City centers of tomorrow — How to revitalize retail spaces
Stationary retail is undoubtedly one of the industries that has been severely affected by the Corona crisis. Curfew restrictions and weeks of store closures have caused foot traffic in German city centers to plummet by more than 90 percent at times, according to retail analytics platform Crosscan. The declining incident rates and the associated easing of restrictions offer a sigh of relief and are now bringing more and more people back to the shopping malls. However, this short-term positive trend should not gloss over the structural change in shopping: Crosscan also proves that Corona has only reinforced the general negative trend of an average annual decline of 5–10 percent. The reasons for this have been amply described. It is now time to look at possible solutions in order to work constructively on the future of retail and the future of city centers as a lively social space. Because there is one thing that Coronavirus has brought to the attention of all of us: The extent of the human need for contact, exchange and interaction.
Subsidized parking tickets are not the solution
The fact that an attractive city center and an attractive retail environment are interdependent is also reflected in the fact that both the German Retail Association (hde) and the German Association of Cities emphasize their mutual importance in relatively identical terms. They are calling for large structural subsidies from the government to strengthen the downtown area. Assuming these demands are heeded, success will clearly depend on what these funds are used for: to preserve a nostalgic notion of retail or to actually rethink the downtown microcosm from the ground up and make it fit for the future? In order to successfully turn new ideas into new structures, the people involved must understand that we are in the age of the Experience Economy. And in this age, there is competition for time. What the downtown area has to offer is not in competition with online retail, but with basically any form of pastime, be it culture or sports, gaming, social media or streaming. A subsidized parking ticket will therefore not bring the desired turnaround — the 50 cents in this equation are irrelevant. For a true revival, retailers should take the following approaches:
The city center as a curated exhibition space
The social trend of attaching greater importance to experiences over material things is generating the change to modern store concepts. Here, the store is not a distribution outlet with an assortment, but ideally an event space and media channel with curated programming. There would be concerts, courses, exhibitions, and conferences that could be attended both on-site and via stream. The structure, themes and program would change on a regular basis to provide constant new incentives to visit. This principle, on which several stores are already successfully relying, should be applied in city centers, as it were: In addition to such evergreens as the annual Christmas market, public spaces must offer curated and changing programs on a permanent basis in order to remain consistently compelling. In order for this system to work, however, existing rules must be rethought to include types of use, opening hours, permits, and so on.
Integrate brands, as competition revitalizes the city center
The so-called Business Improvement Districts (BIDs), in which several stakeholders (property owners, tradespeople or municipalities) join forces to then repave the sidewalk or sweep it twice more often, are laudable — but unfortunately only the lowest common denominator. A real competition for attention releases more creative potential. If we allow brands to help shape public space and create fluid transitions, we will see more creative approaches, as shown by three examples: The legendary, colorful Basketball Court by Nike / Pigalle on Rue Duperré in Paris, the huge Adventure Playground on the roof of the Uniqlo outlet in Yokohama. The %Arabica Coffee Shop in Shanghai, which smoothly opens to the sidewalk, inviting everyone in. All of these are enrichments for the public and the public space as well as strong statements of the brands.
Stationary stores are part of an omnichannel journey
Even in a thoroughly digitalized world, a centrally located site — where customers spend time — is a competitive advantage. For example, much of Walmart’s nearly 100 percent e-commerce growth is driven by a wholly brick-and-mortar service, according to The Motley Fool’s investment experts: The Curbside Pickup. Another clever prototype is the Posti Box from the Finnish logistics service provider of the same name in Helsinki. Here, customers can not only pick up deliveries in automated lockers, but also unpack them, try them on or off, and, if necessary, repack, stamp and return them directly. There are pleasantly designed changing rooms, packing stations and recycling facilities available for this purpose. Stationary stores must finally consider themselves part of an omnichannel journey and build a digital relationship with the customer that also creates a bond before and after the on-site visit.
What would we have to do to make it to the top of the travel guide?
This is a question all retailers should ask themselves because this perspective is crucial. How does a place become a destination that people visit in a deliberate and planned way? Recently, after 16 years (and 500–750 million euros in renovation costs), the “most famous department store in Paris” reopened: With “La Samaritaine“, luxury group LVMH has revived a cultural and architectural landmark that will be a must-see for residents and international tourists alike. Of course, not everyone can renovate an Art Nouveau temple, so each brand has to come up with its own thoughts on this. In case of doubt, even a rose-colored facade will do: At times L.A.’s “most Instagrammed place” was the Paul Smith store on Melrose Avenue, which became a cult backdrop for selfies.
Creative concepts also in demand among real estate owners
All parties involved, especially property owners, should ultimately examine the framework conditions of their business model. If the highest possible rents are always sought for retail space, this almost inevitably leads to only large international chains being able to establish themselves. If leases are only granted on a very long-term basis, this is often an obstacle for young brands and companies. Another school of thought would be to strive for revenue-sharing or space-for-equity approaches that allow both partners to share in the success. The collection and processing of data — both customer data and usage data — could also provide value, not least to enable urban planning to make better, evidence-based decisions.
Public spaces must offer curated and changing programs on a permanent basis in order to remain consistently compelling.
An operating system for the digital city center
If there really is a state structural fund for the inner city, then digitalization should be high on the list of priorities. Previous approaches of “digital marketplaces” that simply help corner stores to become online stores are downright absurd. In that case, the corner stores would also have to start doing SEO and compete against Amazon. Instead, what is needed is an operating system for the city center that digitally enhances the overall physical experience and product offering: Mobility services, event calendars, bookings and reservations, omnichannel services such as click-and-collect, payment & loyalty, information via augmented reality, check-in in locations — all things that individual entrepreneurs cannot handle and can be used by such a downtown operating system true to the motto “public money, public code” across cities, free of charge and “open source”. Again, the resulting data could be used to optimize the experience and improve urban planning and downtown management. A substantial step towards the future for all involved.
Summary
There is no one-size-fits-all solution for the future of city centers. It is a huge project that each city must undertake on its own. In order to accomplish this, there is a need for central leadership figures who take responsibility for this and pursue an overall vision as central points of contact. They must involve the various stakeholders such as property owners, brands, retailers, residents and service providers, as well as municipal silos such as transportation planning, building departments, commercial offices or city marketing. Nobody said it would be easy. But the effort will be worth it and help European cities with their vibrant centers regain their former glory.
About Mathias Ullrich
Mathias Ullrich is Managing Director at LIGANOVA, innovation leader in the field of brand & retail experiences in the phygital area. Over the past ten years, as an industrial engineer, Mathias Ullrich has advised clients from the brand retail sector on positioning, growth and digital transformation. At LIGANOVA, he heads the Experience Solutions division where, at the intersection of people, brands and products, he designs retail locations and experience areas for premium global brands from the luxury, sporting goods, automotive, fashion and retail sectors.
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