How do the multiple channels of modern commerce affect a small town? Is e-commerce killing city centre retail and where do peripheral shopping malls fit in? How should retailers, landlords and city planners act? I would like to share my thoughts on this from a small town perspective.
In the first part of the article I described the state of retail in the small town of Lund, Sweden, and how it has changed over the last 25 years. In this second part I will move on to concrete advice for the different stakeholder, the landlords, city planners and retailers.
H&M and Swedish sports apparel retailer Stadium are two interesting companies, being among the few that exist in all retail arenas; in the city centre, the shopping mall and very successfully online. In the city centre they sell fewer items (you see people coming out of there with pretty small bags) of accessory nature and high margins. In the shopping malls and in the online distribution points, you see bigger packages from these companies but most likely with products of lower margins. Their sales patterns differ but their brands are everywhere, and this is where things are getting interesting from a retailer perspective.
Their sales patterns differ but their brands are everywhere
With lowering city centre rents, will we see more of popup-stores or showrooms? Everyone is talking about it, but it hasn’t really reached small towns such as Lund yet. I am a firm believer that the multi- or omni-channel approach is superior for brand awareness and customer service, and with lowered rent levels in city centres this will be a more viable alternative for many retailers that are more single channel today.
Another point where retailers' organisations are out of step with increasingly online consumer behaviour is opening hours. This goes for both shopping malls and city centre shops. Opening hours are typically daytime plus early evenings, where the shops are almost empty all day except during lunch break. Simply put, opening hours are adapted to employee needs and archaic agreements in the local trade federation - not customer needs. This will be very hard to change, but delaying customer adaptation will seriously hurt business, and even more so in a retail landscape where online is always open.
How should the municipality of Lund act in this changing landscape? If I briefly assume the role a city planner, always under political pressure to bring commerce back into town, I would acknowledge a few things:
- The city centre offers a unique experience that must be maintained and enriched, no one can match the pedigree of a 1000 years of history.
- Office workers mean a steady traffic of attractive consumers, traffic means commerce – plan for more offices in the city centre and do not focus all expansions in peripheral business parks. Lund has, for many years, deported all startups and larger office spaces to the outskirts of town. Office workers in these parts tend to gravitate to shopping malls for their errands.
- Car access will always be inferior to shopping malls but the city centre should mitigate this shortcoming as much as possible with clever use of parking space and reasonable access. This will never be a strong point for the city centre, but it shouldn't be allowed to degrade even further. This is especially important for the weekend activity.
Remembering that weekend traffic is mainly recreational and weekday traffic is more for errand purposes provides the clues needed for improving the city centre retail. Aim to increase the consumer traffic and let the retailers do what they do best: convert, up-sell and cross-sell.
Landlords in city centres should generally cooperate more, acknowledging that their real estate is part of a bigger whole, perhaps even subsidising some particularly traffic generating tenants, even if they are not their own tenants, because they drive shoppers to the block or street.
Landlords need to consider other models than fixed rents or revenue share
The omni-channel shopping behaviour should also be allowed to affect how retail leases are priced. Landlords need to consider other models than fixed rents or revenue share in an environment where the sale may be concluded online. Perhaps leases should be tied to the number of visitors or the total visiting time the store generates, as opposed to revenue. Thus being more in analogy with the cost-per-click traffic expenses that e-tailers face online.
Lastly, for peripheral shopping malls the key to success is to make the online and offline experience more seamless. This has been surprisingly slow and has moved a lot of consumer traffic to grocery stores and other distribution points. Make your retailers more successful by encouraging and facilitating in-store deliveries, in-store return of goods, activities that drive traffic. Shopping malls cannot replicate the experience of a city centre, but being more confined, they can offer completely different experiences, such as celebrity events and more.
In my own and in my family’s everyday life, we buy from retailers both online and offline, both in the city centre and in the shopping mall. We sometimes buy on impulse and sometimes very deliberately and price aware. Successful retailers are aware of that and if they want to increase their share of our wallets, they should be everywhere and offer goods and services that are relevant in each situation.
I would like to thank Jan Jakobsson and Marco Pusterla at Jakobsson Pusterla Arkitekter, Magnus Markgård at DB Schenker, Lena Gustafsson at the Lund Housing Committee and Johan Hallgårde at Avensia for inspiring and adding to this article. For further reading, I would recommend Johan's articles (in Swedish) on omni-channel strategies.
Robin Gustafsson is the CEO of Avensia, specialists in online commerce, but also a long time Lund resident, former student of city planning, house owner, family father and multi channel consumer.