The mall is dead, long live the mall

IT survived multiple economic depressions, two world wars and a catastrophic fire. But after 162 years, Robinsons will be no more.

The iconic Singapore department store may have been the pandemic's latest casualty, but the truth is that the bleeding began long before Covid-19 struck. Suffering from intense competition from e-commerce, the once-publicly listed company had not turned a profit since at least 2014. The pandemic has merely knocked the last nail into its coffin.

Similar stories are playing out for retailers across the world. The double whammy of shoppers' increasing penchant to go online and a pandemic that locked billions of people out of stores and in their homes has devastated retailers from individual brands such as Zara and H&M, to multi-label shops such as Robinsons, to the granddaddy of them all: malls.

In Singapore, apparel and footwear sales plunged a record 62.7 per cent year on year (yoy) in June. While overall online sales that month jumped 151.2 per cent yoy, this surge will not overturn the damage done by store closures and reduced spending from consumers worried about jobs. The Boston Consulting Group (BCG) expects the global fashion industry to shrink by a third, losing US$640 billion in revenue this year.

Online pivot

It is vital for retailers to get online. Covid-19 lockdowns have pushed previously resistant consumers to try out e-commerce: 14 per cent of consumers in the United States and 17 per cent in China purchased clothes, shoes and bags online for the first time due to the pandemic. History suggests these neophytes will be converted. E-commerce spending increased during the Sars epidemic and remained at that level after.

Brands that have not paid attention to their online channels have been the worst hit, including high-street retailers such as Zara, H&M, Esprit and Gap. These rely heavily on walk-in custom.

Zara's owner Inditex had to shut 90 per cent of its stores and suffered its first quarterly loss - of 409 million euros (S$657 million) - despite online sales surging 95 per cent. It will close 1,200 stores globally by 2021 and will be investing one billion euros to increase online sales from 14 per cent last year to a quarter by 2022. It will also be upgrading its remaining stores to integrate them with its digital platform. This would include making them distribution hubs for online sales.

Inditex, whose strength has been in aping market leaders, is embracing omni-channel retailing. This involves interacting with customers through various channels: websites, physical stores, pop-ups, direct mail/e-mail and catalogues, call centres, social media, mobile apps, gaming consoles, TVs, networked appliances, home services, and so on.

Merchants must integrate these disparate channels into a seamless omni-channel experience.

BCG says channel shifts will keep accelerating. Retail stores' roles will change too, with flagship locations serving branding purposes while the average physical location shrinks to serve as order fulfilment and community activity hub.

Unique experiences

The operating model of malls is also due for a revamp. True destination malls offering fancy amenities and unique experiences are better positioned to ride out the pandemic than ageing, threadbare malls offering stale, two-dimensional shopping choices indistinguishable from each other. Malls remain relevant in the retail landscape - for "chore purchases" such as groceries and because shopping is still a pleasurable activity. Witness the crowds on Orchard Road over Black Friday weekend. Pandemic? What pandemic?

Innovative malls will incorporate value-added elements, according to a McKinsey report. These include concert halls, fitness clubs and farmer's markets, which provide leisure and entertainment that cannot be satisfied online. Global examples of malls that have embraced such a direction include Spain's kids-friendly Xanadu, which features a ski slope, go-karts and balloon rides; and Minnesota's Mall of America, which boasts an underwater aquarium, a theme park and a dinosaur walk museum.

In Singapore, CapitaLand's Funan Mall has found a new focus. Formerly the go-to for computers and accessories, Funan went into a decline as shoppers turned to buying such products online where they enjoyed an endless product selection and easy price compari-sons. After redevelopment, Funan now features a centrepiece rock climbing wall, a rooftop futsal court, an indoor cycling track and an urban farm. It also deploys advanced technology, such as facial recognition for entry control to the two office towers attached to the mall.

Mall of the future

Imagine driving into Ion Orchard. As you park, the mall's mobile app offers to place an order for your favourite mocha Frappuccino. You pick up the beverage on your way to a boutique, where you take a picture of a dress you like. The app, knowing your measurements, shows how the garment fits you. It suggests matching shoes and accessories, and alternatives from other shops in the mall. You put your selections in the app's cart, click "Pay", and the goods are delivered to you the next day.

A leading mall operator in Singapore is working to create such a shopping experience, leveraging artificial intelligence and digitalisation to merge the convenience of online shopping with the enjoyment of brick-and-mortar browsing.

Such advances favour larger mall operators, which can aggre-gate more data and fund the cost of acquiring data and developing technologies.

Mall operators need to go from being landlords to providing shopping entertainment if they are to avoid being a footnote in marketing history books. Do that well and they will have staved off the palling of the mall.