Takeaways from the 2017 ICSC Research Connections Conference

Transcription

1 Takeaways from the 2017 ICSC Research Connections Conference The FGRT team attended the 2017 Research Connections Conference organized by the International Council of Shopping Centers (ICSC) in Toronto, Canada. Selected takeaways from the meeting include: 1) Retailers have to do their homework, even when entering a neighboring country such as Canada. 2) Retailers can benefit greatly from location-based data. 3) The current low-inflation environment should persist for at least another year or will it? 4) Entertainment is the new mall anchor. 5) Real estate companies are using consumer and location data to determine the best sites for new shopping areas. 6) Consumer priorities and choices are evolving due to population changes, shifting economic power, technology and changing values. 7) Dining options can redefine and create all-new consumer experiences. 8) There has been a surge in the amount of data available to retailers. 9) Europe is too big for generalization, but is being driven by volatility in the economy and geopolitics, changing consumers and retail sector rebalancing. 10) Retail needs to adapt quickly to compete with e-commerce. 1

2 Introduction The FGRT team attended the 2017 Research Connections Conference organized by the International Council of Shopping Centers (ICSC) in Toronto, Canada. The ICSC is an industry group that aims to advance the shopping center industry and to promote its role in the commercial distribution of consumer goods and services through: education, conducting meetings and other programs, collecting and disseminating information, offering professional certification programs and providing publicity to the general public. Below, are selected takeaways from the meeting: 1) Retailers Have to Do Their Homework, Even When Entering a Neighboring Country such as Canada The opening keynote titled Crossing Borders: Retail Expansion Changes, Challenges and Opportunities discussed retailers experiences when moving successful retail businesses from the US to Canada. For example, Old Navy s entry into Canada was generally successful, however, its entry into Montreal took much longer to build customer loyalty, due to the province s (Quebec) diverse population. Another case was a sporting goods retailer that marketed sporting rifles without having taken the time to understand the fanatic interest in ice hockey in Canada, thus missing the mark with local consumers. Canadian consumers often travel to the US and are familiar with US brands, and retailers that attempt to provide lower-quality products in Canada are likely to be less successful due to this familiarity. On the positive side, Canadian consumers are very loyal once won over. Other differences include Canada being a smaller market for luxury products and the large differences in weather. The weather is colder in Canada, and so a retailer would not attempt to introduce the same products as in Puerto Rico, and there are also differences between Eastern and Western Canada. Finally, due to differences in disposable income, Canadian consumers seek value and tend to buy in higher quantities. 2) Retailers Can Benefit Greatly from Location-Based Data The session titled Innovation in Spatial and GIS Applications and Impact on Decision Making included presentations from two service providers offering location-based services. The primary source of this data comes from smartphones. Businesses can use data on peoples movements to get an idea of the area that a store gets its customers from and, combining this with demographic data, estimate socioeconomic and demographic profiles. This customer data can also help retailers understand the time of day or week consumers visit stores, where they go before and after, and what other stores they visit. These data can be used to create tailored, personalized advertising and to determine the optimal placement for new stores. 3) The Current Low-Inflation Environment Should Persist for at Least Another Year or Will It? ICSC Chief Economist and Deputy Economist at CIBC World Markets Inc. Benjamin Tal offered an entertaining presentation titled Economic Outlook for Retail: What s Normal? He dismissed the Trump Bump in the US stock market, noting that global markets had seen similar increases. The reason? Easy money from central banks, noting If you generate enough wind, even pigs can fly. The question remains, how long can this environment last? China is experiencing slowing GDP growth amid an aging population. Europe recently had stable election results, however, the UK lacks a firm 2

3 plan following the Brexit vote. Although the US unemployment rate is quite low, the labor market is running out of people, facing a mismatch of people without jobs and jobs without (qualified) people. Millions of people have not participated in the economic recovery, which is a global phenomenon. President Trump is seeking to effect economic changes via trade, however, tariffs will adversely affect lower-income people more. The bright spot remains China, where consumer spending is rising at twice the US rate. 4) Entertainment Is the New Mall Anchor Replacing large department stores, restaurants, cinemas and gaming facilities are becoming the new mall anchors, according to the presentation titled Entertainment: The New Mall Anchor. The presenter, Fab Stanghieri from Cineplex Entertainment, discussed the various media his company has deployed in retail locations, from preshow advertising to digital signage. Cineplex s digital signs all include cameras that capture the viewer s age, sex, physical appearance, clothing and time of viewing the signage. The company also offers amusement solutions, such as gaming facilities, benefiting from the global popularity of e-sports. Its Rec Room location is targeted at millennials, with group gaming facilities, food and meeting facilities in a 60,000-square foot space. It also operates SCENE, its loyalty program, with 8.3 million members providing a wealth of data for the company to analyze for making business decisions. For example, the company uses data to offer a popular movie at 8:15 p.m. at a second-tier location, calculating that the 8:00 p.m. movie in the tier-one location will sell out and also accounting for travel time. 5) Real Estate Companies Are Using Consumer and Location Data to Determine the Best Sites for New Shopping Areas In a presentation titled Case Studies: Leveraging New Technologies for Research Decision Making, representatives from Macerich and Oxford Properties discussed how they use data to enhance business decision making. Macerich used customer traffic patterns and demographics to design a new shopping area in downtown Philadelphia, reversing the trend of consumers heading to the suburbs for high-quality shopping. In the second-largest city on the US East Coast, the project offered flagship retail, entertainment, dining and off-price retail (which was missing). The Oxford representative likened retailing to the book and film Moneyball with respect to the benefits of data. Using consumer location data, real estate companies can determine shoppers paths, i.e., where they come from and go. These data can be used to determine the layout of a mall, what the mall s hours should be and how to maximize visitor retention. The speaker commented that retail is no longer a traditional business; it is a mix of business, technology and statistics. 6) Consumer Priorities and Choices Are Evolving, due to Population Changes, Shifting Economic Power, Technology and Changing Values The speaker, Amanda Bourlier, a Senior Analyst from research firm Euromonitor, offered a presentation titled Changing Consumer Habits and Impacts for the Retail Industry. Her presentation centered on the idea that consumer priorities and choices are evolving due to population changes, shifting economic power, technology, changing values, as well as due to connectivity, mobile access and youth populations. In addition, a recent Euromonitor survey of consumers identified several megatrends shaping consumption globally: the desire to experience more, shifting market forces, healthy 3

4 living, shopping reinvented, a middle-class retreat, ethical living, premiumization and connected consumers. Yet, e-commerce penetration is lower in many developing countries, due to the perception that physical stores are more trustworthy, consumers seeking the experience of shopping in-store and avoiding delivery hassles, as well as a lack of trust in the security of online payment. She provided two case studies of innovative international companies: Best Day, an operator of travel service kiosks in Mexico, and Pack ASAP, an operator of storage lockers for all vendors in Argentina. Bourlier concluded her remarks with five brief points: 1) shoppers expect value at all stages of the shopper journey; 2) shoppers may prefer value over price; 3) physical locations still have an important role to play; 4) shopping is constantly in a state of reinvention; and 5) reinvention is a gradual process. 7) Dining Options Can Redefine and Create All-New Consumer Experiences The session was titled Food and Fun: Cultivating Shopper Traffic with Dining and Entertainment, and speakers from JLL and Oxford Properties gave their insights on combining dining with retail. Oxford is developing a new concept called Oxford Market (currently in two locations), which occupies former Target boxes and consists of a food hall with local best-in-class food providers, as well as prepared food and a demonstration kitchen. Another speaker discussed replacing anchor stores in malls with food, and some malls now feature loyalty centers, which are places for loyal customers to sit and relax. The selection of the right food and beverage operator is also essential, and real estate operators have become more involved in the process. Moreover, finding the right balance between food and beverage and retail is important. Finally, millennial shoppers are developing a high amount of disposable income and are looking for a food experience that is communal with local products. 8) There Has Been a Surge in the Amount of Data Available to Retailers Retailers, restaurants and shopping center owners have the ability to access increasing amounts of data. In addition to internally-generated data, retailers can access retail customer transactions (1 billion per year), credit card transactions (145 billion in the US) and massive mobile observations (more than 2 trillion per year). The presentation titled Changing Face of Analytics: Big Data Integration discussed how unlocking the consumer journey leads to better decisions, such as: How often do consumers visit my store? How much time do they spend in the store and when? How is my brand performing versus the competitors brands? Where should I open my next store? Which stores are over and underperforming? Is my campaign driving customers to my store? 9) Europe Is too Big for Generalization, but Is Being Driven by Volatility in the Economy and Geopolitics, Changing Consumers and Retail Sector Rebalancing The speaker, Dr. Yvonne Court, a Partner at Cushman and Wakefield in London, outlined the big trends in Europe as, volatility in its economy and geopolitics, and changing consumers (due to the discount culture, new consumer lifestyles and digital 4

5 upgrades), as well as retail sector rebalancing (the need to satisfy instant gratification, fashion cycles such as fast fashion, multichannel and the need to innovate in the front and back of the store). Trends in the fashion sector in Europe include physical shops still being important, off-price is growing, the importance of online pure plays, the need for a multichannel approach, luxury is still prominent and the expansion of athleisure. Moreover, she outlined several retailers and brands to watch, including fast-growing retailers such as Zara and other index brands such as Primark, H&M, TK Maxx, Kiabi and pure-play innovative retailer and athleisure brands such as Sweaty Betty. Other brands to watch include Asos, boohoo.com, Shop Direct and Amazon Fashion. 10) Retail Needs to Adapt Quickly to Compete with E-Commerce The speaker, retail consultant Jan Kniffen, summarized his 55 years in the retail industry as seeing an accelerating rate of change. Walmart opened its first Supercenter in 1988, and according to Kniffen, If you re not local, off-price or online, you re toast. The current themes in retail are price deflation, increasing online penetration, increasing price transparency and a need to curate the experience. Prices have been driven downward first by Walmart and now by fast fashion and technology. Stores are seeing half the foot traffic of six years ago, however, retailers that get it in terms of offering any place to order from, be fulfilled by and ship to face a tremendous opportunity. Moreover, Kniffen believes that online penetration is following an S-curve and is poised to see a huge surge in penetration. Finally, retailers need to offer a curated experience to fend off online competitors. 5

6 Deborah Weinswig, CPA Managing Director FGRT New York: Hong Kong: China: John Harmon, CFA Senior Analyst Hong Kong: 2nd Floor, Hong Kong Spinners Industrial Building Phase 1&2 800 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 6