It’s Not All Bad: Emerging Uses of Technology to Enhance the Brick and Mortar Retail Experience

It is no secret that the press has been overwhelmingly negative in terms of the impact that technological advancement has had on the business model of the traditional shopping center. The onset of online retail has for years been credited with the demise of some enclosed malls and large-format retailers. However, a more progressive view is the idea that advances in technology can actually be used to reinvent and sustain the traditional shopping centre. This column will outline the enhanced shopping experience that technologies such as Artificial Intelligence, Biometric Recognition, and Customer Relationship Management (CRM) Software can provide when paired with mobile applications, cutting-edge display systems, Augmented Reality environments, and in some cases, even robots.

As the online retail sector continues to gain market share at a rapid pace, the continued success of most traditional shopping centres will in large part depend on the ability of both landlords and tenants to transform the brick and mortar environment to become an extension of the online platform (as opposed to acting as its competitor). In a recent forward-looking study by mall landlord Unbail-Rodamco-Westfield, the researchers hypothesized that the future of retail isn’t online, nor brick and mortar, but rather the seamless integration of the two media.

The use of technology in the shopping centre (as part of a broader “PropTech” category) is becoming of such importance that some landlords are forming entire divisions to manage its investment, implementation, and further innovation. Some key examples include Westfield’s creation of its Westfield Labs division (now operating as a third-party entity called OneMarket), Cadillac Fairview’s Ravel division, JLL Spark, Singapore Sovereign Wealth, Oxford, and Brookfield.

A major opportunity exists for technology to assist customers with product selection in a brick and mortar environment. An early example of this took place in 1999 with the installation of digital mirror technology at the Prada Epicenter flagship in New York. 

The project was a collaboration between architect Rem Koolhaas and design firm Kram/Weisshaar. Magic mirrors in change rooms allowed customers to see themselves from multiple angles displayed in time. RFID tags on clothes allowed the customer to call up the designer’s sketches, fashion runway shots and production videos from the factory floor for a given product.

With advances in technology, the customer experience is further enhanced in some recent examples. With IKEA’s mobile application, customers can view their home in an Augmented Reality environment through their phone’s camera, with sample IKEA furniture pieces placed in the scene as a test-fit.

Some hardware stores have experimented with robots that can use 3D sensing to scan a particular screw or bolt, and subsequently direct customers to the location of that product. Amazon’s Echo Look camera provides customers with style advice, clothing recommendations and sizing from home. The Ralph Lauren flagship in NYC features a modern-day version of digital mirror technology in fitting rooms. A Lululab cosmetics kiosk in the Dubai Mall uses Artificial Intelligence to scan a customer’s skin profile and make product recommendations.

Chinese retailer Intime, in working with Alibaba, has developed smart ladies’ rooms in its stores, where the mirror will show you different cosmetic tones on your skin while you wash your hands.

In some shopping malls, the technology starts working the moment a customer drives into the parking lot (where the license plate is captured and checked against a database), or walks into the front door (where matching with a customer profile takes place via facial recognition). In some simpler cases, digital mall directory boards have cameras mounted behind the display which can determine customer age and gender and tailor recommendations accordingly. Once a customer has been matched with a profile in a shopping centre, the opportunities for the landlord/retailers to leverage that data are almost endless. With modern advances in digital display technology, increasingly captivating advertisements can be tailored to the preferences and mood of the customers located in a particular area of the shopping centre. Targeted promotions can be sent to customers who have installed a particular mobile application for a shopping centre or retailer, or in some cases even those who have just connected to the mall’s wifi network. VIP customers can be quickly identified and catered to. Where malls once tracked foot traffic by manual counters, this can now take place through geotracking by mobile device (unique IDs of Bluetooth-enabled devices can be tracked, with location determined based on signal strength). 

For some mall landlords, the investment in technology has provided a return through their ability to attract new retailers with the customer data that can now be shared. Heat mapping (based on shopper traffic) can help landlords justify higher rents, as well as guide tenant and amenity placement.

As is the case in many other industries, the further proliferation of technology in the shopping centre is faced with the headwind of activism for privacy rights. Certain Canadian malls have fallen under scrutiny by the Office of the Privacy Commissioner of Canada for their use of facial recognition without customer consent. In some jurisdictions in the USA, a ban of facial recognition in its entirety is proposed. The most successful landlords and retailers will establish as many customer data points as possible. One of the most effective methods to date has been incentivizing customers to install a mobile app. Research has suggested that some customers are willing to divulge more personal information in return for a customized offer. One shopping centre increased app installations over the holidays by using it as the format for parents to book a time-slot for their kids to take photos with Santa.

Some retailers (Amazon Go stores in the USA and Alibaba Hema stores in China) are taking this one step further by literally making the installation of the store’s mobile application a criteria for entry. 

In these cases, customers install an app (linked to their payment profile), scan their app at a gate to enter the store, scan items in the store with their app to obtain further product data, and make a cashier-less exit with payment through the app (or, in the case of Alibaba, payment through a facial/retina scan).

The data and opportunities provided to retailers of this format are of course exceptional (in particular with the Alibaba case, where payment must also take place through Alibaba’s proprietary payment system, which has also become a standard payment method in third-party retailers).

While the technologies of facial recognition, digital displays, and mobile phones are not necessarily new or revolutionary, they can become game-changers when coupled with the effective utilization of Artificial Intelligence and CRM Software. A large part of Amazon’s success can be credited to its algorithms used in the analysis of customer data and the deployment of ads – and for many landlords and retailers the goal is to integrate the same toolsets to the physical environment that Amazon has in the digital environment. The true magic of Artificial Intelligence will be realized with as many data points as possible (both online and in the digital world), and with the landlords and retailers having the ability to learn how customers respond to various advertisements and conditions and tailor their operations and promotions accordingly. Landlords and retailers with the best data and the strongest customer loyalty will have the greatest opportunities to gain market share and expand into new lines of business (as was the case for Amazon, Alibaba, and many others alike).

For more information on this topic, or others like it, please contact me at tshumka@form.ca or 604-398-3819.