Why B2C is the new business model for mall operators

In the good old days, shopping mall operators could sit back and watch the revenue come in from long-term tenant leases. Unfortunately, this is no longer the case, with rental income down across the globe due to consumers visiting malls less frequently than in the past. So, what can operators do about this downward trend?

After many serious conversations in boardrooms, operators have responded to these challenges in different ways:

• • London-headquartered Intu created a new combined customer performance directorate consisting of asset management, operations, marketing, and commercialization teams to improve footfall, dwell time, and rental performance within its malls.
    

• • US-based Simon Property Group launched an online shopping platform for customers to boost traffic and sales for its tenants.
    

• • Nuveen is developing Edinburgh St James, a unique retail-led, mixed-use destination for residents and tourists, which will launch in late 2021.

However, what’s holding back malls from changing fast enough to meet the needs of shoppers is a lack of insight into what consumers really want. The reason is simple: historically, operators have been business-to-business companies focused on serving their retail tenants. In the future, success for malls will be dependent on their ability to become and act like business-to-consumer companies.

Some operators have already moved to become closer to consumers by running customer loyalty programs, which is an excellent way to uncover trends in shopper behavior. Arguably, much more needs to happen here, including going beyond the confines of the physical in-store experience and collecting consumer lifestyle data, such as what people do before and after they visit malls. 

Mall operators can learn a lot from companies in other industries that have had to change their business models, such as popular supermarkets that produce their own branded products. They have done this not only to increase revenue and profits via the elimination of the middle manufacturer but also to capture valuable consumer insight. 

Going directly to shoppers is the most effective way to understand and respond to market opportunities. In doing so, malls will also be in a better position to provide greater levels of business value, and new services, to tenants expecting more than just rental space. That’s not enough nowadays.

There is a business reality, too, that is undeniable. Without change and without having the means to collect data to understand consumers, operators will never be able to call themselves customer-centric – and, thus, not be able to navigate these challenging times.

Unsure where to begin on this journey to B2C nirvana? There are three core areas you should consider looking at to transform your mall into a retail destination: 

1. Hire new talent.

Recognize that you must fundamentally change how your company operates in the next five years. Not surprisingly, you will need to bring people in with new skills and new ideas – and they will likely not come from the retail industry. We have started to see this trend with chief executives hiring individuals into heads of innovation roles.

2. Build a customer insights capability.

Armed with the right analytical tools, these researchers will be the engine of growth, supporting colleagues across your company with the insights they need to make informed decisions. This means you will have to invest in developing a data strategy so questions about what customers have done, are doing, and will do at all customer touchpoints, can be answered to support strategic and operational matters. If you are like most operators, you are not collecting the most basic customer profile data, nor are you utilizing must-have data such as shopper behavior, tenant sales, and category performance.

3. Invest in a modern technology platform.

Implementing a direct marketing strategy requires a standardized technical infrastructure that can adapt to fast-changing market conditions while also meeting the requirements of you and your colleagues to identify, monitor and respond to customers in a personalized manner at all times.