ECE on future-proofing shopping centers

Henrie Kötter, CIO of ECE Projektmanagement, explains how technology helps provide what customers want and is key to making good retail investment decisions

Disruptive technology, and the need to embrace it, has been influencing both the retail and the retail real estate sector for a while now, but it is not only the rise and growing success of e-commerce that is challenging retailers and investors. In fact, retailers – shopping centers in particular – are facing multiple challenges at the same time, e-commerce being just one of them. Other aspects include poor or outdated locations, unsuccessful product lines or the effects of an overly rapid expansion. Both retailers and investors must continuously consider how to meet these challenges.

Adopt a customer-centric investing approach

Good investment decisions are key to preparing for the future, but investors often struggle to know where to start. Which investments will make the most sense in the long term and offer the biggest bang for your buck? To get the right focus, it is critical that investors shift from an asset-oriented approach to a customer-focused approach. In other words, investments must be allocated to measures that have the greatest effect in meeting customers’ wishes and improving the customer journey.

Secondly, investments must be systematic and based on a proven analytical approach. This includes comprehensive research and tailor-made customer surveys providing a deep and individual analysis of each shopping center.

One particularly important aspect of future-proofing shopping centers is digitalization. ECE’s digital mall pilot project, launched in 2017, is an example of this in practice. It provides both a digital and customer-focused solution.

Enter the digital mall

The idea is that from a rational perspective, e-commerce in its current form is pretty uneconomical since many products have to be carried to the customer over long distances. This causes time and cost inefficiencies. It would be more reasonable to go the other way and deliver the products from a location close to the customer. Many products are often already situated in the vicinity of their final destination, but nobody knows where and so far there has been no integrated solution to cover it.

The digital mall approach provides a local inventory of a shopping center and makes it available for customers online. It not only helps visitors plan their shopping trips, but also to select and reserve products, and pick them up locally. It also allows products to be sent directly from the nearest center to the home when consumers – hybrid as most of them are nowadays – search and buy a product online. As price differences between online and offline shrink, shops are becoming a thing of the past, so the real advantage for the customer becomes speedy delivery. And that is a lot easier and more efficient when it is being processed from a shop nearby than from a remote warehouse somewhere in the country.

With ECE’s 200 malls under management, it is not only size, a large grid of centers and proximity to customers that create momentum for the digital mall – in Germany, for example, more than half of the population lives within 30 minutes driving distance of an ECE center – it is also having a close and long-standing network of retailers. The pilot project at our Alstertal-Einkaufszentrum in Hamburg, for example, has already started successfully, with 200,000 products available to date. By the end of 2018, approximately 50 retailers will have participated in the digital mall project. It is also a valuable source of information and experience to us for future progress: there are plans to connect several shopping centers to the digital mall platform.

Future-proofing through technology

Digitalization is a major driver for future-proofing shopping centers, and for making wise investment decisions in retail and retail real estate, as they evolve into multifunctional properties. It makes retail malls not only shopping destinations, but also leisure spots, omnichannel and logistics platforms at the same time, providing all services – and all distribution channels – along the customer journey.