Can Shopping Malls Find a Way to Enter the Internet?

Shopping centres are among the biggest losers of 2020. In spring they had to close before Easter, in autumn they lost a significant part of the most important fourth quarter in this industry, and at the end of the year they face another temporary closure. Stores are moving sales online on their own, while malls helplessly wait for shoppers. Experts at merce.com assess how they could fight harder for customers.

Until recently, the opening of a shopping mall in a larger city was an event for local media. In the West, the opposite process has been visible for years - malls are emptying out and going bankrupt. A 2017 Credit Suisse report estimated that in the US their number would shrink by as much as 25 percent within five years. With the pandemic, this phenomenon has also reached Poland.

- Looking for the causes of "mallmageddon", one cannot overlook the growing interest in buying online, for which shopping malls have no answer. With the traditional form of shopping, they allow brands and customers to gather many attractive stores under one roof. Online, they often limit themselves to posting opening hours and a list of stores. They do not use their main asset, namely their local character - notes Paweł Szewczyk, CMO of merce.com

What has been tried abroad and why doesn't it always work?

What has been tried abroad?

The innovator in this area turned out to be... Russia. In 2016, the owner of a shopping centre near Moscow launched the Fashion House Online Shopping project. The platform resembled a large online store, but the project is no longer operating.

Why do some ideas fail?

Other interesting examples appeared this year under the pressure of the Covid-19 pandemic, which is causing serious restrictions on footfall in shopping centres around the world. Lazada, a company belonging to the Alibaba group, launched LazMall in 2018 - a marketplace gathering products of well-known brands in a single e-commerce service. This year it made its tool available to the Singaporean mall Marina Square Shopping Mall, which moved its brands onto the platform, giving them a separate, exclusive section. Siam Center in Bangkok soon followed suit.

A slightly different step was taken by the Northern European shopping centre chain Citycon. Aware that many brands already have their own e-shops but during the pandemic struggle with delivering a larger-than-usual number of orders to customers, it offered them a platform for collecting e-purchases on site, in the increasingly popular click and collect system.

- A shopping centre entering e-commerce usually encounters several obstacles that turn out to be impossible to overcome. Most brands present in these facilities already have online stores and see no need to invest in another company's system to handle processes that happen on their side anyway. Data is also an obstacle. Its unification would require many independent integrations, which are one of the most expensive parts of e-commerce systems. Finally, there is the issue of order handling. Questions arise about the physical delivery of orders to a pickup point, returns, complaints, receipts and dozens of other elements. Ultimately, in the past, a project would grow from an interesting idea into a large system requiring many integrations and the need to unify companies' sales policies, for which brands present in shopping centres had no business justification - assesses Marcin Rutkowski, Brand Operations Manager at merce.com

What could work?

What could work in practice?

A realistic solution may be an ecosystem consisting of three elements. A platform, sellers and a place. The platform will be the shopping mall's marketplace. This is a form that is already known and understood, and most importantly - used around the world.

Where to look for inspiration?

The second important element is the sellers and the products they offer. Shopping malls live in symbiosis with large chain stores whose e-commerce systems are already heavily developed. How to connect them to a new marketplace? What to do about costs? An inspiration may be the Connected Retail programme being implemented by Zalando. As part of it, a data integration standard was created and made available to sellers. Such a solution could be interesting for shopping malls. A situation in which they provide an online platform and brands cover the costs of data integration in an era of a general decline in mall visitors is beneficial for both sides.

Do shopping malls have a chance online?

Do shopping malls have a chance online?

The third element of the puzzle is the physical location of the shopping mall, which can act like a magnet for customers who until now have mostly shopped online. They often try to save time and the cost of delivery by looking for a pickup option at a nearby point of sale. Many e-shops, and even more so sellers on open marketplaces, do not offer such a solution. Shopping malls, on the other hand, are usually located in attractive transport locations.

- The scenario in which a mall shares work and costs with brands when launching an online sales channel is only a prediction, but today it does not seem as distant a vision as it did at the beginning of the year. Paradigms are also changing in retail, not necessarily in such a way that one form of shopping replaces another. The pandemic situation is rather an opportunity to rearrange the relationship between the mall and sellers. Developing a hybrid of online and offline sales opens up entirely new marketing possibilities, combining, for example, the promotion of selected product groups, loyalty programmes and geomarketing - forecasts Paweł Szewczyk.

Terms from the article

Marketplace — A transaction platform. The platform connects many groups of sellers and buyers and facilitates search, payment and transaction. Examples: Amazon, Etsy, Booking.com.

Why it matters: It builds a network effect and allows earning on commissions, fees, advertising or additional services.

When it is used: When the market is fragmented and value grows with the number of participants.

What omitting it risks: Without critical mass on both sides, the platform is an empty catalogue that no one returns to.

Summary

Shopping centres, heavily affected by the pandemic, must develop a new model of operating online. Previous attempts — such as the Russian Fashion House Online Shopping — ended in failure, but new ideas are emerging, including using the brands present in malls or click and collect systems. Experts at merce.com propose an ecosystem of three elements: a marketplace platform, sellers and the mall's physical location.

An inspiration may be the Connected Retail programme from Zalando, which defines a data integration standard. The key is sharing costs with brands and combining promotions, loyalty programmes and geomarketing. As Paweł Szewczyk forecasts, the pandemic is an opportunity to rearrange the relationship between malls and sellers.