Retailers have long taken advantage of the lure ‘want’ has over ‘need’ and created shopping meccas that inspire, delight, and open wallets. But we now sit at a nexus where our shopping needs can be easily filled online, and retailers need to work harder on desire and dopamine hits to keep us coming back into stores.
Iconic and engaging physical retail is bouncing back.
Even amongst global turmoil and the dreaded R word (that we are apparently not having in Australia), physical retail has rebounded. Amongst the biggest and busiest shopping malls in the world are The Forum Shops at Caesars Las Vegas, which is spread over 162,000 sqm and attracts 40M shoppers annually. Westfield Stratford City in London is slightly larger at 177,000 sqm and attracts 50M visitors; dwarfing them both is The Dubai Mall with 577,000 sqm which attracts 85M visitors.
As for department stores the one and only Harrods, with 90,000 sqm of internal space gets 15M visitors per year, while Galeries Lafayette Paris is 70,000 sqm and welcomes 12M visitors. Shading these two, in attendance at least, is the gorgeous Galleria Vittorio Emanuele II in Milan, which has only 19,000 sqm of space, but attracts a whopping 60M visitors.
The average spend per head isn’t eye-watering; which is worrying for luxury brand bottom lines in 2024, but promising for the return of retail as a whole. It indicates consumers want to spend, they still want that physical endorphin rush, and they still see value in getting off the couch to interact with their favourite brands. In Harrods, the average transaction is US$300, whereas Westfield Stratford City is around $100, and Galleria Vittorio Emanuele II is again higher at $450, but nothing crazy - it is Milan after all.
What do these retail meccas have in common?
First and foremost people go for the experience, the history, the Instagram shot, and the bags that bear the name of the brand experience.
People are there because, in many instances, they are fulfilling a lifelong dream. Think Harrods for a genuine shopping tote, the revamped Tiffany & Co’s The Landmark on 5th Ave or the classic Louis Vuitton on the Champs-Elysees. There is something intoxicating about all that history, romance and storytelling, that goes beyond the bag you take home.
The future of retail will have increasingly clear lines of delineation.
For those who want a commoditised item for everyday life, such as a new laptop charger or a replacement showerhead, it’s more likely that the online giants will get the spend. It’s just too easy and too cost-friendly, and nothing good will come from retailers attempting to out-spend Temu and Amazon on digital ads. But when it comes to high-end fashion, luxury goods, and premium or bespoke products that inspire joy, confirm our sense of self, or are intended to last, the experience centres will continue to win over.
In the vast space between these two paradigms, in billions of metres of suburban retail, the mid-ground offerings will continue to struggle. This is not a new prediction, but the timeline does appear to be speeding up. The majority of retail is not cheap or quick enough to compete with Temu, nor is it enticing enough to warrant the ‘day out shopping’ that was once a major form of entertainment. As our needs are fulfilled online and our expectations of great experiences increase, our wants get harder to impress at a local mall level. These stores can't compete with the history of Harrods, so they need another hook. It must be about the intangibles and the power of genuine human experience that online will struggle to replicate for some time.
The future is friendly
How do retailers solve for all that space in the mid-ground? Many larger retailers with vast store networks are already successfully experimenting with ways to play to a store's strengths: instant gratification, touch and feel, and service-based offerings. Even Officeworks has bought Geeks2U inhouse, with 'Meet a Geek' in store because they recognise the value of solving problems face to face that most of us could probably google. Physical retail spaces will always have the upper hand when it comes to good old-fashioned human-to-human interaction and learning. A friendly, familiar face in a local store drives deeper, longer-lasting loyalty than a tiktok campaign, and anyone who has done their time on customer service phone support will attest: we're all nicer, and happier, face to face. The future of physical retail will hinge on, and benefit from continuing to ramp up the humanity. We don't shop to buy; we shop for entertainment, immersion and fundamental human connection.