Imagine it’s 5:00 PM the day before Valentine’s Day and, as always, you forgot to plan something special for your wife. You imagine a nice romantic dinner and a thoughtful gift would do the trick, but there’s barely any time left and you have only a foggy notion of what your wife might like.

Suddenly in a hurry, you wrap up a video chat you’ve been having with a construction manager on site at your company’s latest project and race out the office door. Along the way, you grab your mobile tablet and start frantically scrolling through the touch screen menus to get to your family’s joint shopping channel looking for a list of your wife’s favorite retailers.

She has uploaded her profile to White House | Black Market, Banana Republic and Victoria’s Secret. Through the elevator ride, you peruse her wish lists and purchase history to see if there’s anything she wants or if the retailers can recommend any new items that match her preferences.

As you fumble for your car keys and walk to your car, your search proves fruitful! The White House | Black Market mobile site highlights a slick silk blouse that’s in the same style as a skirt your wife purchased two months ago and that would complement a pair of White House | Black Market shoes she also owns. Since it’s the night before Valentine’s Day, however, you don’t have enough time to buy the blouse online and have it delivered.

Instead, as you ready to start your car, you check out a retail locator application on your tablet to find out which nearby center has a White House | Black Market showroom in it and cross check to see if it has the blouse you want in stock. It looks like the Shops at Winter Village might do the trick, so you begin your drive. As you navigate the evening’s rush hour traffic, you direct the showroom’s mobile concierge to pull your wife’s measurements based on her recent purchases. This gives the store staff an opportunity to sift through their stock and have the right size blouse ready for you to look at by the time you arrive.

As you draw closer to the center, your car’s wireless device pings the real-time parking channel at the center, which plugs precise directions to your mobile GPS on an available parking spot close to the White House | Black Market’s entrance.

As you enter the store, a salesperson is there to meet you, escorting you to an LCD screen that displays a three-dimensional scan of your wife wearing the blouse. A few clicks show you the different color options. Still unsure, you download the images to your tablet and quickly send them to your wife’s sister to ask her opinion about the potential gift. She texts back that your wife would love the blouse in deep blue. The salesperson brings out the blue version in your wife’s size so you can take a look at the actual merchandise.

Satisfied, you ask for it to be gift-wrapped and pay for your order via payment information stored on your tablet. You pull up the center’s mobile concierge again and arrange for the center’s staff to pick up the wrapped present so you can take a quick spin through the rest of the property and finish your Valentine’s preparations. You still need to find a nice place to have dinner. As you pass a personalized, motion-sensitive advertising display, an image comes into focus offering a 20 percent discount on a dinner for two at Amelio’s, an Italian restaurant you frequently visit. The ad teases you with a dynamically-generated image of you and your wife enjoying steak Pizzaiola, one of your favorite entrees.

Intrigued, you go back to your tablet and check your wife’s schedule. You find out she’ll be getting off work tomorrow at 6:00. You then access Amelio’s mobile site, select a table by the window, make a reservation for 7:00 P.M. and place an advance order for steak Pizzaiola for two. The reservation is simultaneously entered into your wife’s digital schedule.

As a finishing touch, you pull up a digital directory of Winter Village and discover a new florist has opened at the center. You make a quick order and arrange for the mall’s concierge to have a dozen roses waiting at your Amelio’s table tomorrow night. Now that your plans are set, you ask the center’s concierge service to meet you at your car with the wrapped blouse. In all, you complete your shopping trip in less than 20 minutes.

* * * * *

Sound like a fantasy? It’s true that no mall today is equipped to provide that kind of shopping experience. Yet the technologies that retailers, marketers and shopping center owners are tinkering with today might make this shopping trip of the future feasible sooner than you might think. The advent of the smartphone and other mobile devices in particular could revolutionize retail in the next couple of decades, says Jane Lisy, vice president of marketing in the commercial group of Forest City Enterprises, a Cleveland, Ohio-based diversified real estate owner and manager.“One obvious drive we are seeing is the drive to this one ultimate mobile device, this complete unit that does all the communication that the consumer wants to do,” Lisy notes.

Various mobile devices, from the iPhone to the Kindle to Apple’s iPad tablet computer, promise to change the way we shop and have already begun to have an impact, even with just a fraction of mobile phone owners using them. (Overall, only about 18 percent of the 223 million mobile users in the U.S. are using smartphones, according to Nielsen Co., a global marketing and media information firm.) Still, during the 2009 holiday shopping season, 51 percent of consumers worldwide used their mobile devices for shopping purposes while inside stores, including comparing product prices, looking up coupons and reading product reviews, according to the Motorola 2009 Retail Holiday Season Shopper Study.

Going forward, the use of smartphones and other mobile devices will become more widespread. By 2011, there will be 300 million mobile users in the United States and the number of smartphones will balloon to 150 million, according to Nielsen. In fact, by 2011, smartphone sales will overtake PC purchases, according to a research report from RBC Capital Markets.

Online retail in this context will not be about people sitting at home at their computers making purchases for delivery rather than visiting brick-and-mortar stores. Instead, mobile devices will blend the virtual and physical shopping experiences in new ways and potentially change how stores and shopping centers are designed, configured and operated.

Enhanced mobile devices could become the primary channel for locating retail properties, browsing retail inventories, pre-ordering store and mall services and making payments. When coupled with other emerging technologies, including video-streaming, face and voice recognition and augmented reality applications, the transition will change the role of the mall from the traditional retail marketplace into something resembling a collection of showrooms, Lisy predicts. The primary function of retail properties will no longer be to facilitate sales transactions—it will be to promote unique experiences and social interaction.

“What we are seeing is the evolution of our developer community from being landlords to being place-makers,” says Paco Underhill, founder of Envirosell Inc., a New York City-based research and consulting firm and author of What We Buy: The Science of Shopping and Call of the Mall: The Geography of Shopping. “They simply can’t survive by just giving you stores.”

The picture today

Today, smartphone owners can already use applications that enhance mall shopping experiences. A few examples include Point Inside, which provides up-to-date layouts of nearby malls; One Touch Concierge, which makes it possible to order mall services ranging from restaurant reservations to package delivery at participating properties; and ShopSavvy, which allows consumers to compare product prices at various retail outlets.

Still, there are just a handful of these kinds of services available. Instead, retailers and marketers are emphasizing the basics in today’s world—in particular...Continue reading on next page

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...SMS messaging—to drive consumers’ purchasing decisions, says Michael Becker, vice president of strategy with iLoop Mobile Inc., a San Jose, Calif.-based mobile marketing and content distribution firm.

Today, a retailer’s typical text messaging campaign might be a blanket strategy that offers a 20 percent discount to every subscriber in its mobile alerts program. But the text messages of today will eventually be replaced by more sophisticated campaigns geared toward individual shoppers, says Eric Holmen, president of SmartReply, an Irvine, Calif.-based mobile marketing provider. In the future, as retailers gather more sophisticated data and analytics on customers’ past purchases, they will target their sales strategies. Think of online services like Amazon.com and Netflix. Amazon generates lists of recommendations based on items previously browsed, purchased or placed on a user’s wish list. In addition, users can specify that certain items were for someone else, so those purchases can be excluded from the process that generates new recommendations. Similarly, Netflix allows users to rate the movies they’ve seen and then comes up with suggested rentals based on what users with similar reviews also liked.

A key step will be getting shoppers to enroll in retailer- or center-specific loyalty programs. Then, using these more sophisticated analytics, retailers will be able to offer discounts based on products a customer has tended to buy in the past, with savings dictated by the customer’s loyalty to the retailer in question, Holmen notes. Moreover, retail property owners could be part of this equation as well. Think of the same data crunched center-wide. If an owner could take data about all of a consumer’s purchases at a center, it could create bundles of offers geared to specific shoppers.

Holmen, for instance, typically buys a new pair of shoes at department store Nordstrom every 18 months. Because Nordstrom is a place he likes to shop, Holmen says he would opt to participate in its promotions program. As it stands, Holmen only buys shoes when the need strikes him. In a scenario where he’s part of a retailer or mall loyalty program, either Nordstrom or the center might be able to estimate when Holmen’s shoes are wearing down and send a reminder, enticing him with discounts on his favorite brand. Holmen might then have the choice of either completing the transaction online through his mobile device, or locating a nearby retail center with a Nordstrom that carries his preferred brand of shoes in his size.

In a more interactive campaign, if sensor-embedded advertisements detected Holmen’s mobile device at the mall, Nordstrom could text him while he was on site. Moreover, if associates at a Nordstrom store know that Holmen is coming by for shoes, they can gear their sales strategy based on Holmen’s purchase record. He sometimes buys a belt or two with his pair of shoes, he explains, so that would be the kind of product that might turn into an impulse purchase. The salespeople might then be able to further narrow down the list of items to tempt Holmen with by checking the amount of store credit on his account and the average price of belts he’s bought in the past.

In addition, the center hosting the Nordstrom might be able to utilize smartphone apps to help Holmen plan his shopping route in advance and make the shopping experience as hassle-free as possible.

Thinking ahead

The management at the Mall of America, the nation’s largest retail and entertainment complex in Bloomington, Minn., envisions a day when shoppers could use mobile devices to get customer service in a matter of seconds. They will gain access to real-time parking information, have the ability to draw a direct route through all the stores they’d like to visit, buy tickets for the mall’s amusement rides in advance and send immediate notification to the center’s staff in case of emergency—for example, if they lost track of their child and need help, says Dan Gasper, director of public relations with the Mall of America.

During the 2009 holiday season, the Mall of America was already using its Twitter account to send shoppers regular updates about the parking situation, including the best ramps to park at and which roads to take to avoid traffic. The service proved so successful that going forward, Mall of America will provide Twitter parking updates on Saturdays and holiday weekends year-round.

Mall of America’s marketing team also hopes that eventually smartphone apps will help them drive traffic to their stores. For example, when customers focus their smartphone camera on a poster in the mall’s common area announcing the arrival of a new tenant, it will immediately take them to the retailer’s Web site, so they gain a sense of what that store is all about, says Bridget Jewell, a public relations coordinator with the Mall of America. Mall of America is already in discussions with several smartphone application developers about ways to improve customer service.

“It could change the whole shopping experience by making it more coordinated with who I am,” says Holmen. “You can have a shopping route planned out and find the best values for you before you even get out of the car.”

Some smartphone-oriented personalized sales techniques are already in the early stages of development. For example, in November, Swedish furniture seller IKEA launched an augmented reality application for its PS furniture collection that allows shoppers to take photos of various pieces of furniture within the collection with their smartphones and superimpose them on photos of their rooms at home to see how well the items fit in.

Meanwhile, a recent iPhone application contest organized by mobile ad exchange network Mobclix and apparel retailer Gap Inc. yielded Gap4Me, an application that allows shoppers to browse through Gap’s current merchandise selection and superimpose the clothes on a photo of themselves to get a sense of how they would look and whether various items would create a cohesive outfit. The application, which helps shoppers cut the amount of time they spend browsing in the store, won the People’s Choice Award. The grand prize went to Gap app, developed by IntuApps, a New York-based technology and marketing firm. That application helps shoppers locate nearby Gap stores and browse the merchandise on iPhones, giving them the option of forwarding photos of items they like to their friends and even providing a selection of background music to simulate a real-life Gap shopping experience.

In the future, augmented reality applications will likely go a step or two further, to the point where customers might be able to perfect fits without ever needing to visit actual dressing rooms. This fall, interactive marketing agency Zugara rolled-out Fashionista, an application that allows shoppers to upload images of themselves using a Webcam, then superimpose different clothes on their digital bodies. They can share the images with their friends on Facebook or with other shoppers on the Zugara site, to get outside opinions on the outfits before they click the “Buy” button. At some point in the future, “I wouldn’t be surprised to see virtual sizing rooms, and then you have that product delivered to you,” says Lisy.

In fact, this might solve retailers’ current woes in ordering merchandise—stores lose money when they fail to sell all of their stock at the list price, but keeping inventory levels too low can drive away shoppers. The ability to size customers virtually and then make customized merchandise orders once they’ve paid for their purchase would solve that problem. It would also limit the amount of inventory each store would have to carry, turning many retail spaces into showrooms, some experts predict. Customers will come in to touch and feel the merchandise, get sized if necessary, then place orders through the retailer’s online or mobile channel.

“The role of brick and mortar stores might [change to] function as an old-fashioned showroom,” says Underhill. “When you look at the Sears catalog showroom of the 1960’s, you’d go visit the showroom, but then call-in the order.”

New configurations

All this would have deep implications for store sizes and layouts. Retailers will need less storage and display space with streamlined supplies of merchandise carried on hand. There are already some retailers who operate based on the showroom model, including consumer electronics seller Apple. Apple’s wildly successful stores allow customers to test-drive its products before they make a purchase. They also keep a trained army of store associates and “Geniuses” to dole out technical advice. Inventory clutter in the sales area is kept to a minimum.

Retailers should also eventually be able to use face recognition technology to market products to every shopper directly, notes Holmen. In the not so distant future it might be possible for retailers to install LCD screens in their storefronts that will recognize customers through a signal on their mobile device and beam a digital image of that customer wearing items from the Gap’s latest line. It will be much like a scene in...Continue reading on next page

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...Steven Spielberg’s 2002 blockbuster Minority Report. In the film, Tom Cruise, when walking through a futuristic mall concourse, is bombarded with holographic advertisements addressing him by name. In a later scene, he walks into a Gap that asks about a recent purchase. In fact, Spielberg tapped high-level consultants in envisioning the technology that would appear in the film. So the fact that some of the technology is coming to reality shouldn’t be a total shock.

LCD screens with motion sensors combining video-streaming and face recognition are already available from companies like Microsoft. During the 2010 Consumer Electronics Show, Intel introduced 7.5-feet-tall multi-touch, multi-user digital signage screens that allow shoppers to take virtual store tours, access sales information and even share their finds with family and friends through social media and mobile devices.

Meanwhile, many retailers have been launching mobile sites, where they can fuse several different sales channels—online, in-store and mobile—to improve customer experience, says Chris Goumas, senior vice president of retail and marketing solutions with Access 360 Media Inc., a Los Angeles-based mobile marketing agency focused on the retail sector. For instance, in November, apparel seller A|X Armani Exchange announced the launch of its mobile commerce Web site, which allows smartphone users to access the retailer’s merchandise selection and mobile customer service, as well as find A|X Armani Exchange stores nearby. Target and Sears have mobile sites as well.

“I would be shocked if every single retailer didn’t have a pretty robust mobile channel in three to five years. It supports your email channel really well, it supports your marketing channel really well, it supports your promotions,” says Goumas.

In addition, mobile marketing specialists predict that one day smartphone users will be able to pay for their purchases directly from their mobile device, rather than having to exchange cash or enter credit card information into the retailer’s system.

Today, it’s already possible to complete transactions from cell phones, as more and more companies partner with mobile payment service providers. In some parts of the world, including Africa, mobile payment, called “mobile money,” is already commonplace. People can buy vouchers to “top up” their accounts. Then they can transfer money to other users via texts.

And in the U.S., the Red Cross and other aid organizations have been successfully in soliciting donations by having people send texts that authorize the Red Cross to charge a user’s cell phone account $10. In the future, the smartphone, or its equivalent could replace the wallet, says Kevin Foreman, CEO of Point Inside Inc., a Seattle-based indoor mapping developer. There might no longer be a need for the cash register, with its long lines.

All these changes toward easier and faster shopping might divide retailers into those whose products it might be more convenient to purchase online, including sellers of electronic devices, household appliances and household items, and those whose products appeal to the consumer’s need for a sensory experience, says Foreman.

“I would be as happy having something delivered from Costco as I would be loading it into the back of my SUV,” adds Yaromir Steiner, CEO of Steiner + Associates, a Columbus, Ohio-based retail developer. “But if I want to make a beautiful dinner, if I want to see and touch the produce, I will go [into] Whole Foods because it offers that experience. Our job as developers will be to adapt.”

Mall's new role

Mall owners and developers might have to rethink many aspects of their business, from leasing strategy to rent collection to layout arrangements, says Lisy. For example, as many stores shift from being the final point of sale to serving as a showroom and service center, the straightforward model of rent based on a percentage of store sales might have to be switched to one that takes into account online and mobile orders that customers complete while on site. Mall owners might also have to rely more on social spaces like restaurants, cafes and movie theaters to drive traffic.

This change has already been taking place over the past decade, but it will take on increasing importance going forward, notes Steiner. Moreover, when developing a leasing strategy, property owners will want to keep in mind that commodity retailers will continue to shift operations online, while retailers that make the shopping experience itself part of their appeal will prosper in the brick-and-mortar format.

Mobile shopping, like online shopping before it, will never completely replace shopping in-store because people have an inherent need to go out into the physical world and experience new things in person, says Thomas Frey, executive director and senior futurist at the DaVinci Institute, a Longmont, Colo.-based non-profit futurist think tank.

The challenge for retail property owners will be to provide enough regular changes in their tenant offerings to keep shoppers coming back for the sake of the mall experience itself. The current practice of signing 10-year and 15-year leases for most tenants could become outdated over the next decade as consumers get tired of seeing the same stores on every shopping visit and opt to shop on the Web, Frey says. One way for retail property owners to combat their fatigue would be to rotate tenants on a much more frequent basis —for example, month to month—and allow space for emerging vendors to showcase their wares. The monthly rotations would best be suited to local merchants who might have a unique product offering, notes Underhill. In the future, the concept of the pop-up store might evolve into that of a pop-up mall.

In addition, Underhill advises retail property owners to start thinking about low-cost ways to make their centers attractive to children—for example by putting in aquariums or duck ponds or bubble machines near areas frequently visited by parents. “Often, the children define where we spend our time,” he notes. “If the children fall in love with the aquarium or the pond, those are things that are creative, but don’t necessarily cost a lot of money on an ongoing basis.”

The end result of all the recent technological innovations, coupled with America’s ongoing focus on New Urbanism, means that enclosed regional malls will continue to become obsolete. Adapting the same storefront to a rotating roster of retailers is much easier in an open-air center or in an urban streetscape than in a traditional mall, says Frey. Going forward, the shopping center industry will continue to redevelop those properties into mixed-use centers, creating vibrant, social spaces that will keep people coming back to physical stores for a long time.