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| Source - Cédric Dhaenens | Unsplash |
The not-so-recent proliferation of shopping malls in Klang Valley has led many operators to look into ways they can stay competitive. With extensive experience in supporting clients in the retail industry, Orchan Directors – Craig J Selby and Farrell Tan share with us what mall operators and owner can do to survive the competitive climate.
1. What are some of the challenges malls face in this competitive climate?
There are simply a lot of malls out there. There are a lot of the ‘same outlets’ and the ‘same A & P initiatives’. The challenge is keeping relevant to your core demographics, keeping relevant to the new customers that you are attracting, and staying fresh with ideas to bring in new customers. No one wants to see the same roadshow at four consecutive malls – customers want variety.
Additionally, customers want convenience. Parking. Retail. Food and beverage. Convenience. They want to be considered as part of the process – not just “oh, customers will come as long as we have Brand X here”.
2. How do consumer habits and spending power affect the survivability of malls? What can mall operators do to influence this?
Malls need customers to spend. Simple. Malls, and individual outlets need to explore how best to engage with customers. The recent e-commerce trend – virtual stores and online shopping – is having an impact. But at the end of the day, customers still want to feel and touch products too – they just do their research online first, and are therefore more targeted in their purchases. Because of this, stores, and malls need to step up their game to encourage and facilitate impulse purchases.
Survivability however is beyond just purely customers. It is having the right tenant mix, creating a community hub (be it a hub for a geographic community, or a community of like-minded individuals [eg; electronics mall, discount stores mall] – somewhere where the stratums of society feel at home, want to come to shop, to be seen, and to function – all of this is relevant too. Mall operators need to know their demographics, and their psychographics; then work with retail brands – both established and new – to create unique experiences that people want to enjoy.
3. What are some of the elements that can make a mall standout for consumers and tenants?
For consumers – tenant mix – a variety of great brands, but also the unknown and emerging brands. A mall without a strong food & beverage selection can be a massive failure – you have to give reason to people to hang around. Interesting and diverse activities, roadshows, customer engagement opportunities.
For tenants – a mall must be active in marketing (A & P) – they must be committed to helping all tenants equally in putting forth their brand. They must also be committed to creating a positive mall environment (cleanliness, security, accessibility, maintenance).
4. What are some of the strategic approaches existing malls can take in order to keep up with the game?
By taking a strategic approach to tenant mix, to marketing (A & P) support, and to expansion plans – by keeping relevant to their catchments – these are what will help. As a society we are heading more and more towards micro-integrated-townships – does your mall reflect this trend? If not – consider whether you should be.
5. If freeze on new malls is not implemented, what can new operators or owners expect if they wish to start the business?
They can expect a challenge. They can expect a lot of competition. They can expect to find the early months extremely tough. They can expect to find tenants who want bargain rental deals. They can expect to do a lot of hard work in marketing for potentially disproportionate results.
But they can expect things to get better. Malls, just like brands, attract loyalty. When you consistently maintain the standards that your customers expect, and you deliver on a quality retail experience, your customers will come back. They might like a certain outlet, or they may like the vibe; but it will become their “go-to” place for select activities.
6. Looking into mall concepts might be one of the ways malls can stand out. What are some mall concepts operators and owners can consider?
There are many concepts out there. My personal favourite is Grand Indonesia in Jakarta, and how they have created functional and fun zones for shoppers. It’s a huge property – vertically massive, which creates its own challenges.
Concepts may go from the simplistic of targeting select tenants only – fashion and textiles; homewares and furniture; electronics; through to more micro-level concepts – cultural alleys, continents, technology zones.
For this to work, operators really need to consider both their catchment and their attractiveness. Will this work for the current catchment? Or, is it stretching the experience too much? Likewise, am I similar to my competitors? What makes me different? Nothing worse than being a boring neighborhood strip mall – unless, of course, that’s what your neighborhood wants, supports, and makes viable.
7. In this climate, should mall operators focus on getting the right tenants, or getting the right number of tenants?
Both.
The right tenants are extremely important. The wrong tenants will close shop anyway. But, the mix that works, that meets the needs of the customers is important.
Concurrently, the right amount of tenants is important. If you only have a 20% occupancy rate; it will not inspire confidence in either customers (there’s simply not enough to attract and wow them) or prospective tenants (what went wrong).
8. Are online stores necessarily a threat for brick-and-mortar stores, or can they be a blessing in disguise? How can mall operators work with retailers to ride the wave of online shopping?
The industry gossip is that they are a threat. Large retailers are closing down across North America.
But, I contend people want to shop. We are social beings. We still need our malls. At least, in Asia that is.
What is changing is how we choose our products. We either research online to target then purchase. Or, we head to a retail store to check products out, then purchase online via aggregator sites to get the deals.
Retailers and mall management need to understand these trends, and see how they can work within the phenomena. That’s the key to a successful future.
9. Will freezing new mall licenses solve Malaysia’s impending retail problems? What benefits can a freeze bring to existing operators?
I do not believe it will.
Developers are not stupid. They don’t invest hundreds of millions to fail. There’s a longer-term plan / goal in sight – call it land-banking, hedging, whatever. So, it works for them.
Freezing mall licenses is a temporary measure only. It allows the population to catch up with the malls. But it lulls retailers and operators into a false sense of security too – they won’t feel the true essence of competition.
10. Based on current trend, we can foresee that the rising number might not change anytime soon. What are some of the things existing mall operators need to take into consideration if the number grows larger in the coming years?
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