Improving Product Quality with Technology – A Perspective

 

Westfield Corporation, one of the world’s largest shopping centre developers and operators, launched its first product in Australia in 1960. Since that time, Westfield has launched nearly 100 shopping centres Australia, the United States, and the United Kingdom. When shopping centres first opened, they addressed a core need in the retail landscape: with the movement of populations into suburbs in the decades following World War II, the ability to have all of one’s shopping conducted in one convenient location. With few malls on the landscape at the time and a booming post-war global economy, developers and their retail tenants were willing to spend on ensuring a quality product experience: a clean, vibrant, family-friendly place for consumers to buy from brand retailers with few other ways to efficiently attract foot traffic to their physical stores (Uberti, 2014).

Today, most people assume that the shopping center is ‘dead’. Fast forward a few decades from the 1950s and 1960s, numerous articles in very well respected media outlets have long reported on the death of the shopping mall. One may rightly assume that online shopping harkened the death knell of the shopping mall. While that is a factor, only 10% of total retail dollars are spent online (Schwartz, 2015). Moreover, as far back as the early 1990’s, before the Internet’s massive boom in usage, statements were made regarding the death of the mall because of declining quality. The Chicago Tribune ran an article entitled, “Death of the Mall Greatly Exaggerated” (Schmelzer, 1994). The cause of the decline in quality was a significant over-expansion of developments chasing a stabilizing set of shoppers that were no longer migrating or having children in the suburbs that once supported the development boom. In addition, the business model of a shopping centre is based on a landlord-tenant model — with a lease held by the shopping centre operator, the incentives of the operator and retailer are not aligned. And even as recently as 2015, the New York Times reported on the ongoing decay of the quality of the experience in shopping malls:

The upbeat music of “Jingle Bell Rock” bounced off the tiles, and the smell of teriyaki chicken drifted from the food court, but only a handful of stores were open at the sprawling enclosed shopping center. A few visitors walked down the long hallways and peered through locked metal gates into vacant spaces once home to retailers like H&M, Wet Seal and Kay Jewelers. “It’s depressing,” Jill Kalata, 46, said as she tried on a few of the last sneakers for sale at the Athlete’s Foot, scheduled to close in a few weeks  (Schwartz, 2015).

As a last, perhaps most critical point before turning to remedies that have been introduced, the decline in quality of the mall as a product doesn’t just affect the business itself. When malls fail, communities begin to fail as well, as cited in The Atlantic:

“What happens when a mall begins to deteriorate and no longer function as a mall?” he [the president of Austin Community College] said. “In the surrounding neighborhoods, you begin to see the crime rate increase, other homes and buildings being vacated—the whole community surrounding it begins to deteriorate” (Semuels, 2015).

Without becoming overly philosophical in this analysis, one might argue that addressing the quality of a shopping mall is as much a social/ethical imperative as it is a business imperative. To address the decline in quality, shopping centre developers have begun to turn away from pure retail. The president of the community college cited earlier, convinced the college board to take over the local failing shopping mall for this very reason. As part of the takeover, the college transformed the mall into a hub of a planned, mix-use community, with 604 computer stations, 200,000 square feet of instructional space, a library, and offices. Many shopping centres have become lifestyle centres instead, focusing on providing utility to their consumer bases:

In many areas of the country developers are finding new uses for dead malls. Dunham-Jones keeps a database of projects that retrofit dying malls for other purposes, and says that there are 211 spaces across the country being retrofitted in one way or another. “Malls are being turned into medical centers, colleges, elementary schools, churches,” she [an architect and professor at Georgia Tech] said. (Semuels, 2015)

While this change in product in order to address quality has been used across the shopping centre industry, it has not been adopted by Westfield. Rather than transform its properties in flagging markets, Westfield’s strategy to address the overall quality of its product portfolio has been to sell off products that do not meet the highest criteria for quality and income. In addition, compared to most of its peers, Westfield has embraced technology as a critical facet of its operations (Baldwin, 2014), which also leads to the concluding predictions for this paper.

In terms of a couple of predictions regarding how technology could improve the quality management for Westfield’s products, many experts in both the property management and technology industries see the advancements in retail technology being equally relevant to the shopping mall. The rationale is that a symbiotic relationship between shopping centres and their retail tenants exist, because without rents, malls can’t survive and without foot traffic, stores that require a physical presence can’t survive. This author’s first prediction is that shopping centers will improve the quality of their tenant mix by adopting the same technologies and techniques that retailers and media companies have been using to succeed or survive online:

while retailers have been drawing attention with their innovative use of technology, what about the shopping centres which house many retailers under one roof? What can they do to capitalise on technology to make the customer journey easier and more enjoyable? Stephen Millard, managing director of the retail technology accelerator Eccomplished, says shopping centres could prove excellent testing grounds for the multitude of retail technologies entering the market (Baldwin, 2014).

Using these same technologies and techniques means that shopping centres will act less like landlords, collecting rent regardless of the financial performance of their tenants and more like partners, even media companies or search engines, who are equally invested in making sure the people visiting their products are converting to buyers at partner websites. In terms of the quality of the experience, shoppers will be provided with much more interactive, personalized experiences while they are in shopping centres. Creating this more exciting experience means that malls will attract more shoppers and the shopping centre will understand more about shoppers’ interests and buying patterns through the use of technology.

This also leads to this author’s next prediction: many shopping centres like Westfield will take on more of a ‘performance based’ revenue model, which is only achievable by integrating technology. Rather than extracting only rent, shopping centres will increasingly use technology to integrate their data and financial tracking systems with those of retailers. Doing this will enable mall operators to ‘go at risk’ more with their partners in terms of revenue. In terms of the technology, shopping centres like Westfield already operate websites that catalog the products available at retailers who are tenants in their malls, and Westfield refers this traffic to retailer websites much like Google (Baldwin, 2014). This ability to track inventory and the conversion to sale for shoppers will occur also in the physical world. These two predictions will transform the perception of malls as being ‘dead’ to that of a vibrant, engaging experience that shoppers and retailers will want to continue to use. This process has already started in a very small way at Westfield Corporation; in 2013 it founded a laboratory where this author works, and its sole focus is how to integrate technology as a critical means of transforming the quality of its malls.

 

References

Baldwin, C. (2014).  The Technology Opportunity for UK Shopping Centres. Retrieved from:

http://www.computerweekly.com/feature/The-technology-opportunity-for-UK-shopping-centres

Schmelzer, J. (1994). Death of the Mall Greatly Exaggerated. Retrieved from:

http://articles.chicagotribune.com/1994-11-06/business/9411060211_1_natick-mall-large-stores-specialty-stores

Schwartz, N. (2015). The Economics (and Nostalgia) of Dead Malls. Retrieved from:

http://www.nytimes.com/2015/01/04/business/the-economics-and-nostalgia-of-dead-malls.html

Semuels, A. (2015). A New Life for Dead Malls. Retrieved from:

http://www.theatlantic.com/business/archive/2015/03/a-new-life-for-dead-malls/387001/

Uberti, D. (2014). Death of the American Shopping Mall. Retrieved from:

http://www.theguardian.com/cities/2014/jun/19/-sp-death-of-the-american-shopping-mall

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