By Carolyn Gray Anderson
The June 2016 second-quarter economic forecast asked hard questions about the overall outlook for the U.S. and California, particularly the future of commercial real estate. In his keynote address, Peter Lowy made the answers sound easy.
Lowy is co-CEO of Westfield Corporation, one of the world’s leading shopping center companies, with retail destinations in London, New York, San Francisco and Los Angeles among its portfolio of 34 malls and 6,480 retail outlets in the U.S., UK and Europe. He is also a chairman of the company. Last year, Westfield Corporation’s approximately 400 million customer visits to Westfield shopping centers generated over $16 billion in retail sales. With new investments underway, Westfield’s value is expected to exceed $50 billion by 2020.
Lowy has 30 years’ experience in the shopping center and real estate investment trust industry and has been with Westfield Group since 1983. So when he told the Forecast audience that his company is thriving, he didn’t have to talk long to convince them — and he may have provided the “sliver of optimism” Dean Judy Olian hoped for when she introduced him.
He identified the three areas where the most significant shifts have occurred and how Westfield is approaching them profitably: technology, consumer behavior and the retail business model.
1. Technology is an opportunity for traditional retail to build stronger connections with its customers.
Lowy evangelized at length on the power of mobile and other technologies to draw consumers to physical locations and to streamline their experience with retailers both in person and remotely.
Westfield’s multivalent app purports to guide shoppers to the nearest mall via the quickest route, advise on the closest parking, enable retailers to download every SKU available to individuals’ phones, and steer the shopper not just to stores but products and services. Naturally, the app facilitates ticket purchases, restaurant reservations and food orders that can be picked up or delivered. “We have already created the technology backbone to connect our customers to these services,” Lowy said. The product was developed by the company’s Westfield Labs, where it focuses on “removing the friction from physical commerce.” The goal is seamless customer experiences whether at a local mall, an airport or in transit.
2. Retailers need to retool how they think.
Consumer behavior habits have changed dramatically and permanently, Lowy said. Customers save more, spend less and what they spend, they spend more efficiently. If the old model was to aggregate retail markets for consumers, it’s now time to aggregate consumers for retailers.
Eyeing long-term trends, Westfield created what Lowy called a “smart global network of retail experiences” at flagship locations to enhance the UX, if you will, so people will think of Westfield malls as “their place.” Defying traditional beliefs that Londoners would never dine en masse at a mall, Westfield successfully expanded food options at the UK locations. He said it completely changed the nature of the business. Here at home, Lowy said Westfield caters to a “community” of 900,000 Angelenos who spend like they number two million, and these people want a lifestyle destination. Some 50,000 people work every day within four blocks of Westfield Century City; he predicts that with the ambitious expansion slated for this year — including 40,000 square feet of open space for events and performances, a 10,000-square-foot rooftop beer garden, and, yes, expanded parking that will retain the pioneering system of red and green lights that indicate where space is available — the asset that cost Westfield $318 million in 2002 will be worth $3 billion.
3. The storefront is more than just a repository for sales.
Retailers now need fewer stores but with higher volume, Lowy said. They need to depend on the storefront as a brand as much as a destination. This establishes recognition online as well. Lowy stressed that in order to transform old business models his company needs to integrate fully with every aspect of the retailers’ businesses, especially their marketing strategy and team.
Sharing data on customers’ habits and behavior, he said, “changes the economic value of what we do.” Westfield’s task is to build an asset even if the retailer is in essence agnostic about how its customers make purchases. But he pointed out that online retailers (notably, Amazon) are beginning to open storefronts. “We’re so technologically forward,” he said, “we’re bringing bookstores back to the mall!
“Welcome to the future,” he concluded.
The UCLA Anderson quarterly economic forecast conference took place on June 8 at UCLA.
Read the press release.