ACRE

Data-driven decision making across the agriculture and food value chains

Agricultural Input Manufacturers & Distributors

Identifying growth opportunities in agricultural markets

ACRE uses local agronomic data and satellite imagery to determine the market potential for new and existing input products. This deep, local understanding allows commercial and marketing teams to identify opportunities for growth, match offerings to grower needs, and adjust to changing conditions.

WHAT WE DO

Footprint strategy

We define local markets on which to focus by determining market size and share, gaps in the market, growth hot spots, and locations for greatest product fit.

 

Resource planning

We identify potential channel partners, realign sales territories, and position assets to align best with the market and competition.

Sales optimization

We identify ways to increase sales through cross-selling and customer-churn reduction, with in-season adjustments of marketing, sales targets, and inventory levels.

$500 million in growth-headroom opportunity identified

Determined underperforming counties with a high potential for market-share growth for a US crop-protection producer.

 

120 percent increase in sales opportunities

Helped an agricultural-input provider define its go-to-market strategy for seed and crop protection in Canada by focusing on areas with high product fit.

$80 million in untapped revenue potential identified

Helped a seed producer in the India market by focusing sales efforts on the smallholder-farmer segment in specific districts.

30 percent increase in return on investment

Created a new marketing-and-distribution plan based on product fit of specialty products for a European input provider.

Commodity Buyers & Traders

Evaluating and optimizing commodity risk

ACRE uses advanced analytics to identify opportunities to improve risk-management strategies and then deploy accurate price forecasts and risk models to reduce bias and sustain impact.

WHAT WE DO

Diagnostics

We rapidly identify opportunities to make procurement and risk management more agile through quantitative assessments of performance and comparison with best practices.

Customization

We tailor ACRE’s machine-learning algorithms to your risk tolerances to create a fit-for-purpose set of tools to help balance risk while reducing cost.

Capability building

We train your team to incorporate best practices, including the use of digital tools, to help your organization make real-time, fact-based decisions with greater transparency.

More than $150 million in savings identified

Incorporated dynamic risk analytics into a metals company’s procurement processes.

3 to 5 percent savings on raw-commodity costs

Identified raw-commodity costs savings for clients in the agriculture, metals, and mining sectors.

More than $85 million in unwanted risk identified

Helped a grain trader’s risk-management function whose trading decisions did not reflect the organization’s stated risk tolerance.

Governments & Nongovernmental Organizations

Spurring agriculture-value-chain growth with digital and advanced analytics

ACRE helps governments, state agencies, donors, and nongovernmental organizations prioritize value-chain investments and understand market volatility by using digital and analytic tools. We employ real-time data on crop and livestock production, soil conditions, climate, and weather to enable transparent, data-driven decision making for those trying to improve the system.

 

WHAT WE DO

Investment strategy

We identify the most attractive value chains for sustainable competition, leading to improvement in economic, productivity, and nutrition indicators.

Digital food balance sheets

We combat food shortages through use of digital food-balance-sheet technology, which combines food consumption, trade flows, local reserves, and yield forecasts in one place.

Land use optimization

We determine the right mix of crops, forest,and livestock to maximize value for a given area through use of satellite imagery, weather data, and deep agronomic knowledge.

$5 billion aquaculture-development opportunity identified

Helped African country looking to replace imports and increase presence in global export market quantify aquaculture-development opportunity.

360,000 tons of maize managed in real-time

Implemented a digital solution to help an African country track strategic food reserves.

50 percent increase in smallholder-income identified

Designed an investment plan for three competitive value chains for an African country.

Investors

Identifying hot spots for investment

ACRE combines multiple layers of insights to identify high-potential value chains and size the opportunity for investment. By using extensive data on demand growth, local environmental conditions, production potential, value-chain structure, and trade, we can help investors prioritize where and how to play.

WHAT WE DO

 

Investment selection

 

We define the most attractive value chains to target investment based on expected demand growth and regional competitiveness.

 

Investment strategy

We understand the area of the value chain—whether upstream in farming and inputs or downstream in processing and trading—most ideal for investment.

 

Environmental analysis

We analyze the impact of climate change and other macroeconomic factors on local agriculture markets.

1.5 million hectares of a new coffee-growing area identified

Uncovered an area currently not in use in East Africa with high future suitability for coffee growth to introduce new land options to combat increasing volatility from climate change.

More than 100 value chains analyzed 

Helped a private investment fund in Eastern Europe looking to gain exposure to the food sector but unsure where to start.

Three high-potential export crops identified

Worked with a Central American land investor that wanted to diversify its production.

Farm Operators

Informing and optimizing farm operations

ACRE offers layers of insights to help farm operators manage their operations more effectively. We pair this knowledge with analytics—including on crop identification and yield optimization—and with the expertise to implement end-to-end operational improvements, from the field to processing to logistics.

 

WHAT WE DO

Crop selection

We define the most suitable and attractive crop to grow based on soil and climate profile, with long-run revenue projections.

 

Harvest optimization

We predict yield and production to optimize harvest and post harvest logistics and identify production-management approaches that will maximize yield and minimize costs.

 

Technology implementation

We assemble the right suite of precision-agriculture tools—including data management, drone and imagery use, and the Internet of Things—to improve yield and your bottom line.

 

95 percent accuracy in a crop-yield forecast

Used weather and satellite imagery to help an integrated North American food company make better planning decisions.

 

$5.5 million in incremental profit identified

Optimized logistics network by integrating field-level yield forecasts into truck routing plans for a large European sugar producer.

 

Predicted crop yields up to 12 months in advance

Used more than 12,000 variables to predict field-level oil-palm yield up to 12 months in advance for a large plantation operator in Asia.

Fishery Operators

Identifying fishing hot spots throughout the season

ACRE helps commercial fishery businesses improve the profitability and sustainability of their operations. By using advanced geospatial analytics applied to historical capture records, environmental data, and fishing vessels’ behavior, we help commercial fisheries identify attractive fishing areas throughout the season and optimize fuel consumption while decreasing bycatch.

 

WHAT WE DO

 

Fishing efficiency diagnostics

 

We benchmark the standardized catching rate of each of your vessels against the rest of your fleet or against competitive vessels to identify improvement opportunities.

 

Fishing strategy

We use geospatial fish-optimization models to help you intelligently allocate your vessels to the fishing hot spots in your territory.

 

In-season adjustments

We support in-season adjustments of your fishing strategy through forecasts of fish-abundant hotspots, with visualization on a customizable digital platform.

 

$11 million in margin identified

Helped a midsize commercial fishery optimize catch and reduce fuel consumption.

 

31,000-tons reduction of CO2-equivalent emissions identified

Supported a European commercial fishery to improve use of fuel and fleet time.

 

$5.5 million in potential savings identified

Deployed vessels to areas of fish abundance, allowing quicker achievement of catch quota and reduced time at sea for a commercial fishery.

Small plant, big protein

Could a tiny aquatic vegetable become the primary source of protein for millions of people worldwide? An Israeli start-up believes so.

What if all food—even processed food—could be made protein rich and more nutritious just by adding one ingredient? Better yet, what if that ingredient could be grown year round using very little land, water, and energy?

 

What is Mankai?

That’s the vision of Hinoman, an Israeli agritech start-up. And it’s betting on a tiny, protein-packed vegetable—a member of the duckweed family—to shape the future of global protein consumption. Hinoman has spent close to a decade cultivating this vegetable and developing methods to grow it in a scalable and sustainable way. The vegetable is called Mankai (see sidebar “What is Mankai?”).

In 2019, some cafeterias at Harvard University started serving Mankai smoothies and veggie burgers, with more Mankai-containing menu items rolling out later this year. Soon, Mankai will be available at dining establishments on the Massachusetts Institute of Technology campus as well. Hinoman is also preparing to launch its product at retail in Japan. One of its goals is to build Mankai into a well-known, widely available food brand by 2025.

 

Ron Salpeter, Hinoman’s CEO and one of its three cofounders, recently spoke with The Jeeranont partner Michael Taksyak at Hinoman’s headquarters near Tel Aviv. Salpeter shared his views on how consumers’ eating habits are changing and what lies ahead in meat and protein consumption. An edited version of their conversation follows.

The Jeeranont: Alternative proteins have been a hot topic in the food industry this year. How do you see the demand for alternative proteins unfolding in the next decade?

Ron Salpeter: Alternative protein must be viewed within the broader context of two megatrends: conscious eating and the “plant forward” agenda. Young consumers—millennials and Gen Zers—are the predominant force shaping demand in everything, including food, and they are the ones driving these two megatrends. So, I believe these two trends are going to dominate the food industry in the next 20 or 30 years.

The first trend, conscious eating, means that consumers now think, “How does the food that I eat actually affect my body?” People are willing to spend time educating themselves about this. I have two daughters—one is 24 and the other is 20—and very rarely do they put anything into their bodies without first looking at the label. The younger generations want to know what is in their food. Consumers now also take into consideration how their food affects the planet. I don’t subscribe to the idea that people will stop eating meat in the next 20 or 30 years, but I do think that as soon as 2030, eating meat will, to a large extent, become immoral; people will feel rather uncomfortable eating meat.

Meat and morality

The other megatrend is the plant-forward agenda. This agenda, promoted by organizations like the Culinary Institute of America, is about making sure people are exposed more and more to fruits and vegetables because these foods provide elements that are lacking in processed foods. And there is growing evidence that procuring one’s needs for protein or iron solely from meat sources is not enough.

Here’s how I think these trends will translate in the food industry: more regulation in food labeling and food marketing. I think that, in the not-too-distant future, regulators will establish a scale for food labeling that will clearly indicate what we call the bioavailability of the food—how much of what is in the food is really absorbed into the body—and the food’s impact on the environment. So, food labeling will change. And the same goes for food advertising.

The Jeeranont: The food industry has changed quite a bit, even in just the past few years. Has anything surprised you as the market has evolved?

Ron Salpeter: Social media has proven even more effective than I thought. It is very effective in creating a space for newcomers. I’m surprised at how fast it brought innovative food manufacturers, like Beyond Meat and Impossible Foods, to consumers’ attention.

Nutrition and processed foods

Another data point that surprised me is that, according to Innova, a market-research company, new food offerings with vegan-related claims have grown more than 45 percent annually over the past few years. That’s tremendous growth in new products targeting a consumer group that even just five years ago was considered marginal by most large food companies.

The Jeeranont: Are vegans the target customer for Mankai? Interestingly, the two alternative-protein companies you just mentioned have grown so rapidly because they’re targeting meat eaters, not vegans or vegetarians.

Ron Salpeter: Mankai is for everyone. We believe we can make the world a healthier place by embedding Mankai, an all-natural source of macro- and micronutrients, into the processed foods that consumers like to eat. We actually do not think of Mankai as an alternative protein; that term does not do justice to the virtue of this product. It’s a superfood—a dietitian’s dream.

By 2025, we want to build consumer awareness to the point that the emblem or the stamp of Mankai on a food product will become synonymous with quality and bioavailability. That means when consumers see the Mankai emblem on a food product, they’ll know that the food they are buying is packed with protein, iron, vitamin B12, calcium, and other nutrients that won’t just pass through and leave the body very quickly but will make a significant contribution to the overall health of the body.

The Jeeranont: What do you think it will take for Hinoman to achieve that level of consumer awareness?

Ron Salpeter: I’ve been told by many people, “Keep your messages simplistic. Consumers know nothing about protein or iron or vitamin B12; they know so little about what they eat.”

People have been telling me that education will be a challenge, a barrier. But I’m finding that consumers are more savvy and more sophisticated than people tend to think—and they have a strong appetite to try new solutions.

The true challenge is scalability. In the food business, if you cannot offer your product in large quantities, you’re a marginal—and probably soon-to-fade—phenomenon. Scaling up is a capital-intensive effort for us because it requires constructing aquatic precision-agriculture basins in greenhouses; that’s our cultivation environment for Mankai. So, becoming more efficient in our production to improve our yields is our biggest challenge. That’s where we will be concentrating our efforts in the years to come.

The Jeeranont: What’s your craziest prediction for food in 2030?

Ron Salpeter: By 2030, it will be possible to achieve personalized nutrition. If people somewhere realize that there is a specific need—for example, a need for more iron to deal with anemia in a certain region—then we will be able, with just the touch of a screen, to create a non-GMO iron-accentuated crop right there. This will be just an initial step toward a far more ambitious endeavor: creating ingredients that match the unique physiological and metabolic needs of each individual. That’s what I see as the future of food.

Voices on Infrastructure

The future of real estate

One of the world’s most interesting industries, real estate contributes significantly to global GDP; it is also the bedrock of urbanization and has created immense wealth. But it is difficult to understand. Real estate is local in character, extremely cyclical, and often characterized by information asymmetry and lack of transparency.

This issue of Voices explores the trends shaping the future of the industry, including customer-centricity, functional design, disruptive technology, transit-oriented development, and investment in emerging markets.

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A turning point for real estate investment management

As institutional investors flock to real estate, investment managers must avoid getting stuck in the middle of the market—too big to be nimble yet too small to reach scale.

At $3.1 trillion in assets under management (AUM), real estate is one of the largest alternative asset classes (Exhibit 1). Sustained, high single-digit growth in AUM has been driven as much by investor appetite as by strong asset-class performance. LP allocations nearly doubled from 5 percent in 2005 to 9 percent in 2017.1 Investors have flocked to the asset class because of the perception of equity-like returns, relatively high cash yields, and lower correlation with broader capital markets.

Even after massive capital inflows, the sector continues to enjoy a structural tailwind, as LPs remain underweight relative to long-term targets (Exhibit 2). One reason might be that, as LPs have told us, few managers are well positioned to meet their evolving needs and to give LPs confidence in alpha generation at a time when capitalization rates are low. Still, recent surveys indicate that many LPs expect to increase their allocations to managers they trust, and capital appears likely to continue flowing from new sources (for example, retail investors).

How exactly are the needs of LPs evolving? We see four trends:

  • Risk off, yield up. As a share of their real estate allocations, LPs have traded down the risk spectrum in the years since the global financial crisis. Allocations to core, core-plus, and debt strategies have grown more quickly than value-add, opportunistic, and distressed strategies (Exhibit 3). One likely reason is a search for yield, as many investors have rotated away from sustained low yields in traditional fixed income. Even with prime yields for Class A office space falling as low as 3 percent, core real estate has provided a 200- to 400-basis-point spread over ten-year Treasuries (and also did well through the last downturn).2 While that has attracted much interest, lower expected returns in core strategies, driven by compressed cap rates, have prompted a shift to core plus. One early-moving core-plus fund has grown massively, and others are quickly following. For LPs, core plus might be said to combine the yield of core with the opportunity to outperform the leading benchmark3 referenced by most pensions and their investment teams.

  • Long-term capital deployment. Open-end funds have grown at 18 percent annually in the past five years, as GPs have favored capital without a set hold period. Their share of core and core-plus investment grew from 21 percent to 28 percent during that time (Exhibit 4). Private equity–style closed-end structures are not dead; indeed, fundraising has recently accelerated, particularly for opportunistic funds. But the permanent nature of open-end vehicle capital and incremental cash flow over time have led to greater share for these vehicles. In keeping with the broader shift across most private markets, the traditional drawdown vehicle has lost ground to more flexible structures.

  • Growth in direct investing. Many larger, at-scale LPs have built in-house capabilities, increasing control and discretion through separate accounts, discretionary sidecars, coinvestments, and direct investment through large-scale joint ventures (JVs). Others are tying up with operating companies, either by buying them outright or by investing through exclusive agreements. By increasing allocations to more-direct strategies, LPs both lower their costs and retain greater control over decision making and cash-flow timing—both attractive attributes.Many large LPs will continue to invest in funds and look for partners that can service their full range of needs (such as one-off development JVs). Smaller LPs (which represent the majority of capital) still rely on commingled funds.

  • Net returns, not just gross returns. LPs are looking for ways to get exposure to real estate but will only pay for higher cost structures that also deliver consistent alpha. While some managers are meeting that need, the push for lower costs has led to rapid growth in AUM of several very large investment managers (IMs)—most notably, funds sponsored by insurance companies and traditional asset managers, both of which often benefit from balance-sheet capital and in-house distribution networks. These embedded advantages provide scale economics to these players, allowing them to compete with relatively low fee structures (typically without a promote). As these investors grow larger, and the institutional-investment landscape grows increasingly fee averse, managers with higher cost structures will be further pressed to justify their fees through differentiated value propositions and proven ability to outperform through cycles.

 

How can investment managers respond?

The evolving landscape of real estate investment management

 

The needs of LPs are evolving, and some managers have adapted better to the new environment. A few such firms have collected more capital—and have transformed this newfound scale from a simple outcome of their success into a genuine competitive advantage. Other managers have distinguished their firms by developing unparalleled expertise (and, often, operating capabilities) in niche segments (see sidebar, “The evolving landscape of real estate investment management”).

 

Across the spectrum, from niche to scale, LPs’ changing needs are resetting the industry’s dynamics. In response, we see five ways for IMs to differentiate and grow profitably:

  • Meet investors across the risk spectrum. Capital has shifted to core and core-plus strategies, but many of those dollars are run by managers that have moved down the risk spectrum to meet investor demand. Gone are the days of single-strategy at-scale managers in real estate and across private markets. Winners today are flexible in what they do, and excellent opportunistic investors can convince investors that they can perform in value-add or core-plus strategies (as evidenced by capital flows). In our view, the lesson is not just about meeting the current demand for core-plus strategies but also about building the capabilities to play across the risk spectrum, using their hard-earned reputations and investor relationships to play an outsize role in LP portfolios, regardless of market conditions and favored strategies.

  • Build analytics capabilities. Real estate investors and operators sit on an enormous set of data about each of their properties and many more in the industry. Further, nontraditional data sources promise to illuminate even more insights. Are multifamily rents in a given zip code more sensitive to the number of five-star restaurants in the area or to the proximity to gas stations? Answers to such questions are now knowable, and forward-leaning managers will create a meaningful data advantage from simply utilizing what is already captured, even when stored in cumbersome formats. Underwriting with data-backed conviction could help managers pick better buildings and invest in second-tier cities, out-of-favor submarkets, and emerging specialty segments, expanding the opportunity set. Furthermore, the use of data to drive tenant selection, revenue management, and so on can produce significant operational outperformance and free up cash for capital investment.

  • Build a set of strategic anchor partners, complemented by a long tail of investors. Large institutional investors are looking for strategic relationships with managers in which they can deploy big pools of capital across a range of opportunities and access a range of services that go well beyond the product, such as research, analytics, and advice on their portfolios. IMs that build global relationships with a few top LPs as anchors will have advantages when launching new strategies and investing in new geographies. Vertically integrated managers that can partner with LPs for both their direct and traditional needs may be particularly advantaged.

Anchor partners are helpful but not sufficient. They jump-start funds and fundraising—but typically at discounted rates. A longer tail of investors is required for funds to reach profitable scale. Such investors typically invest in funds only. Winning with the long tail requires a credible track record and an exceptional sales force—something many managers lack. Retail, in particular, is a significant opportunity: we estimate that, in the United States, high-net-worth investors’ unmet need for private real estate ranges from $50 billion to $100 billion. Accessing this capital requires matching investment products with liquidity needs (as private real estate investment trusts do) and partnerships in the right channels (such as wirehouses, private banks, and retail investment advisers). In this way, IMs can use centralized, shared resources to create scale economics to access an investor base that pays nondiscounted fees.

  • Invest behind transformative themes to reach scale. With large-scale demographic shifts and significant changes in how we live, shop, work, and play, disruption has come to every food group. As an example, the aging stock of core office towers in major cities was not constructed to meet the demands of open floor plans, shared spaces, or short-term leases. Beyond traditional segments, these contemporary needs are also increasing the demand for specialty products (such as data centers, senior housing, and e-commerce distribution centers). Especially in the late stage of the cycle, IMs cannot sit around and wait for the perfect asset to arrive. They must focus on proactive theme generation and find portfolios of assets to deploy capital at scale.

  • Go international. Leading GPs today are truly global, with acquisition and operating capabilities around the world. The most successful managers are replicating their successful domestic platforms, often by exporting a concept such as build-to-rent multifamily. They are serving the needs of cross-border tenants such as e-commerce companies. And they are relying on the trust given by their LPs to enter foreign markets with confidence in their ability to spot good practices and opportunities in less familiar markets.

 

Of course, pursuing any of these five growth strategies introduces operating complexity and a need for new capabilities. If not managed well, then growth—raising more capital from more investors, deploying that capital in larger transactions and in new markets, and adding analytics capabilities—will both add costs and increase investment and operational risk. In a world where fees are compressing, increasing costs is not a winning formula. To grow profitably, GPs must ensure that scale truly brings about operating leverage (especially through efficient general and administrative functions that utilize digital tools, process automation, and thoughtful outsourcing strategies).

 

Real estate is in a period of substantial disruption and growth that has already created big winners and stands to create more. To break out from the pack, IMs should lean into the disruption, embracing new asset types, food groups, vehicles, and partners. Those that do are set to deliver differentiated performance and build scaled, sustainable businesses.

Meeting millennials where they shop: Shaping the future of shopping malls

The traditional shopping mall is under threat. Here is how to meet the needs of digital customers.

 

Digital technology is transforming global lifestyles and changing the way we live, work, shop, eat, play, and learn. Real-estate developers therefore must provide new ways to meet these needs.

One example is the shopping mall. These sit at the heart of communities in many cities in both the developed and developing worlds. But as consumers embrace digital technologies, developers must redefine the traditional shopping mall to adapt to this behavior.

In this article, we explore five consumer trends that will shape the future of the shopping mall.

Entertainment

Many millennials—adults born from the early 1980s on—prioritize spending on multisensory experiences and events over product ownership. They prefer instant gratification from entertainment and are attracted to media, gaming, and experiences that are shared socially. Half of millennials regularly go online for video games (versus 30 percent for Generation X); four in ten use social media to record their experience after using a product. Meanwhile, Gen X consumers—those born from the mid-1960s to early 1980s—are embracing digital from a different angle. For example, this segment increasingly views digital entertainment as an education tool, underpinned by smart technology and an expanding, globally connected Internet.

Meeting the needs of these groups while responding to rapidly developing technologies, such as virtual reality and participative experiences, will be the key to providing successful entertainment.

This disruption in traditional entertainment offerings has serious implications for the real-estate industry. Here are some ways that they may react:

  • Reimagining public spaces as a canvas for entertainment. This can mean integrating the community experience into the public realm via live social-media feeds and new display formats that share user-generated content. Technology will enable public events and spectacles to become participatory experiences with multisensory appeal, increasing visitor numbers and tying the physical space with the virtual world. Being part of such experiences and sharing them becomes a social currency for millennials, thus encouraging repeat visits.

  • Working with educators to create new learning opportunities via “edutainment.” Likely venues include museums and theaters, which could be redesigned to combine learning, discovery, and entertainment. Some destination malls are already considering designing entire districts as “hackable and playable.”

  • Redesigning entertainment hubs, such as movie theaters, theme parks, and gaming parlors as interactive experiences with virtual-reality content and immersive experiences where the customer becomes part of the story.

 

Food and drink

“Food is the new fashion” is the mantra that increasingly guides development. The expression reflects the idea that food has usurped fashion as a force in retail and travel. One example is the fast-growing trend toward healthy eating, driven by millennials’ preferences and government policies to curb obesity. Food-focused digital platforms that see consumers routinely reading online reviews before choosing restaurants or ordering through food-delivery platforms are on the rise.

 

Quick-service restaurants are upscaling through furniture and technology changes. At the same time, casual-dining restaurants are transitioning to two established formats—fast casual and casual premium. On the other hand, fine dining is embracing new and niche concepts, such as multisensory experiences. The sector is also adapting itself to provide more accessible dining formats.

In response, real-estate developers are positioning more restaurants within retail areas; the idea is to create gastronomic “stop spots” to attract shoppers. Real-estate experts suggest that the gross leasable area devoted to food and beverage outlets in malls could rise to some 25 percent by 2020 from 10 percent today. Among the possible strategies are the following:

  • Using technology, such as self-ordering, and providing healthier eating options to redefine traditional fast-food outlets and casual dining.

  • Creating new “experiential dining” options that offer more entertainment for consumers. Examples include farm-to-table courtyards, gourmet food halls, and “cook your own food” facilities.

  • Seeing food as theater, using reconfigurable spaces and rotational chef concepts in restaurants to offer customer encounters with, for example, celebrity chefs.

 

Retail

Millennial consumers want to shop for experiences as well as products. Rising demand for cooking classes, health-and-wellness sessions, and makeup tutorials means that retailers, athletic-apparel makers, and electronics companies are changing what they offer and how. Specifically, traditional department stores and shopping malls are wondering whether and how to embrace online shopping.

The traditional department-store format is driving less traffic to shopping malls as consumers move their retail activity online. With online retail creating choice overload, consumers are beginning to appreciate curated retail concepts. “Pop up” stores that provide distinctive products for a short period are one significant response. These are on the rise in a variety of markets. In the United Kingdom, for example, pop-ups accounted for £2.3 billion in sales in 2015, up 12 percent compared with the previous year.

To meet this changing environment, real-estate developers should consider the following:

  • Creating retail centers, that are also learning zones to bring together consumers, retailers, and entertainment. One example is a sporting-goods store that includes a fitness studio to enable the consumer to experience the product.

  • Experimenting with niche retail concepts such as revolving storefronts, pop-up stores, dedicated space for “glocal” brands, and offline showrooms of online players. Doing so creates a more interesting mix of tenants. It may not maximize leasing yields per square foot, but it will generate buzz and traffic.

  • Converting anchor retail spaces into coworking areas that are flexible and reconfigurable for other retailers and more appealing to start-ups and to millennial customers. For example, one San Francisco mall created a coworking space that provided direct access to more than 20 million mall shoppers.

  • Allocating reconfigurable spaces in mall corridors and piazzas to host pop-up stores for product launches and seasonal offerings.

 

Transportation

Getting into and out of the mall is an important part of the shopping experience—and often a frustrating one, when it comes to parking, safety, and convenience. Here are some approaches that real-estate developers might consider to improve this part of the experience:

  • Technology-enabled parking, including use of robot parking valets to perform the last-mile parking service and maximize the available parking space. Integrating parking apps and sensors can help shoppers spot spaces and then get to them.

  • Redesigning car parking to include dedicated e-hailing pick up zones, shared economy parking, and fast-charging stations for electric vehicles.

  • Preparing underground parking space for possible future conversion to retail or commercial space as autonomous vehicles gradually reduce the need for private-car parking.

 

Technology

By 2017, the millennial generation will comprise the largest online audience, and they will have more buying power than any generation ever. Almost seven in ten say they are influenced by friends’ social-media posts; 83 percent say they trust recommendations by friends and family. They rely on peer recommendations, and increasingly discover products online before going out to shop. But they still want to touch, feel, and explore products before purchasing them. The need, then, is to create a seamless chain between online and on-site shopping. There are several technology-enabled innovations to consider:

  • Creating “virtu-real” formats to provide consumers with a more interactive retail experience, for example, through the use of touchscreen navigation panels, virtual fitting rooms, magic mirrors, and augmented-reality zones.

  • Merging online and offline retail using “social shopping” technology with digital screens in transport-arrival zones, piazzas, shop windows, and major junctions of the shopping district. These can help consumers find products, access reviews, and then direct them where to buy.

  • Using smartphones for e-checkouts and click-and-collect services, to help blend the offline and online shopping experience. Some of the largest mall operators in the United States are already working with partners to give shoppers same-day delivery service.

 

Digital technologies and changing shopping habits are a clear threat to traditional retail business models. But there are positive ways to respond to these trends. To embrace these opportunities, real-estate developers must get closer to consumers and figure out how to meet their evolving wants and needs. That means rethinking the role of the shopping mall, and adapting its strengths to those of the virtual world.

The Jeeranont

Issued by The Jeeranont Company Limited is authorised and regulated in the USA by the Financial Conduct Authority. UNITED STATES OF AMERICA