Shopping mall operators are looking to the future by assessing how their assets will be positioned in the long-term, in this rapidly changing retail landscape.
With over 80% of retail businesses temporarily ceasing operations to beat the virus during the Circuit Breaker, Singapore's usually booming retail sector has been hard hit.
To paint the picture globally, 13 major international brands have filed for bankruptcy including Aldo, J. Crew and J.C. Penney. Singapore is not alone.
As Singapore transitions through Phase 1 of its safe re-opening, businesses - including shopping malls - will gradually resume their activities. Shopping malls’ operators are looking to the future by assessing how their assets will be positioned in the long term in this rapidly changing retail landscape.
Retail is resilient, on the cusp of transformation
It is our view at Colliers that the coronavirus (COVID-19) outbreak was an isolated Black Swan event with temporary effect. Colliers' recent Resilience and Rebound Ranking report revealed key indicators of sectors to watch, as well as sectors which will not be as resilient during the current pandemic.
"Retail has been fairly resilient historically, owing to rising consumerism and income growth. However, with the acceleration of e-commerce, offline retail could face a longer path to recovery."
The retail sector ranked fourth in resilience behind manufacturing, technology and hospitality. The report highlighted that retail has been fairly resilient historically, owing to rising consumerism and income growth. However, with the acceleration of e-commerce, offline retail could face a longer path to recovery.
Singapore's usually booming retail sector hard hit by the circuit breaker measures
Shopping malls have suffered collateral damage from the pandemic, but they will remain as very relevant and attractive asset classes - both in Singapore and globally.
Related content: Resilience and Rebound Ranking report
Transformation opportunities for the retail sector
Shopping malls will certainly undergo transformations to remain competitive in an evolving retail environment. We see the following three broad transformation opportunities for shopping malls in the coming years.
#1 Malls as last mile e-commerce hubs
It is a well-known fact that online shopping has become the primary disruptor for the Singapore retail sector, and this is unlikely to change anytime soon.
Singapore’s e-commerce market grew at a compounded average growth rate of 17.2% per year since 2015. E-commerce accounted for approximately 5.9% of Singapore total retail sales in 2019, well below the United States at about 11% or China at nearly 30%, suggesting that there is significant room for future growth.
"Shopping malls in Singapore are well-positioned to serve a large catchment area of consumers and could act as local fulfilment, distribution and pick-up centres for certain types of e-commerce orders... This e-commerce hub role would adapt the property for e-commerce requirements."
Colliers expects that shopping malls in Singapore could play a vital role in the e-commerce last-mile delivery system. Currently, over 60% of e-commerce retail orders in Singapore are sourced overseas and shipped directly to the customer’s home. This entails delivery delays and the risk of supply chain disruption (as experienced during the COVID-19 outbreak).
As a result, many retailers and distributors are now looking at decentralising their global supply chain, with a greater share of local storage and distribution functions.
Shopping malls could incorporate spaces for e-commerce requirements, such as delivery and storage facilities
The shopping malls could be well-suited locations to achieve this objective, while enhancing the consumer experience. Shopping malls in Singapore are well-positioned to serve a large catchment area of consumers - due to their location near residential areas and major rapid transit stations - and could act as local fulfilment, distribution and pick-up centres for certain types of e-commerce orders. This would considerably reduce the delivery time, as shipments of goods could be received at the mall rather than being delivered to the consumer’s homes.
"We expect shopping malls to increasingly leverage integrated “Click-and-Collect” options, omni-channel marketing strategies and digital marketplaces."
This e-commerce hub role would provide spaces for e-commerce distributors within shopping malls and adapt the property for e-commerce requirements, including with larger and improved loading areas, delivery and storage facilities. Existing malls could convert some of their existing vacant spaces to e-commerce logistics and pick-up centres, while new malls could incorporate a purpose-built e-commerce facility.
#2 Bridging between physical and digital retail
Shopping malls have the opportunity to become the bridge between brick-and-mortar and digital retail formats.
We expect shopping malls to increasingly leverage integrated “Click-and-Collect” options, omni-channel marketing strategies and digital marketplaces featuring the merchandising of their tenants, to enhance the shopping experience and drive sales.
While these strategies are already being used by individual retailers and brands, they have just barely started being used by shopping mall operators.
Earlier in June, CapitaLand launched the first mall-operated integrated digital marketplace for tenants - eCapitaMall and Capita3Eats - in Singapore. These platforms offer shoppers the flexibility to browse items online, before purchasing in-store. Simultaneously, shoppers have the option to browse in-store before purchasing items online and opt for home delivery or in-store collection.
Digital marketplaces allow shoppers to purchase items online and opt for home delivery or in-store collection
In addition, the integration of in-store artificial intelligence (AI) and virtual reality solutions is also a way which malls can better bridge the physical and virtual retail gap, while providing an exciting shopping and dining experience to consumers.
#3 Activity-based community hubs
Retail malls are emerging as the primary meeting, entertainment and community spaces in Singapore, with a shrinking percentage of their revenue and space dedicated to traditional retailers.
As experiential retail and activities become more prevalent, shopping malls are expected to shift their tenancy mix to attract more activity-based tenants and activities so as to entice repeat patronage and extend dwell time among patrons.
"Though [shopping malls] have been hard hit by the pandemic, they will bounce back and are on the cusp of an exciting transformation journey."
Diverse lifestyle and experience-based operators, including gyms, fitness studios, education centres, entertainment operations, social kitchens, makerspaces and gourmet food concepts are growing in popularity, and will no doubt occupy a growing footprint within Singapore malls. Shopping malls will also feature a growing mix of community-oriented tenants and amenities such as childhood enrichment centres, sport and cultural facilities and community centres, as well as host regular community events.
The future is very bright for shopping malls - though they have been hard hit by the pandemic, they will bounce back and are on the cusp of an exciting transformation journey.
 E-conomy SEA 2019 report published Google, Temasek and Bain & Company
 Singapore Department of Statistics
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