2017 CEO Outlook

Gary Horwitz, Lendlease

There’s no doubt that 2017 will be influenced by many of last year’s global events. Locally, we saw it was a tough year for some retailers with the decline of some very well-known brands. With this in mind, we need to make sure we constantly evolve to stay relevant and attract people to our shopping centres in this changing landscape.

Our key achievements both at our centres and urban retail precincts along with the wider Lendlease business will shape our learnings around retail mix, food offerings and community engagement strategies. Digital advancements will continue to soar, and the opportunities to create impactful and meaningful customers experiences, are only limited to our imaginations.

Our extensive research tells us consumer uncertainty, increased urbanisation and the increase in customer expectations are some of the trends that will have the greatest impact on the retail industry this year and into the future.

Innovation and technology continue to take centre stage. In a dynamic market with tech companies such as Google, Microsoft, Apple and Amazon all investing in artificial intelligence (AI) and augmented reality (AR) technology, providing consumers with the smartest, user-friendly software at their fingertips, will boost online transaction capabilities. Last year, Amazon announced an annual $2.5 million university competition to build a socialbot. According to Amazon, a socialbot is a robot that “can converse coherently and engagingly with humans on popular topics for 20 minutes”. This might seem a long way off to some but with rapidly increasing take-up rates and advances in voice recognition technology, it’s likely to be here sooner than we think.

These technological and digital advancements have not only become the norm, they are extremely popular. Nintendo’s augmented reality game, Pokemon Go recorded 500 million downloads globally in just two months*. It’s no longer enough to be digitally capable, it’s about harnessing the right digital opportunities that will drive customers to our shopping centres, to stay, transact, share and do it again, and again!

Feels like home

Both globally and locally, we live with more uncertainty. Influenced by immigration, job automation, terrorism concerns, and the ongoing refugee debate, people are increasingly dissatisfied with the world’s response in addressing these issues and providing a sense of stability.

Research suggests that there is a yearning for the economic and political security of the past. People are seeking security and safety in what is known. This sense of safety is more than just the physical safety of a community or place. It goes much deeper than that. Our customers want to feel at home in our centres. They want to feel comforted and protected in our centres. They want more relaxed food options, an element of nostalgia, along with a connection to their local community.

The research conducted with our customers prior to construction of the $240-million redevelopment at Macarthur Square in Sydney’s south-west, is a great example of this desire for home. Customers told us in no uncertain terms that they wanted ‘the best of the city’ with ‘the best of the country’. In other words, they wanted to visit in a world-class shopping centre with ‘all the comforts of home’.

Leading social researcher and commentator Hugh Mackay, in a recent address at the University of Sydney*, explained that we are “people who need each other; people for whom a sense of belonging is fundamental to our wellbeing; people who utterly rely on communities to define us, sustain us and protect us.”

With this understanding of our customers during uncertain times, comes an opportunity to provide refuge for our local communities, helping them thrive for years to come. Our centres can play a leading role in creating ‘a feeling of home’ and stability for our communities. The challenge will be in balancing the changing nature and intricacies of our communities to achieve this.

Our centres have made steps towards reconciliation with Australia’s First People, by respecting and valuing local Indigenous culture. Cairns Central, in consultation with community and retailers has a Strategic Indigenous Partnerships Program. One of the program partners, Mainie Designer Australia, specialises in fashion featuring authentic designs by traditional artists from Yarrabah, a coastal Aboriginal community located south east of Cairns and artists from Central Australia’s remote Tanami Desert. The Mainie concept store opened in July 2016 and is now providing traineeship opportunities to local Indigenous youth and through fashion sales, providing artists with sustainable incomes.

The centre also supports the Cairns Indigenous Art Fair, a unique event that offers a place for visitors to experience the rich cultural diversity of the region through dance, performance, music and a collection of curated art.

This work will be greatly supported through Lendlease’s partnership with Reconciliation Australia to implement its second Reconciliation Action Plan (RAP) at an Elevate level. This is for organisations with a long, successful history in the RAP program and a willingness to significantly invest in reconciliation. I’m excited to share in this journey, and I look forward to supporting our Centres to further enhance their relationships with local Indigenous communities.

Food for thought

Food remains an area of great evolution and growth within our centres, and I don’t see that abating in 2017. There are some underlying fundamental reasons behind this trend – increased urbanisation, growth in multicultural markets, innovation around store fit-outs and food service delivery.

As our suburbs become increasingly densified, the places in which people eat, live, work, play and shop are gradually overlapping. This is not just a story for our Urban Regeneration projects but one for our regional centres too. People are changing the way they eat. They are eating out more frequently and have greater access to food options and restaurant-style dining experiences, not fast food. Today people have less time or desire to cook at home for friends and family. Increasingly, working families are spending quality ‘family time’ eating out. The close proximity to home, varying price points and convenience makes this an appealing trend in our markets.

Food retailers are creating environments that people want to be in. The sustainable, bespoke design and fit-outs of food retailers is rapidly altering the feel and environments of our shopping centres. Our $240-million redevelopment of Macarthur Square which opened this month reflects the ever changing appetite for more food experiences. The Centre’s design and retail mix, with alfresco dining and a fresh-food market hall, will bring an exciting new offer to Macarthur Square, reflecting the natural environment and tastes of the region.

Our retailers are responding to the changing cultural mix of our communities and this is evident in their marketing of cultural celebrations such as the Chinese or Lunar New Year. Australia Day campaigns more recently have reflected the customer base more broadly. Diversifying the retail mix to reflect the changing demographics means store fit outs will naturally evolve to capture the cultural essence of that retailer.

If you did not visit the streets of Barangaroo in 2016 it’s a must for 2017! It’s a unique mix of fantastic waterfront restaurants, great cafes, health and well-being services, and David Jones’ first boutique format store. Our retail vision was to create a place where Australia’s amazing cuisine could rub shoulders with the best of the world. Throughout 2016 we opened 50 brand new restaurants, shops and cafes, including a dozen restaurants on the harbour. We’ve created a truly unique dining experience on iconic Sydney Harbour, at one of the world’s most ambitious urban renewal developments.

Great expectations

Customers’ expectations are increasing. They understand we have the technology and ability to enable an amazing customer experience. We are regularly interviewing our customers to make sure we are identifying areas of improvement and are constantly on top of what drives customer satisfaction. Customers expect personalisation in their interactions with retailers, and with us as property managers.

Leading e-commerce companies and retailers are in the business of selling products and over the years have masterfully captured a tonne of customer data to help them do so. If you want to find a new blender, book, or virtually any consumer product, the software is now available for you do this with just a few words or clicks.

Amazon chief executive Jeff Bezos often talks about “erasing every bit of friction” between the buyer and the product they want to buy. Sounds simple. This reduction in friction can be applied, not just to the online world, but across a customer’s journey to our centres. The way in which we facilitate their experience from home and back again is critical to the ongoing success of our centres. Greater emphasis needs to be placed on the entire customer journey both online and in the physical realm.

The desire for expertise and customisation from our customers is also increasing. In store expertise and curation will be critical in combating this desire to only transact online. By curating quality and delivering value, retailers build trust with their customers. This trust can be harnessed through delivering content and communication tailored to customer preferences.

Online consumption is significantly changing. The overall browsing behaviour of our customers is shifting with new content consumption preferences, adoption of voice search, increased viewership of video content, and the increase in chatbots enables a more personalised feeling when transacting online.

In this rapidly changing digital world, an exciting opportunity awaits in the physical world. Our shopping centres can leverage their tenancy mix, community spaces and think more broadly about delivering daily convenience, along with the wellbeing of our local communities. Engaging all the senses: sight, sound, smell, texture, and taste, is critical if our shopping centres are truly going to be places people want to transact and spend time in.

We are investing $400 million at Sunshine Plaza in Queensland to build a flexible format that will capture the hearts and minds of the local market, always with one eye on future trends and one eye on delivering customer experiences that keep the locals coming back.

In this new retail world our planning and research teams have invested significantly in understanding our customer needs. This has in turn informed our retail mix and ultimately the retail design of our new look mall. Ensuring we embrace the changing retail landscape we selected international designers to challenge our ideas and ultimately create a precinct of the future at Sunshine Plaza.

As a business we need to constantly evolve the way we manage our retail spaces and reassess what we do and why we do it. As part of a new five-year strategy, we have asked all of our customers, including retailers and employees what they think about us. This will ensure that our strategy is truly customer focused, responding to the needs of our customers, employees and owners.

Business as usual is simply not an option anymore. It’s now critical to have alignment with owners, retailers, and management, combined with a renewed focus to deliver sustainable returns, and innovative, relevant and tailored customer experiences in both the physical and digital world.

1. DMR Stats and Gadgets September 2016
2. Gandhi Oration, delivered by Hugh Mackay at the University of New South Wales on January 30, 2017. Originally published in The Conversation.

About the author

Gary Horwitz

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