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1 DeborahWeinswig,ManagingDirector,[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2017TheFungGroup.Allrightsreserved.

September7,2017

Top Takeaways from The Connected Mall of the Future

TheFGRTteamattended“TheConnectedMalloftheFuture,”theinauguraleventofaseriesofcollaborationeventsbetweenFGRTandtheUrbanLandInstituteAsiaPacific,whichfocusoninnovationinretailanditsapplicationstorealestate.

TheKeyTakeaways

1) Chineseconsumersaremoretech-savvyandwillingtotryoutnewdigitaltools.

2) Consumersarenotcautiousaboutgivingawaydata.

3) Shoppingcentersshouldhavetheirownapps.

4) High-endmallsoutperformandthereisopportunityintier-2andtier-3cities.

5) Shoppingintheconnectedmallofthefuturewillbesocialandseamless.

ThethemeoftheeventseriescollaborationbetweenFGRTandtheULIAsiaPacificis“RetailRevolution:DisruptorbeDisrupted,”andthevariousconferencesandpanelsplannedthroughouttheregionaremeanttoshowcaseinnovativesolutionsintheretailspace.Theinauguralevent,TheConnectedMalloftheFuture,focusedonconsumer-facingtechnologiesthataugmentcommunicationandengagementwithcustomers.

Duringthefirstpartoftheevent,DeborahWeinswig,ManagingDirectorofFGRT,presentedontherecenttrendsinretailtechnology.Herpresentationisavailablehere.

Inthesecondpartoftheevent,WeinswigwasjoinedbytheCofounderandCEOofActiMirrorVictorRuizandtheFounderandCEOofNeomaFrancoisChabaudieforapaneldiscussion,whichfocusedonconsumer-facingretailinnovationsthatarerelevantforrealestatecompanies.


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CompanyBackground

• ActiMirrorhelpsstoresbecomeomnichannelhubsbycreatingapersonalizedconsumercommunicationchannelandenhancingtheoverallguestexperience.

• Neomahelpsshoppingmallscreate,launchandpromotebeacon-poweredandaugmentedreality(AR)applications,andhelpsretailerswithinthemallinspireandattractcustomersassoonastheyenterthebuilding.

KeyTakeawaysfromthePanelDiscussion

1)ChineseConsumersareMoreTech-SavvyandWillingtoTryOutNewDigitalToolsThefirstquestiondiscussedbythepanelistswasrelatedtothedifferenceinshoppingbehaviorsbetweenmarkets.BothRuizandChabaudiesharedtheopinionthatconsumersfromMainlandChinaaremoreforwardwhenitcomestointeractingwithtechnologyduringaretailexperience,mostlybecauseoftheiruseofappssuchasWeChat.

Forexample,lastyearNeomasupplieditsbeacon-poweredtechnologysolutiontothedeTourHK2016festivalinHongKong,whichhosted110,000localandinternationalvisitors,andfoundthatChinesevisitorsexperiencedsignificantlyhigherlevelsofengagement.However,consumersfromHongKong,aspointedoutbyRuiz,havebenefitedfromandexpectin-personassistancefromsalesstaff.Chabaudiecommentedthat,inmarketssuchasIndia,connectivityisstillaproblemwhichpreventstheadoptionofretailtechnologies.

Source:FGRT

ThepanelistsalsoagreedthatretailexperiencesintheUSlagbehindinretailtainment,whichpresentsabigopportunityforrealestateoperators,retailersandtechcompaniestomakeshoppingfunandexciting.


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2)ConsumersAreNotCautiousAboutGivingAwayDataActiMirror’sdigitalmirrorsuseface-recognitiontechnologytocreatepersonalizedexperiencesforconsumers.Inoneinstance,thecompanyranaselfieapplicationthatrequiredconsumerstoacceptthetermsandconditionsonActiMirror’swebsite,and,notsurprisingly,fewconsumerstookthetimetodoso.Fromthisperspective,Ruizobservedthatconsumersarenotcautiousaboutgivingawaydatawhenengagedininteractiveexperiences.Atthesametime,startupcompaniesneedtopayparticularattentiontoprivacylawsandtomakesuretheyarecompliantwithregulations,becauseanylargefineorsuitcoulddramaticallyimpactthesurvivalchanceofastartup.

Source:FGRT

3)ShoppingCentersShouldHaveTheirOwnAppsThepanelistsdiscussedwhetheritmakessenseforshoppingcenterstobuildtheirownapps.Usersarereluctanttodownloadandusemultipleapps,soatthefaceit,theinvestmentdoesnotseemjustified.However,ifonetakestheviewthattheshoppingcenterisaretailplatform,thenamobileappcanaddsignificantvaluetotheconsumer,especiallyifnotallshoppingcentertenantshaveadigitalfootprint.WeinswigfurtherelaboratedthatthecaseforbuildingappsisevenstrongerforlargerREITSwhichoperatemultiplelocations.Theycanuseanapptocommunicatewiththeirvisitorsinadirectfashionandfurtherestablishtheirbrands.InChina,shoppingcenterscanuseWeChattoachievethesamepurpose,whilebenefitingfromtheapp’s963millionuserbase.

4)High-EndMallsTendtoOutperformandthereIsOpportunityinTier-2andTier-3CitiesWhenaskedabouttheretailoutlookforshoppingcenters,Weinswigcommentedthathigh-endmallstendtooutperformthemarket.Forexample,AmallsintheUShaveperformedstrongly,seeingdouble-digitsalesgrowthinrecentyears.Thatbeingsaid,propertiesarestillfacingchallengesfromdecliningfoottraffic,duetotheexpandinge-commercesegment.Weinswigalsocommentedthatthereisanopportunityintier-2andtier-3cities,especiallyinChina,wheretherisingmiddleclass,higherexpectedlevelsofurbanizationandshifttoaconsumption-driveneconomyareexpectedtosupportretailprojects.


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5)ShoppingintheConnectedMalloftheFutureWillBeSocialandSeamlessThepanelwrappedupwithadiscussiononwhattheshoppingmallofthefuturemightlooklike.Weinswigcommentedthattheshoppingcenter,whilemoreconnected,willbeaplaceforsocialconnectionsandcommunityactivities.Chabaudieremarkedthattheshoppingcenterwillprovideaunifiedshoppingandcommunityexperiencetoconsumers,whiletechnologysolutionswillbeabletomeasurethesatisfactionofvisitorsandsupplyrelevantdatatoshoppingcenteroperatorsandretailers.Ruizconveyedthatwiththehelpofinnovativetechnologies,consumerswillhavetothinklesswhenshopping.Instead,theywillgetwhattheywant,whentheyneedit,inaseamlessfashion.Inaddition,withasizablemillennialpopulationglobally,thefocusondeliveringmeaningfulexperienceswillonlyamplifygoingforward.

Source:FGRT

DeborahWeinswig:TheRetailRevolutionandtheFutureOutlookforShoppingCentersAttheevent,WeinswigpresentedFGRT’sworkontheevolvingretailmarketandthetechnologicalinnovationsinthespaceastheyrelatetotheshoppingcenterindustry.Shepointedoutthreeglobaltrendsimpactingthefutureofshoppingcenters:1)urbanization;2)demographicshifts;and3)thehyper-connectedconsumer.

1.UrbanizationUrbanizationisoneofthemostimportantdemographictrendsfortheretailsector,with66%oftheglobalpopulationforecasttobecomeurbanizedby2050,accordingtotheUnitedNations’WorldUrbanizationProspectsreportreleasedin2014.Urbanareaswillaccountforallpopulationgrowthacrosstheworld.Forexample,peoplelivinginChinesecitieswillgrowby100millionbetween2014and2019,andby292millionbetween2014and2050,accordingtoUNforecasts.

Oneimpactofthisurbanizationtrendisthatnewinfrastructureprojectssuchasmetrolinescreatemorelocalcommunitieswithnewopportunitiesforretaildevelopment.Atthesametime,morepeoplelivingincitiesmeanssmallerlivingsspaces,andthisnecessitatesmoreplaceswherepeoplecanspendtimetogetheroutsidethehome.

Source:FGRT


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2.DemographicShifts

SilversThesilverpopulationaged65andoverisforecasttogrowfrom8%oftheworld’spopulationin2015to13%in2035,andisexpectedtoaccountforover33%oftotalpopulationgrowththrough2035,accordingtothePopulationDivisionoftheUN.Thesizeandgrowthrateofthesilverpopulation—andofthesubgroupswithinit—varyconsiderablyacrosskeyregions.By2035,Japan,SouthKorea,WesternEurope,NorthAmericaandChinawillseesilversaccountforthehighestshareoftheirpopulations,atmorethan20%ofthetotal.

Silversaredrivingahugelydisproportionateshareofconsumer-spendinggrowthinmanykeyregionsglobally.Insomemarkets,theyaredrivingnearlyallsuchgrowth.

Retailersareoptimizingstoredesignsandlayoutstocatertotheneedsofsilvers,aswellasopeningsmallerstoresclosertowheretheylive,astheytendtotravelshorterdistances.Silverswillalsodrivee-commercegrowth,duetotheirlimitedmobilityand,consequently,theneedfordeliveryservices.

MillennialsandGenZersThesedemographicgroupscomprise43%ofthepopulationintheUSandmajorEuropeanmarkets,accordingtodatafromEurostatandtheUSCensusBureau.Thisisasegmentofgrowingvalue,sincemillennialsareenteringthehigh-growthphaseoftheirearningspotential,whereasGenZershaveagreatinfluenceonfamilyspending.

InChina,millennialsnowaccountforover30%ofthepopulation,representing415millionconsumers.ThisismorethantheworkingpopulationoftheUSandWesternEuropecombined—undoubtedlyaneconomicforcetobereckonedwith.

Figure1.PopulationSizein2014,byYearofBirth(Million)

Barlabelsrepresentthe%ofthetotalpopulation.Source:NBS/Euromonitor/GoldmanSachsGlobalInvestmentResearch

11%

14%

16% 16% 16%

12%

7%

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6%

8%

10%

12%

14%

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18%

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Figure2.ChineseMillennialsAreaBiggerDemographicthantheTotalWorkingPopulationoftheUSandWesternEuropeCombined,2014

Source:Euromonitor

AccordingtoastudybyBostonConsultingGroup,by2020,annualconsumptionbythoseaged18–30inChinawillincreaseby14%peryear.Thisisdoubletherateofthepreviousgeneration.

ChinesemillennialsdoappeartobemorewillingtospendmoneyonluxuryproductsthantheirAsiancounterparts.AreportbyMasterCardin2015,foundthatChinesemillennialsplantospendanaverageofUS$4,362onluxurygoodsoverthecomingyear,farexceedingtheluxuryspendingbudgetsoftheircounterpartsinSouthKorea(US$2,638)andtheAsianaverage(US$2,584).

3.TheHyper-ConnectedConsumerIsAlwaysOn:MoreInformedandwithGreaterAccessConsumersareevermoreconnected,bothphysicallyanddigitally.AccordingtoresearchfromBoeing,airtrafficisexpectedtoincreaseatanannualrateof4.8%between2016and2035.TheGSMAssociation(GSMA)forecaststhatby2020,therewillbe5.8billionsmartphonesglobally,leadingtoa49%increaseindatatrafficbetween2015and2020.Thispaceofgrowthinconnectivitymeansanexpandingconsumerbaseforbrands,retailersandshoppingcenters,yetitalsospellsamorecompetitivelandscapeaswellasanincreasinglysophisticatedconsumer.

Figure3.EstimatedAnnualGrowthRatesforPassengerAirTrafficfor2016–2035,byRegion

Source:Boeing

415

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ChineseMillennials Totalworkingpopulalon

Popu

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illion)

TotalWorkingPopulalon

3.1%

3.7%

4.8%

6.0%

NorthAmerica

Europe

World

Asia

WesternEurope

USA


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TheEvolvingRetailLandscapeandChangingShopperExpectationsCallfortheShoppingCentertoReinventItself

ReinventingtheMallExperienceMalloperatorsarerethinkinghowtheydeliverexperiencestoconsumersandhowtokeepoccupancyrateshigh.

• Curationandnovelty:Pop-upsareusedtocreateacuratedmixofsmallerstoresthataddasenseofnoveltyandurgencytothemalloffering.

• Contentandevents:Artexhibitions,performancesandexclusiveeventshaveproveneffectiveindrivingtraffictoshoppinglocations.

• Locallygrownandmade:Consumersareseekinggoodsthataregrown,madeandproducedlocally,andthatincorporatemoreregional,artisanalflavorsanddesigns.KimcoRealtyhasexpandedaprogramthatofferssmallbusinessesoneyearoffreerentandreducedpropertycharges.

• Convenience:E-commercecompaniesarepartneringwithmalloperatorsonmorecompellingomnichannelofferings,includinga“driveup,pickup”serviceatmalls.

ReinventingtheRelationshipwiththeConsumerMalloperatorsmustrethinkhowtheyengageandretaintheirvisitors.

Tech

Experiences&Entertainment

NewTypesofTenants

ConnectwiththeConsumer

Conversations

PersonalizedServices

Community

TheConnected

Mall


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ReevaluatingHowTheyThinkAboutTheirTenantsMalloperatorsmustrevaluatewhotheirpotentialtenantsmightbe.

• Onlinegoingoffline:Fore-commerceretailers,physicalstoresaremarketingassetsthatsupporttheironlinebusinessmodels.Theyrequiremoreinnovativeleasingmodels.

• Officeandwellnessservicebusinesses:Co-workingspacesandgymsrequireflexibleaccessschedulestooffermoreconveniencetousers.

RethinkingHowTheyApproachTechnologyREITsandshoppingcenteroperatorsareturningtoinvestmentsinstartups,andrunningacceleratorprogramsasawaytoaccesstechnologyinnovationandfutureprooftheirbusinessmodels.Overthepastfiveyears,companiessuchasWestfield,theSimonPropertyGroup,GGPandMacerichhaveinvestedinretailstartups,whileWestfieldLabs,partneringwithR/GAVenturesontheConnectedCommerceAccelerator,openedaretaillabinSanFrancisco.

PartneringwithTechnologyCompaniestoBridgetheGap:AGlobalOverviewofSolutions

Entertainment:Location-Based,Fully-ImmersiveVirtualReality(VR)

• DreamscapeImmersiveisanewLosAngeles-basedstartupforlocation-basedVRthatisplanningtoopenaVRMultiplexinLosAngeles.

• NomadicVRisaCalifornia-baseddeveloperofVRgamesthatcanbetouchedandfelt.ThecompanyreceivedaninvestmentfromHorizonVenturesanddemoeditstechnologyattheWonderfulWorldsoftheWhampoamallinHongKonginJuly2017.

Security:RobotsinShoppingCenters

• ThePrudentialCenterinBostonandtheWestfieldValleyFairinSanJosehavepilotedsecurityrobots.

• TheK-5robotbyKnightscopetakespicturesandvideo,andcandetectheatandCO2.Itleasesforamonthlyfeeofabout$8,000.

Security:UsingCrowdsourcingtoCatchShoplifters

• SpotCrowdisanonlineplatformthatstreamsexisting,real-timefootagefromretailstores’surveillancecameras.

LoyaltyandRewards

• SpringMarketplaceisusedat75livemalllocationsintheUStodate.ClientsincludeSimon,Taubman,Macerich,PREITandGGP.Whenconsumersusetheircreditordebitcard,Springtrackstheirspendinginrealtimeandofferspersonalizedmarketingandrewards.


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FlexibleSpaces

• WithMe:Pop-upstoresaredesignedtobeassembledquicklyfromthegroundup.ThecompanyhaseightlocationsintheUS.

• Storefront,anAirbnbforretail,isarentalplatformoperatingineightmarkets,includingHongKong.

OmnichannelSolutions:SolvingtheIssueofSame-DayDeliveryandEasyReturns

• HappyReturnsacceptsin-personreturnsfromparticipatingonlineretailersatsixmalls.

• ShopRunBackisanon-demandreturnsservicefore-commercebusinesses,whichoperatesreturnsdrop-offpointsaswellasanetworkofdeliveryprofessionals.ThecompanycurrentlyworkswithMangoinEurope.

• ShopTurn,aTechstars-backedcompany,isanon-demand,returnsserviceenablingconsumerstoreturnpurchasesdirectlyfromhome.

• OLAMisatechnology-enabledlogisticsplatformsolutionformall-basedretailers,providingconvenient,same-daypurchaseoptionsforshoppingmallpurchases.Thecostperpickupis$5.

Hassle-FreeCheckouts

• ShopicisaQRcode-based,expressself-checkoutapp.ThecompanycollaboratedwithTycoonanapplicationthatenablesconsumerstoremovethesecuritysensoronitemsatthepointofsale—withoutrequiringanyassistance.

• QueueHopletscustomerscheckoutontheirphoneswithouthavingtowaitinline.ItusesQR-codescanningandRFID-poweredsecuritytagsthatautomaticallyunlockafterpaymentismade.

PersonalizedandData-DrivenMarketing

• ActiMirrorhelpsstoresbecomeomnichannelhubsbycreatingapersonalizedconsumer-communicationschannelandenhancingtheoverallguestexperience.

• Neomahelpsshoppingmallscreate,launchandpromotebeacon-poweredandARapplications,andhelpsretailerswithinthemallinspireandattractcustomersassoonastheyenterthebuilding.

AbouttheULI/FGRTPartnershipTheUrbanLandInstitute(ULI)AsiaPacificandFGRTarecollaboratingonaseriesofeducationalconferencesandpanelsintheAPACregion,culminatingwithULI’sAsiaPacificSummitinJune2018.Thepartnershipispartofawide-ranginginitiativetoshowcasethefutureofretailrealestate,encouragegreaterintegrationoftechnologyinshoppingcentersandprovideaplatformwhereindustryprofessionalscanlearnandshareaboutretailandtechnology.


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AbouttheUrbanLandInstituteTheULIisanonprofiteducationandresearchinstitutesupportedbyitsmembers.Itsmissionistoprovideleadershipintheresponsibleuseofland,andincreatingandsustainingthrivingcommunitiesworldwide.Establishedin1936,theinstitutehasmorethan40,000membersworldwide,representingallaspectsoflanduseanddevelopmentdisciplines,includingmorethan2,000intheAsiaPacificRegion.Formoreinformation,pleasevisituli.orgorasia.uli.org.


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DeborahWeinswig,CPAManagingDirectorFGRTNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comKirilPopovSeniorAnalyst

HongKong:2ndFloor,HongKongSpinnersIndustrialBuildingPhase1&2800CheungShaWanRoad,KowloonHongKongTel:85223004406London:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NewYork:1359Broadway,18thFloorNewYork,NY10018Tel:6468397017FungGlobalRetailTech.com