By Peter Tonstad
Fifteen years is an eternity when it comes to technology. Imagine a world without the Apple iPhone or all the other smartphones that have followed. Fifteen years ago, that was the case. The iPhone launched in June 2007, and, as we all remember, the new phone was magical. It was like nothing else we had seen before. “Where is the keyboard on this thing?” Yes, we all had color screens with a selection of apps, but the way everything was consolidated and connected to a single ecosystem was something else entirely. The mechanical gesture feature, pinch to zoom, was also remarkable. Do you remember how mind-blowing that was the first time you used it? Three years later, we got the same thing, this time in a larger format, when Apple introduced us to the iPad. Once again, the product caused quite a frenzy, as the entertainment and business value increased proportionally with the size of the screen.
Think back 15 years: Social media barely existed. Facebook officially launched in 2004, became publicly available in 2006, and introduced the disruptive Facebook Ads platform in late 2007. Although most of us were well acquainted with digital advertising and Google’s AdWords at the time, the idea of social media as a marketing channel was nothing short of revolutionary. For shopping centers, Facebook Ads, and later other social media networks, created a tremendous new opportunity to directly engage with shoppers.
New Global Opportunities
Those new platforms and digital ecosystems opened up huge new global opportunities that were embraced by countless industries and thousands of startups, impacting virtually every aspect of business around the world.
I remember working in the media industry at the turn of the millennium. The level of innovation was insane. The only problem was that most of those innovations were apparitions. There was a lot of talk back then and a lot of PowerPoint presentations. All of the fantastic ideas about how media content could be personalized down to the last word or image are still “works in progress”. For the media industry, however, which until then had been dominated by printed newspapers, magazines, broadcast television, and radio, it was a matter of either evolving or dying: Either innovate and reposition yourself completely, or you will be out of business in the not-too-distant future.
The entertainment industry, represented by movies and music, faced the same doomsday challenge a few years later. The Internet had transformed the way we listened to and shared music. The peer-to-peer music sharing service Napster proved just how enticing the offer of free music could be. Services like Pirate Bay and LimeWire continued to fuel the acceptance of torrent sites, which were later supplanted by Spotify (2006) and Netflix (2007). The entertainment industry is thriving in what could be characterized as more of a revolution than an evolution – not in spite of the internet, but because of it.
Slow Velocity of Attrition for Retail Real Estate
Kiss Your Mall Goodbye – online shopping is faster, cheaper, and better. That was the headline on the cover of the 3 August 1998 issue of Time magazine. Despite the fact that the media and countless analysts have trumpeted the day of reckoning for retail real estate, it has never fully materialized. The velocity of attrition in retail real estate has been much slower compared to the rapid changes experienced by the entertainment industry. That could explain the lack of urgency to employ technology and the perception of the industry as slow to innovate, despite huge shifts in shopper behavior. Seizing opportunities created by technology will be key to unlocking new sources of revenue.
By 2007, e-commerce accounted for 3.5% of total retail spending. Fifteen years later, that number has risen to 20% (Statista.com), with physical stores still accounting for the remaining 80%. Some estimate that by 2050, e-commerce and physical retail will account for an equal share of consumer spending. Physical retail has remained resilient despite major advances in retail technology. However, future relevance requires moving beyond the traditional view of shopping as online or in-store and viewing shopping as technology-enabled and fully omnichannel.
When your business is technology, time flies. The Placewise story begins in 2000, when the company was founded on the idea of leveraging the latest technology at the time – SMS or Short Message Service and media-rich websites. Peer-to-peer SMS had been around for a while. It was introduced in Europe as early as 1993 (but not in the US until 2001). The new business opportunity that SMS offered was the ability to send a message to many recipients. The first SMS client was a local football club, whose coach used the service to communicate with the players. Within a short period of time, the tool became widely used as a marketing channel by all kinds of businesses, including a handful of shopping centers.
Full Focus on Shopping Centers
In 2004, Placewise launched our first digital “customer club” for shopping centers in Europe. Shoppers could opt in by sending an SMS with a keyword to a short code, and they would receive marketing messages in return. By 2006, the response was so strong that Placewise decided to start a separate company focused exclusively on digital work for shopping centers.
Initially, Placewise was all about messaging, websites, and digital content creation. Fifteen years later, we are the most comprehensive, industry-specific retail real estate platform in the world. We are a complete ecosystem of customer data, data management, content management, client relationship management, tenant communication, and marketing automation, driven by algorithms, cross-retailer e-commerce, business intelligence, and operational support tools.
Every step of the evolution and every innovation has been aimed at increasing the digital reach and improving the digital experience offered by our shopping center clients.
Fifteen years ago, the concept of digital reach was unheard of in the shopping center industry. At best, the industry focused on the number of likes and followers the center had on Facebook. Placewise recognized the value to be gained by our shopping center clients by digitally connecting with their customers beyond Facebook. We made it our mission to build lasting digital relationships with shoppers and to leverage technology to convert digital shopper engagement to increased footfall and sales for our clients.
To some extent, the world is overpopulated by technology. Too many tech companies start with solutions, not problems. If you do not know the industry, how do you know you are solving the right problems? Focusing on retail real estate is not a given formula for success. As all of our industry peers know, the retail real estate industry has some unique challenges to overcome. One obvious issue lies in the fact that shopping centers have two “customers”, tenants and shoppers. Shoppers do not have direct customer relationships with shopping centers – that relationship exists between the shoppers and the individual retailers. What happens if the retailer leaves?
Dealing with the Pandemic
In the last 15 years, we have all experienced two years of a pandemic. It brought about an entirely new situation in which the foundation of the retail real estate industry was challenged; instead of doing everything possible to attract visitors, shopping centers were forced to close. Out of necessity, the pandemic accelerated the adoption of e-commerce, click-and-collect, and other low-touch purchasing and fulfillment technologies. The frantic mass movement toward e-commerce led to a resurgence of “death of the shopping center” opinions and stories, but once shopping centers were allowed to reopen, the opposite thing happened. Shoppers rushed back to shopping centers, spending more money than ever before. However, it is unlikely that once the “cabin fever” subsides, shoppers will be eager to forgo the convenience of the pandemic era, which allowed for new purchasing and fulfillment options.
The pandemic also highlighted the need for technologies that could make shopping center operations and tenant communications more efficient. The rapid pace of innovation was driven by a dire need to reduce expenses and to manage a greater volume of customer communications and interactions between tenants and landlords. We continue to see examples of how our operational support tools are replacing thick binders and people running around to get signatures or share pieces of information. Buildings will continue to become smarter, more efficiently driven by sensors, and more sustainable. As a new generation of people take over the management of operations and stores at shopping centers, technology is not just the solution for efficiency gains, but an expected part of their daily workflows.
After all of the great technological developments of the last 15 years, we believe that the next 15 years will transform shopping centers into true omnichannel offerings. Shopping centers will become true combinations of physical and digital marketplaces. All products at a given shopping center will be available for purchase online, with cross-retailer payment, pick-up, and delivery. Such technology exists today, and our most innovative clients are already using it. The next hurdle to overcome involves mass volume adaptation.
Proptech is by no means a hype. The right property technology can help solve real business problems, improve efficiency, and deliver a better user experience for everyone.