October 2013 – For this first report we have chosen to focus on the online retail trade and its potential impact on the shopping center industry and its development and format.
NCSC has employed WSP Analysis & Strategy to conduct a survey aimed at its members, as well as analyse how online retail has evolved and is likely to develop in the future. A Nordic perspective has been applied throughout.
The shopping center industry estimates that online retail sales will more than double over the next 10 years and thus pose a substantial threat to the industry. If this trend continues unabated, many shopping centers will be left facing formidable challenges. Growth may grind to a halt and some centers may also see a drop in sales. ‘Dead malls’ could become a more common sight.
In order to meet these challenges, stakeholders in shopping centers must develop their offerings. For retailers, the introduction of online shopping, for instance, will be important in order to take advantage of the online retail trend. For shopping centers, what matters is adopting multichannel strategies (e.g. showrooms, goods collection, own websites and a strong social media presence). Shopping centers will in all probability also introduce and offer other services, both public and private, and will very likely come to resemble even more meeting places, with restaurants a significant feature. The growth of the online retail market may also have an impact on the relationship between landlords and retailers. The bargaining power of retailers in negotiations with landlords will increase, which in turn may lead to new forms of lease agreements. Retailers and landlords have, however, a common interest in creating attractive shopping centers, which will require continued cooperation.
The retail trade’s history is littered with concepts that have come and gone and some that have endured. In recent decades the traditional city center has been challenged by shopping centers. Now shopping centers (and city centers) are facing a challenge from the online retail trade. Those players that are unprepared and not already taking action to see off this competition may well be squeezed out. For those that recognise the challenges ahead and meet customers’ demands, there are more opportunities on the horizon than threats.