Today we speak with Zsolt Kákosy, Property Management Director of ICON REAL ESTATE MANAGEMENT. Zsolt offers us his opinion regarding the current situation of the shopping Center sector. He highlights that the brick and mortar retail stores will survive because of the need of customers to touch and feel some products and services.
Zsolt also mentioned the importance of transforming malls into sustainable spaces, and the necessity of creating the perfect mix between well-curated tenant and a loyalty program in order to achieve a good customer loyalty program.
Enjoy the interview!
Shopping Center Interview – The future of brick and mortar retail
First of all, analyze the current situation… How are you living it?
There are many factors that make the current situation more difficult, not only professionally but personally too. As far as the real estate market is concerned, it faces several challenges at the moment that require attention. For example, the destabilising effects of the changing economic environment, inflation and the war between Russia and Ukraine are felt even in the otherwise slow-moving investment property market.
This uncertainty resulted in a drop in the volume of newly announced developments. At the same time, tenants became hesitant and they declined non-prime shopping locations. Some companies are more cautious about increasing their commercial space, but those who have strategic plans, a solid financial background and business model use the current situation to acquire favorable positions from weaker players.
However, one significant thing that we can do to keep the already existing spaces efficient and valuable is listening to our tenants, seeing what they need, and realizing what we can do in order to put their needs into practice.
We also feel that we have the responsibility to show a good example on how to be sustainable in everyday life.
On the other hand, ESG is becoming more important especially for landlords and young generations, but tenants are also starting to realize the importance of it. The EU taxonomy is in force, and everybody should be prepared for it.
As for the personal side of it, although there are challenges, I believe that it is important to always stay solution-focused and strive for what seems like the best outcome on the long-run. Retail is always full of challenges, but this is the beauty of it. It is never boring.
What is the biggest problem or weakness that a shopping center has to face?
The biggest challenges shopping centers have to face nowadays include creating a unique and unforgettable consumer experience, keeping up with rapid technological advancements and emerging market trends.
With the growing concerns over climate change and sustainability, shopping centers are faced with the need to create sustainable and environmentally friendly facilities, from energy-efficient lighting to recycling programmes. We also feel that we have the responsibility to show a good example on how to be sustainable in everyday life. Malls must ensure that they minimize their environmental footprint and that they provide a green and healthy shopping environment for their customers and that they also mean a cost-efficient business for the partners.
Online retailers also got stronger during Covid, but brick and mortar retail is still strong since people are eager for in-person experiences.
What role does technology play? How does it help a Shopping Center in the current situation?
As there is a rising need for energy and financial efficiency, smart buildings and the installation of sensors is becoming more and more widespread. In buildings where sensors are used, digital collection and analysis of data allows ICON experts to adjust devices in an optimized way, taking into account the needs of the tenants.
However, where sensors are not in place, the manual analysis of usage patterns is needed so that tools can be adapted and operated efficiently, even in buildings that are less modern. Another task in case of less modern buildings that we can do to operate more efficiently is replacing older devices with new ones, like changing traditional light bulbs to LED lights.
Yet, it is important to note that the technological equipment of a building is only one aspect to operation. An additional thing that ICON can do to optimize buildings is to educate tenants on proper usage and paying attention to rightly setting the devices. In the latter, intelligent and automated systems can help our colleagues in modern buildings.
There are many discussions on VR and AR solutions for retailers, but we still see a rare usage of it. Blockchain and AI are not really discovered by brick and mortar retail yet.
Mention some technology that is now standing out above the others.
Managing a shopping center does not only mean fulfilling the needs of tenants, but also serving the daily needs of thousands of customers who visit the center. This represents an additional challenge that requires effective coordination and management of resources to ensure a satisfactory experience for all parties involved. It is crucial to maintain high standards of cleanliness, safety and customer service to attract and retain a loyal customer base.
So, it is not an exact technology that I would like to highlight here, but rather the fact that managing a shopping center and making sure it caters for the needs of both tenants and customers requires careful planning, effective communication, and strong commitment to excellence. These all require expertise, strong management skills and good team cohesion, that we, at ICON, are good and experienced at.
As for technology, you have to find the right fit for your shopping center, customer base and retailers because the local specialties are what make you successful.
How do you achieve customer loyalty now? What do you think this customer is looking for? How can we offer them an optimal experience?
ICON specifies in property and facility management, so for us, the customer is the tenant. We work so that visitors stepping into a shopping center can focus on shopping and entertainment, and that their attention is not distracted by any technical failure or inconvenience. This is the interest of the tenant too, since they can become successful this way, which resonates with the needs of the owner of the real estate as well.
Specifically speaking of a shopping center, a combination of a well-curated tenant mix and a loyalty program can contribute significantly to strengthening customer loyalty. By providing an excellent visitor experience, we can create a loyal customer base for years to come. Such quality service is the base of our credo.
Helping tenants to become successful also lies in understanding visitor needs. We assess and learn about shopping behaviours and motivations in each location to design marketing programs that attract visitor segments that will guarantee optimal operation for our commercial partners and clients.
Are you optimistic about the future of this sector? What do you think the mall of the future will be like?
There are many reasons to be optimistic. Business must remain flexible so that it can adjust to the constantly changing consumer behaviours and values, and at ICON we are constantly monitoring the needs of our tenants so we can improve our services provided to them. These changes are clearly visible in malls too.
The shopping center of the future will need to strive to become a destination for entertainment and leisure, to give visitors a whole experience once they enter the building. You also have to find the right tenant mix and build up a mutual cooperation with them. Besides, sustainability and ESG practices will also play a vital role in success. Retailers must recognize the importance of these issues for long-term success. Consumers are increasingly conscious about the environmental and social impacts of their purchases and are actively demanding eco-friendly and ethical products and services. Whoever successfully meets these expectations will be the winner on the long-run. Technology can support this, but it is not a solution in itself.
Retail is always full of challenges, but this is the beauty of it. It is never boring.
Despite the quick development of online spaces, most of the turnover is still in brick-and-mortar spaces, because some goods are not the right fit for online shops and people would never give up the need for live meetings and experiences. The role of the shops of a retail property may change to serve the showrooming trends, still in many categories you cannot sell without being involved physically with the product.
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