unlike standard retail outlets, e-stores can change their presentation and adapt to client-needs in a short amount of time. Changing a store’s UI (user interface) and UX (user experience) requires relatively little resources, and the benefits can be reaped right away. You can also get a lot of useful data that will allow you to strategically improve the marketplace, based on real-time feedback from customers. These elements allow e-commerce to adapt to user needs better and faster than physical stores.

Feedback is easy to obtain on an e-commerce website—but it’s important to interpret and implement this data correctly. You need to understand your audience in order to convert them into customers. This is best accomplished by analyzing their actions. Time spent on the website; links clicked; hobbies; affiliate channels; and social media monitoring all help you better understand and define your target audience. Better understanding is fundamental to increasing sales. Given the large amount of data they receive from users, this is especially easy for e-commerce stores. Furthermore, because this data is received instantly, it can be implemented quite quickly.

With the increasing popularity of social networks—and the highly-effective tracking capabilities of these platforms—merchants get access to extremely accurate, detailed data about their audience’s hobbies, habits, and needs. This allows savvy business owners to run highly relevant ads to only those people who may want to buy their product(s). These social networks also give detailed reports on your campaigns, making it easy to split test and optimize your ads. This exceptional e-commerce feature maximizes your marketing budget.    

Finally, online stores have proliferated because of their availability and convenience. E-shops are accessible ‘round-the-clock—from anywhere in the world. This allows customers who are unable to visit shoppings centers access to a vast array of products. Customers that cannot make it to a store during business hours can order goods whenever they wish, without even leaving their homes. This unique advantage—one that’s virtually impossible for physical stores to copy—has led to many customers preferring e-commerce.    

On the other hand, certain obstacles have limited the growth of e-commerce stores. Unlike physical retail outlets, online shops have to deliver their products. The main obstacle with this is figuring out the logistics so that customers are not discourage by shipping costs and delayed delivery dates. Given increasing customer expectations, reducing shipping times and costs is a key concern for online traders. Amazon, the market leader, has been able to hone its logistics strategy to offer consumers 2-day (sometimes even 1-day!) delivery. This achievement has contributed to rising customer expectations, and Amazon’s dominance. Delivery times in Eastern Europe are still relatively long; however, this situation is likely to change over the next couple years. This would lead to even tougher competition for shopping centers.     

Two Main Advantages

In summary, two main features of e-commerce that can help give merchants an edge are:

1) Flexibility

2) Meaningful Data

Online stores can get an incredible amount of data about their customers and adapt their presentation and marketing decisions accordingly. This creates an exceptional opportunity to achieve sales growth efficiently and effectively.

Elements that Create Value for the Shopping Center

Managing the shopping center is no simple matter; however, it's important to accurately measure the current situation before implementing changes. Based on our research, we have highlighted the main elements of the shopping center which create value for the mall, along with the elements which can and must be adapted for better results.

Accessibility

One of the key elements of value-building in the shopping center is the accessibility of a mall. This includes the strategic location of the shopping center, ease of access, and number of parking spaces. The physical location and visibility of the shopping center offers the main distinction between it and an e-commerce store.

Accessibility is usually planned before the construction of a shopping center. Its construction is often regulated by local authorities and requires a significant investment. Location is one of the most important elements of a successful a shopping center—and also one of the hardest to change. It's important to note that good accessibility increases the chances of a shopping mall remaining relevant in the Digital Age.

Variety of Stores

One of the keys to a successful shopping center is successful tenants. It’s critical to find the correct variety of stores to satisfy your target customers’ needs. An accurate analysis and implementation of the goods and services local customers demand is what allows shopping centers to remain competitive.   

Most shopping centers have and continue to identify customer needs through surveys. Unfortunately, survey data is often incomplete and imprecise, which makes it difficult to understand how to change the variety of stores to better serve consumers. E-commerce, on the other hand, often defines the needs of customers according to their search frequency in search engines, a much more precise gauge of what goods customers need. This digital tactic can also be used by shopping centers and their tenants. Doing so would allow managers to identify and respond to customer demands a lot quicker.

Atmosphere

The main purpose of this element is to provide convenient, intuitive, and pleasant navigation through the shopping center. This includes the look, feel, and even smell of the mall. It starts with the architectural design and layout of the location. Successful shopping centers are constantly striving to improve their customers’ experience. However, most malls lack the technology to track their customers and improve the atmosphere based on customer feedback. Imagine the opportunities if shopping centers were able to get insights into their visitors’ behavior on a daily, weekly, and seasonal basis. Consumer needs could be met with surgical precision. Atmosphere—the store’s unique environment—can provide a huge competitive edge over e-commerce. Physical stores are able to engage more senses, creating more emotional, excited customers. Therefore, atmosphere is both a challenge and an opportunity.   

Technology

Most malls currently use basic flow-measurement devices, such as number of cars entering parking lots and passing through infrared sensors. However, these solutions require high investment in infrastructure and do not provide complete information about incoming traffic. For example, they do not track how often loyal customers visit their establishment, the visitor's age and gender, or how they navigate the shopping center. From a technological point of view, e-commerce is a strong leader, while malls are lagging behind; technology is often a low priority for shopping centers.

In the future, information about the target customer will become more and more valuable, and malls that are able to leverage this data will gain a competitive advantage, which will enable them to better select their tenants, adapt their atmospheres, and conducted more relevant marketing campaigns.

Services

Customer service centers, restaurants, recreation areas, child care, banks, post offices, and sports clubs are services that foster a community in shopping centers. This provides a competitive advantage over e-commerce; its importance will only increase with the growth of e-commerce. A strong community-based shopping center has loyal customers who will not only utilize its services, but also buy goods from its stores.

Human Resources

Given the change in the competitive environment, most shopping centers will need to restructure their human resources divisions, hiring more technologically-savvy employees. This, in turn, presents new challenges for recruiting managers. Right now e-commerce companies are able to give top-talent tech workers much more attractive job offers. In order to survive, shopping centers must find a way to entice these essential employees.

Financial Resources

Financial markets are undergoing major changes, specifically the adoption of blockchain technology and new forms of currency. Convenient payment and the ability to get funding via these new financial instruments can give shopping centers a strong competitive advantage.

Marketing

This item is concerned with the overall effectiveness of a shopping center's marketing. That is, how the shopping center manages to satisfy customers and turn them into loyal customers,  how it's able to conduct market research, track the competitive environment, carry out marketing campaigns, and maintain public relations. Most mall representatives understand that investing in marketing is crucial in order to increase customer flow. Investing in marketing is usually painful because very few people can tell exactly what channels are working well and which are a waste of capital.

As John Wanamaker, a pioneer in marketing, said, "Half the money I spend on advertising is wasted; the trouble is I do not know which half". Marketing has become even more complex with the emergence of digital media. E-commerce businesses are generally better with digital marketing because they emerged right alongside one another. Conversely, new online tools have increased the uncertainty for shopping centers, leading to disputes among executives as to how much of the center’s marketing spend should be deployed on digital advertising. While these debates still rage on, most shopping centers still opt for traditional, hard-to-quantify marketing channels.

How Shopping Centers can Implement Amazon-like Changes

What is the Goal of a Supermarket?

Each shopping center has two main tasks: to rent commercial stores at the highest price and to attract as many visitors as possible. In most cases, tenants that are poor operators—and thus low income generators—are forced to leave the shopping center. Research revealed that most of the surveyed malls experienced an increase in rental income when their tenants revenues increased. Therefore, management should prioritize increasing its tenants income. This is an important, often overlooked detail. The shopping center’s main goal should be to increase the income of its tenants, not just its own.  

Measuring Elements

One of the most important features of e-commerce is the ability to get real-time data about visitors: their navigation; the most popular products; revenue; needs; and other parameters that allow owners to make the right decisions related to improving customer experience.  Conversely, most shopping centers are still limited to traditional measuring instruments, such as inbound and outbound customer traffic or the number of cars parked in the parking lot. This data is not enough to make the right conclusions that will lead to better results.

Nowadays, artificial intelligence and algorithms can solve problems related to video processing. For example, facial recognition software allows owners to identify a specific person from a photo, including his age, gender, and even emotions. This technology provides us with a great opportunity to solve the shopping center's marketing problems. Shopping centers must choose the correct measurement and tracking tools in order to achieve positive marketing changes. The right technology will allow malls to take advantage of the unique opportunities that come with having a physical location, giving them the best of both worlds.

Analysis of the Shopping Center's Systems

Utilizing traffic measurement tools will allow center owners to remove obstacles and add more of what’s working to contribute to a better customer experience. This can be achieved by following a three-step process.

FIRST STEP

First and foremost is the analysis of income. For example, the right tools can show owners that their mall is financially unbalanced; that is, that certain areas of the mall are generating a disproportionate amount of overall revenue. This analysis allows managers to measure the amount of each tenant’s earnings and understand which geographic spots in the mall are weak.

This box shows how to measure the shopping center's revenue in four levels:

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SECOND STEP

Traffic analysis must be done in order to generate a properly managed system. This should be done whether you plan to completely reorganize the mall or just make improvements to the existing layout. Managers must ask the question, “What’s going on?” and examine the shopping center as if it were a living organism. Visitor traffic is the mall’s lifeblood; it needs healthy circulation.  

Traffic is divided into 4 types:

Internal is the traffic inside the mall. External is traffic immediately outside of the building ( in the parking lot and on the walkways of the shopping center). Forced—or “directed”—traffic is artificially created flow, such as traffic to the bathrooms, dressing rooms, etc. Outside of the building forced traffic may be associated with public transport stops. Free traffic encompasses visitors who came to the mall by choice.

This box shows how to analyze traffic flow:

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THIRD STEP

By combining the first box with the second one, owners can understand when and why traffic appears, can properly measure the benefits of marketing, and see if there are problems in a particular area of the mall or with a particular tenant.

Resolving problematic areas requires a deeper analysis of these locations based on key elements of the system, such as accessibility, variety of stores, atmosphere, technology, services, human resources, financial resources, and marketing. Problem solving can be complex. But this kind of thorough analysis allows managers to identify and fix the underlying issues.

Examples of Shopping Center Analysis

Here we present some examples of how certain problems are identified and how they can be solved.

Analysis of the Atmosphere

After realizing a specific zone has low traffic or generates low revenue relative to the rest of the mall, managers can perform a deeper analysis, called a “Heat Map”. This enables owners to tell which zones are cold (low traffic) and which are hot (high traffic). After receiving this data it’s important to as, Why? One possible reason, for example, could be poor design decisions; visitors are unlikely to linger in areas that seem cold and uninviting. In-depth analysis of this nature makes it quite easy to change a mall’s "street" design. Heat maps can show where the shopping center has a healthy "blood flow" and where it's lacking. This process can then be applied to each individual store.

The blue segments on the floor denote “cold” areas, places in the store with poor traffic. The orange segments indicate areas where customer circulation is healthy. Analyzing these segments makes it easy to identify working retail space (orange) from non-working retail space (blue).

This analysis includes important questions, such as: What type of goods are being sold in the orange areas? Why are visitors uninterested in the blue areas?; Are the goods being offered visible? Is there a problem with the way the goods are displayed? Is the price too high or too low? Are there obstacles to get to a certain area?  

The shopping center's "skeleton" is its architecture, the material that makes up and supports the building’s structure. Its "circulatory system" is composed of the passageways used to convey the center’s lifeblood—customers and employees—from site to site . Each individual store is a microcosm of the shopping center itself.

Questions to ask when doing heat maps in stores include: What kind of goods are being sold here? Why are visitors not interested in certain areas of the store? Are there sections visitors don’t see? Is the presentation of goods off? Are goods too high, too low, or is something blocking them from view? Is the store design flawed? How’s the store’s navigation?

Analysis of Stores Variety

In some cases the problem is poor variety of stores. When this is the case, careful cross-shopping analysis is required to clearly understand what types of stores complement one another and create a cross-shopping benefit to customers. This analysis will help owners understand whether a particular store is suitable or not for their shopping centers.

Marketing Analysis

One of the problems in a mall is the lack of traffic. This issue is often resolved by running marketing campaigns, However, it’s often impossible to tell which elements of a campaign are working when using traditional marketing channels. This often leads to disputes among mall executives, based on subjective opinions, about what’s working and what’s not.  

As previously mentioned, shopping centers can perform precise analysis with the implementation of the right measurement technologies, These tools will allow managers to understand mall traffic demographics, better target their ad campaigns, and track loyal customers. Perhaps most importantly, these tools will allow owners to see which marketing channels are attracting traffic. These insights allow efficient distribution of marketing budgets and assurance of better results. Below are some examples of traffic analysis snippets before, during, and after campaign analysis:

Visitors and External Traffic

Duration of Visits

Percentage of Sales

Insights and Conclusions

Shopping centers are experiencing turbulent times—what’s often called the “retail apocalypse”—mainly due to the explosive growth of e-commerce. Due to its low startup costs, accessibility, and targeted adaptability, e-commerce quickly adapted to the needs of users and gave them the opportunity to conveniently purchase goods and services without leaving home. Technology has created great innovations in the virtual retail space. Meanwhile, physical space—shopping malls—has changed very little. However, because of the proliferation of e-commerce stores, shopping centers will need to adapt and implement new technologies in order to survive. This means learning from their digital counterparts.

It is essential for malls to understand the key elements of value creation: accessibility; variety of stores; atmosphere; technology; services; human and financial resources; and marketing. Once the goal is set and the correct measuring technology is implemented, an analysis that allows for faster adaptation to customer needs can be implemented. The main analysis consists of three parts: revenue analysis, traffic analysis, and the analysis of value-creating elements. This kind of in-depth analysis allows to identify the shopping center’s biggest problems and take rational measures to correct them.