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Retail Real Estate: Back to the Stores

Posted by Surabhi Sheth, Real Estate research leader, Deloitte Center for Financial Services, Deloitte Services LP, on August  06, 2014

Retailers are embracing technology like never before to enhance both their brand and customer experience.

Consider the experience that the new RadioShack concept stores in New York have created. These stores offer interactive touch screens and displays that allow consumers to understand and compare products. Further, the stores offer speaker walls that allow consumers to compare speakers using music from their own mobile devices or in-store tablets. These technologies aim to make the shopping experience more fun and interesting, aligning with the company's new brand tag — "RadioShack: Let's Play!".1

Auto manufacturer, Audi, is using augmented reality in their store, whereby customers can create personalized cars with 3D technology, view a life-size image on floor-to-ceiling video walls, and explore every angle using hand gestures. The car configuration can be further personalized and then saved on USB sticks that can be used at home. The stores smartly use an interplay of tablet, video wall and tabletop surfaces sensing products.2

What is the common thread in the above instances? Physical stores continue to remain core to creating an innovative and lasting shopping experience. You may argue that stores have always been core to a retailers' customer-engagement strategy. So what is the difference? Well, it is both the positioning and the expectations. Commonly referred to as concept stores, each one is now customized to enhance customer experience and is considered more a part of the seamless engagement model by retail tenants than as the ‘only channel'. This means that retail real estate owners (RREOs) need to increase collaboration with retailers. With the increasing focus on converting existing stores into concept stores, real estate owners will have to make stores technology-enabled. For this, real estate companies need to partner with tenants to understand their technology needs and incorporate those as an integral piece of store redesign.

Still, collaboration at the redesign stage may not be enough. RREOs should strive to drive demand through continuous support of their tenants' customer engagement strategies. Efforts toward making malls entertainment centers and adding to the ‘convenience' quotient will go a long way in driving customer traffic for their tenants' businesses.

RREOs appear to have embarked on this journey, judging by some recent initiatives. They are helping retailers provide same-day delivery for online orders from the nearest store. Companies are also developing apps that provide details of special sales and events, favorite stores, mall maps, parking reminders, dining deals and other offers at their shopping malls. Some RREOs are considering expanding availability of Wi-Fi across malls, recognizing consumers' affinity toward remaining connected all the time. Then there are others that are considering providing interactive digital concierge services to help consumers find directions and information with ease.

Glimcher Realty Trust's CEO, Michael Glimcher, says, "Our emphasis on experience retail is driven by the understanding that people are social animals who want to interact with each other."3 At some of its malls, this company is providing experiential services such as spinning classes, yoga studios and movie theaters with reserved seats. In addition, the company is offering local and regional cuisines to provide a differentiated dining experience.4

How can RREOs achieve this tech-enabled collaboration? 

Companies should leverage analytics to conduct an end-customer demographic analysis to understand customer needs and preferences. Subsequently, companies can use these insights to assess the appropriateness of their existing tenant mix. They can also use this analysis to provide the aforementioned tailored options and services at the mall level to attract the end customers. Similar to the retailers, companies can also consider partnering with technology firms to evaluate innovative options to connect with the end-consumer. A few large companies are beginning to pilot such liaisons.

Next, the transformative tenant demand requires an interplay of responsibilities among CXOs as well as traditional business functions. For example, many chief technology officers of RREOs are assuming additional responsibilities for innovation and marketing. Hence, companies will likely benefit from retooling their existing talent base, particularly in the property management and marketing departments. Some large RREOs are hiring hospitality experts to coordinate the efforts of these two departments.

Lastly, along with playing to the end customers, RREOs can run programs to incentivize tenants, attracting them to their malls. This may include loyalty programs or promotions involving all tenants, or incentives for high-performing tenants that attract customers for other retailers.

With your retail tenants focused on leveraging physical stores to enhance customer experience, are you ready for the tech-enabled transformation to capture the renewed demand?

1Craig Smith, "Radioshack's Concept Stores," Retail Innovation,
2Craig Smith, "Audi City digital experience opens in Berlin," Retail Innovation,
3Michele Lerner, "Customer Experience the New Mantra for Retail REITs", May 19, 2014,,

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