Placemaking Column by Caroline von Westerholt
The looming threat of possible vacancies within the retail sector, could be countered if we abandoned our rigid structures, our holding on to old real estate valuation patterns, and our immobile way of thinking. To date, the space of a property is still advertised in a very static manner. However, it would be more future oriented to market properties as dynamic platforms and as integral cooperating parts of omnichanneling. A great opportunity with regard to the modern retail cycle lies therein.
Whether it is a shopping center or a high street: In order to convince the fed up customers, to engage in physical shopping again, they are offered more and more additional experiences aiming to turn shopping into an experience once again. Expanded gastronomic offers, cinemas, indoor mini-golf, augmented reality, and wellness oases are just some of the wide range of add-on experiences. At some locations, new incentives do, in fact, seem to work; at many, however, after a short initial flow the impulse quickly wanes again. Leaving nothing but additional costs. According to retail marketing expert Rachel Shechtman: “It is not enough to have a roller coaster at your center, because six months later, someone else will have one, too, and then the question will be, ‘Where is the new thing?’”
After their initial enthusiasm, customers quickly realize that the spicing up of locations with experiences or terms such as entertainment, luxury, etc. is nothing more than relabeling. What’s missing out is the real change in structure. The change from a static point of sale into a dynamic brick and mortar as part of exciting omnichannel sales. And if a purely static point of sale is no longer enough to retain customers, what function do we have as retail locations and spaces now and in the future? How can we evolve to become a real part of the dynamic digital retailing?
Whereas online retail used to support the physical store, today, it is increasingly the other way around, regardless of whether purchases are actually made in the store itself or ultimately online. The space has to increasingly serve as an additional marketing platform, as a stage for innovative products and services in the context of omnichannel. That is true whether swings are hung from the ceiling or an instore digital retail experience is used for marketing.
The brick-and-mortar store there within is the place in which customers can interact with the products (touch, handle, test) they have seen or heard of before digitally. Or the other way round. The mere real estate property itself is not the trendsetter. It’s the vehicle for the user to promote his innovative trends. The tenant or user sets the trend and specifies the degree of innovation. Understanding the (retail) space as a dynamic marketing channel for tenants, which supports them in responding creatively and flexibly to the requirements of their customers, is essential. That is the real first step in the rethinking process, which creates added value for the tenant or user, thereby ultimately providing another reason to rent again.
The mere real estate property itself is not the trendsetter. It’s the vehicle for the user to promote his innovative trends.
Therein lies the next big challenge. Who are the right tenants, users, or cooperation partners for my space? How do I find those tenants, and how can I make myself stand out? What real added value does my space offer compared to my competitors, and can I make my space even more attractive and dynamic for potential tenants through the use of technology and advertising or marketing cooperations? The answer lies in B2B in its purest form, but rethought and from a new dynamic performance perspective.
The retail property and, therefore, those involved in it will see themselves as dynamic marketing channels for the users, supporting them in responding creatively and flexibly to customer requests, digital requirements, or user changes. Taking a new look at a property from a dynamic perspective almost makes it “moveable”.
Why is such a shift towards more flexibility so difficult for us? Why is a shift in thinking from solid walls to “space as a transformative marketing channel” so challenging?
The need to think of space in flexible or mobile terms and, most importantly, to be able to quickly adapt it to new requirements runs counter to the way real estate has been perceived up to now. How does real estate as a marketing platform with ever more rapidly changing tenants and requirements fit into a system in which the value of a property is based on the remaining terms of existing leases? Should rental rates be based on local sales or turnover rents, and will incentives to shop online be created locally in the future? Will municipalities, in whose city centers (at least in Germany) assortments are specified to the square meter, make such tenant or assortment flexibility possible? Moreover, if retail space in the future is much more of a flexible marketing space, with dynamically changing products and tenants, how will we as location branders change our marketing activities in the future? What exactly will we market and to whom?
Once you have really accepted that you can’t beat something, you finally set your power free to join and become something big within the new
One thing is for sure: It will involve a lot of work to develop new structures, new technology, new tenants, and new ways of marketing ourselves. However, it is also certain that reimagining the retail space as a dynamic marketing platform will create a sustainable opportunity for the brick-and-mortar space to once again play a leading role in the digital marketing age. Once you have really accepted that you can’t beat something, you finally set your power free to join and become something big within the new. The winners will be those who courageously question themselves, accept confidently their new important role and enter into new cooperations not fearing to change old structures. The next few years will be incredibly exciting for the retail real estate world and should also prove to be very prosperous.
About the author:
Caroline von Westerholt has masters degree in real estate economics and is the Head of Strategy & Repositioning of Retail Real Estate at Twenty One Media GmbH (Germany). Prior to that, she spent nine years as Director of Development for Urban Districts at MAB Development GmbH and five years in Asset & Portfolio Management for Commercial Real Estate at Provinzial Versicherung.