10 Takeaways from the ULI Asia Pacific Summit

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1 10 Takeaways from the ULI Asia Pacific Summit Source: apacsummit.uli.org 1) The Fung Global Retail & Technology team attended the ULI (Urban Land Institute) Asia Pacific Summit, held in Singapore. 2) The event brings together institutional investors, funders, developers, advisers, planners, architects and city leaders, and provides a forum for real estate and land-use professionals to learn about the latest global real estate trends, connect with industry leaders and explore new business opportunities. 3) Much of the discussion centered on using extra space at malls for entertainment or offering it to local artisans in an effort to drive traffic and interest in malls. The share of food and beverages in malls is higher in Asia than in Europe and the US, and this is likely to rise. 4) Developers can use apps and other technology to bring retailers and consumers together as they shop, consume food or beverages and enjoy festivals or other entertainment. 5) There are many underserved customer groups, such as baby boomers and the plus-sized, who have traditionally been neglected, but who represent a significant demographic and have substantial purchasing power. 6) There was further discussion on what the mall of the future and the office of the future look like, and it is possible that they both integrate work, shopping, food and beverages, entertainment, healthcare and other activities. 7) The Fung Global Retail & Technology team will continue to attend and report on further key events worldwide. About the ULI Asia Pacific Summit and the ULI The Fung Global Retail & Technology team attended the ULI (Urban Land Institute) Asia Pacific Summit, held in Singapore during June 6 8. The event brings together more than 500 institutional investors, funders, developers, advisers, planners, architects and city leaders, and provides a forum for real estate and land-use professionals to learn about the latest global real estate trends, connect with industry leaders and explore new business opportunities. 1

2 The ULI, established in 1936, is a global, member-supported nonprofit education and research institute, with more than 40,000 members worldwide. Its mission is to provide leadership in the responsible use of land, and in sustaining and creating thriving communities worldwide. The institute has more than 1,800 members across the Asia- Pacific region. Source: Fung Global Retail & Technology Below are 10 selected takeaways from the event. 1. Multi-Use Is the Way of the Future Retailers and property managers use their spaces for more than just selling goods in the future, as the amount of space required for physical sales is lower due to the transfer of inventory to e-commerce. Retailers can use their spaces to expand the experiential component of store visits by adding events, food and beverages, auxiliary services or offering space to pop-up stores. Moreover, the increasing transformation of physical stores into showrooms for e-commerce business frees up even more space for additional functions. Physical stores can expand beyond being spaces purely for transactions into public meeting spaces. 2. Seamless Online-to-Offline or Offline-to-Online Integration Consumers no longer differentiate between the online and offline spheres, electing to buy either online or in-store and to pick up their purchases at the store or another location, or have them delivered to their home, office or another location, according to their shifting preferences. Retailers should view the shopping experience as their customers do; as one all-encompassing experience, not separate channels and devices. Although the term omnichannel has been bandied about for many years, in reality for many retailers to this day, the online and offline businesses remain separate, with separate inventory. Retailers who have successfully merged these two worlds will have a huge competitive advantage over those who are still attempting to manage online and offline separately. 2

3 3. Partnership and Collaboration Between Retailers and Developers Together They Can Find Solutions The challenges of dealing with the steady encroachment of e-commerce on physical retail are too large for the retailers or the developers alone to overcome. Property managers and retailers need to work together in a concerted effort to design malls and develop promotions that benefit all the retailers in the mall, and therefore, the developers as well, through greater foot traffic and profitability. Technological solutions, such as apps for the entire mall featuring promotions or competitions that involve multiple stores in the mall can drive traffic and increase the time consumers spend at the entire mall, encouraging consumers to linger rather than enter the mall just to make a single purchase and leave thereafter. 4. There Are Many Underserved Customer Groups, such as Baby Boomers and the Plus-Sized Products targeting baby boomers and the plus-sized are underserved by retailers. About 65% of women wear a size 14+ in the US, according to market research company The NPD Group, and plus-size US women s apparel sales have outpaced total women s apparel sales for the past three years. Moreover, the percentage of teens buying plussize clothing is expected to reach 34% in 2017, up from 19% in 2012 (The NPD Group). This segment is highly underserved, with limited in-store options, prompting women that wear a size 16 or larger to buy more than 50% of their clothing online, versus 33% who wear a smaller size (ModCloth). The US Census Bureau estimates there were 75.4 million baby boomers (i.e., those ages 52 70) in 2015 versus 83 million millennials, however, boomers outspend their children and grandchildren nearly 2 to 1 and hold 70% of US disposable income, yet less than 5% of advertising dollars are geared towards them (Nielsen), and over 80% of boomers feel that advertisers are not targeting their needs. As consumers, boomers are connected, health conscious and want convenience. 5. Encourage Local Artisans to Use Excess Capacity in Malls a Driver of Foot Traffic As referenced in Takeaway #1, offering excess space in malls would enable developers to achieve several goals. First, filling empty spaces with artisans would generate consumer interest and drive traffic to the mall. It would offer an interesting alternative to the standardization of chain and department stores, and drive traffic to those stores as well. Second, filling empty spaces with artisans would help improve the feeling that a mall is busy and reduce the impression that empty stores create that the mall is falling out of favor with consumers. 6. Increase Food and Beverages in Malls Increasing the amount of food and beverage space in malls gives consumers additional reasons to come and linger at the mall, driving foot traffic to other stores. In the US, food service accounted for just under 9% of total mall space in 2014 (latest), according to the International Council of Shopping Centers (ICSC), and at top malls in the US, the UK, Germany and France, food service outlets account for approximately 13% 19% of all units, and an even higher share at newer malls they are clearly taking a bigger share of space. In China, the formula used to be 70% retail and 30% food and beverages, according to Hong Kong Lan Kwai Fong Chairman Allan Zeman, however, Zeman claims that the optimal formula today is for space allocated as 65% food and beverages and 35% 40% retail. 3

4 7. Entertainment Opportunity in Malls from Retail with Entertainment to Entertainment with Retail? Whereas malls previously focused on commerce, with the occasional entertainment such as a fashion show thrown in, perhaps malls should focus on entertainment first and commerce second. Malls are increasingly competing with social media and smartphones for the consumer s attention and need to offer a comparable quality and quantity of entertainment. Why should the consumer go to a mall when he or she can view higherquality entertainment anywhere on a smartphone? Malls are uniquely positioned to offer a comprehensive experience involving space, light, sound, food and beverages, and commerce, leaving smartphone functions behind if conceived and executed skillfully. 8. Developers Should Build Apps to Reward Customers for Shopping their Properties and at Events such as Festivals Echoing the comments in Takeaway #3, developers have an opportunity to work with retailers to build apps that drive traffic to the entire mall and to all its tenants, which increases profits for the retailers, and therefore, the developers as well. The apps can offer promotions, coupons and scavenger hunts, and include food and beverages combined with retail, or a combination of retailers. For example, if consumers purchase a meal in the food court, they could receive a discount at one or more retailers. Along the line of entertainment, apps could support festivals, events and entertainment taking place at the mall and link them to the retailers in the mall. 9. Live-Work-Play How Is the Mall More Than Just a Mall? Malls have the potential to become spaces where consumers spend a significant portion of their lives. In addition to shopping, consumers can go to restaurants, go to the gym, visit the doctor, watch films or other entertainment, or perform several other types of activities at the mall. Malls can be attached to hotels, apartment buildings or offices, integrating shopping with everyday activities. Rather than being a location to which consumers travel in order to purchase goods, malls can be more tightly integrated into modern lives and the variety of activities consumers undertake on a daily basis. 10. What Does the Office of the Future Look Like? As malls are changing, offices are changing as well. Offices have been transformed from a maze of individual rooms into large common workspaces, with flexible rooms and movable furniture that can easily be reconfigured depending on the task at hand. Although the advent of telecommuting means that fewer employees needed space in the office, and wireless communications technology means that employees can connect from anywhere, it appears that the pendulum has swung back in favor of having a common space where employees can have actual face-to-face conversations. Tech companies have long included recreation, relaxation and dining facilities on their campuses to make employees feel more at home while at work. It is possible that the fusion of activities at the mall is implemented to some extent at work, and our offices will include convenient nearby shopping, dining and recreational facilities. 4

5 Deborah Weinswig, CPA Managing Director Fung Global Retail & Technology New York: Hong Kong: China: John Harmon, CFA Senior Analyst Hong Kong: 8th Floor, LiFung Tower 888 Cheung Sha Wan Road, Kowloon Hong Kong Tel: London: Marylebone Road London, NW1 6JQ United Kingdom Tel: 44 (0) New York: 1359 Broadway, 18th Floor New York, NY Tel: FungGlobalRetailTech.com 5