In this episode of The Future of Retail Asia, Ethan Hsu, Head of Retail at Knight Frank Singapore, joins Jun and Imran in the studio to talk about some of the intricate details of making a mall future ready. With his experience in retail, property and even academics, Ethan shares that types of data that mall management teams and retailers should be looking at to not just attract customers to them, but also to grow the brand loyalty.
Episode 11: “The Secret Sauce of a Successful Digital Mall” with Ethan Hsu
-- Start Transcript --
IMRAN: Welcome back to the Future of Retail Asia, I’m Imran.
JUN: And I’m Jun.
IMRAN: And we are so happy to share that we have passed our first ten episodes, and with that, we were actually just named Top 50 Best Retail Podcast in the world! Thanks again for joining us on this journey.
JUN: Yes! Thank you all so much for the support. We wouldn’t be here without you listening as well as our guests! So, speaking of which, today’s episode, we have Ethan Hsu joining us.
IMRAN: Ethan, welcome!
ETHAN: Thank you, thank you for having me.
IMRAN: Ethan is currently the Senior Director and Head of Retail at Knight Frank Singapore, managing a diverse portfolio of retail and lifestyle projects, including the new Northshore Plaza in Singapore. He has over 20 years of experience across different industries and agencies, and brings a fresh perspective and burning passion to the retail landscape. Welcome to the show again!
ETHAN: Thank you, thank you.
JUN: Okay, so Ethan, from your past experience, media appearances especially. You are very much a supporter of omni-channel retail, and so are we! The brick and mortar stores and even shopping malls have to adopt digital technologies. You’ve mentioned at the start of this year that it’s not about competing with e-commerce, but actually finding that sweet spot. So now a year has passed, how has that transformation been and do you see more adoption and innovation within the industry?
ETHAN: Before Covid started, I think that the pick up rate for digitalisation of retail was still pretty much slow and steady, kind of rate. Seeing like, 7-9% of online sales transacting every month versus what we are seeing now currently at 17% more or less on average. I think there was a slower pickup, in terms of how retailers wanted to digitalise their operation. Because there is always this, sticking to their comfort level of knowing that they have been in brick and mortar for a long time, it is just something more comfortable to them. So when Covid happened, my take on it is that it is a blessing in disguise. It accelerated that process of digitalisation for retailers, because the global lockdowns just made it such that if you don’t have an online presence, you are out of business. Because you cannot open your shops, physical shops due to safe measurement measures. And the only way you can trade is through online platforms. So that kind of gave everybody no choice but to move online. So fast forward now, we are coming close to two years of having this situation in the background. And I think that we are seeing a lot of support from the retailers and from the consumers in terms of how they have responded to digitalisation and also to see the retailers going towards evolving their operations now that they have multiple channels of touch points. Different touch points at different levels, whether is it physical or online or a mixture of both, and finding that balance between how much physical and how much online do you need. So that is the trick question, and that is the one million dollar question that if you can answer it for your own operation. Because every retailer is different, their products are different, their offering is different, the value proposition that they bring to their consumer is different. So depending on what kind of product mix they have, they can also then customise their marketing mix accordingly. So if they have a good digital marketer to help them to customise their offerings across different platforms. We are seeing a lot more support coming back from the consumer side, because we are seeing how they enjoy how they are going to the shop. As you can see from the Black Friday sales, people are still enjoying going down to the shop to touch, to feel, to experience certain things. But they may not transact at the shop. They might go back and compare a little bit on the different options they have, different prices, and then maybe on the way back home on the MRT train, they are doing the transaction on their handphones or their mobile gadgets. So we are seeing a lot of these sort of new behaviours, consumer behaviours, consumer preferences coming through. And I think that the good thing about data analytics is that it gives the retailers data points to analyse better what kind of consumer they have, what do their customers like, what are they doing. Or would like to see more of what they are not doing. And these give them information on how to better position themselves post-Covid, because we are all still in a state of transition. We are still all evolving, and I think this is something I feel personally is a very exciting phase of transformation right now.
IMRAN: You are so right to mention that this is a literal million, or if not a multi million million dollar question to unpack. And I think there are ten questions that I want to ask you.
ETHAN: Yes, I know, I combined everything into one.
IMRAN: So where I would like to start off is this right, you mentioned about digitisation is a means. Now I am thinking about how do I optimise the cross channels, do I have the right digital marketing in place. How do I customise this. You mentioned about data. Which is what I actually wanted to ask you about. So two things, one is what data makes sense? What do I need to look at as a retail player looking at data, knowing that there is a mountain of data to look at. That is one question. The other part is then, if you were to look at that, if you were to look at the newer players into the scene. If we talk about traditional retailers, competing with some of the e-commerce marketplaces or online retailers which may not even have physical stores. In some cases, maybe leaving them in the dust. What can they learn from these new players then? When it comes to the data insights, or when it comes to how they structure the operations?
ETHAN: Okay, so let’s do the first question first. What was the first question?
IMRAN: What data makes sense?
ETHAN: So what data makes sense. As I mentioned earlier, because every retailer has a different set of features, it is a different character. I painted the analogy of if you have three children, each of the kids are different in different ways, they have different traits. Some are good in science, some are good in sports, some are good in arts. Depending on what that retailer is selling, what kind of customers they have, they then need to see what data points that makes sense to their operations. In general, most retailers will need to know exactly what their customer profile looks like. So they will usually do a first take, let’s analyse what our target audience is, what our current audience is, and where is that gap in order for us to bridge it so that we can actually target effectively who we want to reach out to. So data points about consumers is going to be number one, the top most, because if you don’t know who your customers are, it’s very hard for you to know what they want. And how do you then change or provide those services or products that you have in order to makes sense to your customers, and that they would then purchase and transact with you. So I think having the data points concerning the profiling is very important. So we always look at the usual demographic profiling, the age group, the income range, the kind of spending that they do when they come to your website. The level of spending they do when they come to your physical shop, and how much of it is repeat purchase, repeat visits and also average pax per spent. So what is the average bill size when they come to the shop? Then they can also have data analytics of each of the product, SKU items, and seeing what kind of products a certain profile of customers like. So ladies in their 20s to 30s might prefer a certain kind of product over someone who might be in their 40s-60s. And with those sort of data points, they can better target certain customers in certain malls. Because if they are in a chain stall in different malls. You might not carry the same range of products in each outlet, depending on who are the customers or shoppers who visit the particular mall. So it can really go down to granular details depending on what kind of data we are talking about. So F&B operators can have their own sets of data points they can look at. In general, for me, I am an advocate for the more data you have, the better it is. Because data is king. Without data, then your information, or your decisions that you take, will not be as well informed as if you had had the information to support the decision that you take and the actions that you decide to go for.
IMRAN: So there was a second part to the question, now you have the new players. I will give you a simple example. I could open up any of the shopping apps, and on a Black Friday or a 12.12, they would say hey, we have a flash sale happening every hour. Every hour of flash sales, got 20 brands participating. It is almost like might be like what you might see in retail, but on steroids. But is there a leaf from this that traditional retailers should be taking a leaf from?
ETHAN: So whether traditional retailers should..
IMRAN: Is there anything traditional retailers can learn from this new age of retailers?
ETHAN: I believe so. I think that, I truly believe that the traditional retails have their own strengths. The new retailers will have their own strengths, their own set of strengths. I think we need both to learn from each other, not just one way. But two ways. Because we cannot disregard the traditional way of doing business as totally irrelevant. I think there are good things that they have done that we can learn from. Over the years they have also garnered, gathered a lot of good working experience, on the ground experience that they can share with the new retailers. So can the new retailers use that information to improve what they currently have. But for sure, the traditional way of brick and mortar retail will have to evolve, it’s for sure. Because people change, retailers change, retail change, the retail landscape changes. It is so dynamic, the whole secto. Today we can talk about this, tomorrow something new will come out. A new technology can come out and change the entire game. I guess it is a matter of how fast they want to adapt and change together with the waves that come through, and I don’t think this will be the last, obviously. As long as there are human beings in this world, there will be a need for people to consume. You and I, and whoever comes after us, will have to eat, will have to clothe ourselves, will have to go for entertainment, will have to go for a haircut, will have to go for a facial, will have to go for a massage. These things won’t change, because we as human beings need to consume things, because it is part of our lifestyle. Unless lifeform completely comes to a stand still, which looks unlikely, otherwise this idea of trade has been around since the beginning of time. The old merchants did ply their trade through the village, through the market, door to door. I mean, we have evolved from those kind of old time retail to today’s form where we have seen omni-channel, hybrid channels, physical channels, direct marketing channels. So there are so many things that will continue to see evolving. Everybody can learn from everybody. I like to see that there is a good part in different generations of retail that we can learn from. And hopefully using the positive aspects to transform them to even better experiences for our shoppers.
IMRAN: To add on to that point, it is very valid, traditional retail has been able to build up business sustainably, while obviously the new generation, vast majority of the growth is venture funded. It remains to be seen whether it can evolve and calibrate to something that is sustainable in the long term. Like you said, there will be this next wave and the wave after that as the market starts calibrating. I think it is very interesting to see and is a very fair comment.
ETHAN: What I can add is that, which may be of interest to the viewers, one thing that I can see that has consistently been around from beginning of time till now, is that the relationship aspect of retail has always been very important because the better you are at cultivating a relationship and building it throughout time, the better the connection with that brand loyalty will be. So the older generation might have a certain way of building relationships, because they have lived through that time and built that relationship through time, through really effort of one-to-one physical interactions and making sure that their customers remember them. And now what we see today, the way of connecting with customers have so many different platforms that we can use. So how do we then strengthen the customer relationship through a variety of formats. Maybe the youngsters today, the millennials have a different way of reaching to that, and how well the retailers can connect with these new age kind of consumers would be interesting to note. That is where we have data analytics, we have digital platforms, and tech to help us to connect with the younger generation. This is probably the area where the older, traditional brick and mortar, mom and pop stores operators might have to take a leaf out of the book from the younger generation retailers, because they won’t know how to connect. They weren't from a time where these tech gadgets were available.
JUN: Interesting, where do you see the online retailers coming to the physical space? Just now we mentioned that we need to learn from each other. For the past few months, we saw Amazon, Meta, and closer to us there is Zalora, Love, Bonito.
IMRAN: In China you have JD.
JUN: Yeah, JD, Alibaba, Tian Mao. So what do you see where those online retailers start to come out to have the offline store.
ETHAN: Actually I think the online retailers have already started coming to physical space, as you correctly mentioned Love Bonito, Pomelo, has been on an expansion route in expanding their physical footprint in Singapore. And you can see very clearly, even throughout the pandemic, they have continued to open stores, multiple stores within one year, at a time where retail is supposedly struggling. These players are coming in to open up even more physical stores during those times. So I don’t think it is going to be a growing trend, I would say, just that maybe through the last couple of years, market conditions have been more challenging. Some of them could have been withholding back their expansion plans to go into physical brick and mortar. We had some interest even from overseas players to come into Singapore. We hope to see them at some point. I think they are doing more in depth studies before they take the plunge, but I think for sure we will see more online retail concepts, or even online services coming on board to really try out a physical format, because there are certain limitations, we have to be really honest about there being certain online platforms to what they can provide to the consumer. You can do sight, sound probably online, but in physical, you do all the sensory experiences. You have sight, sound, visual, touch, smell. Those are the things you can only do in physical retail stores. So different touch points for different types of experiences will apply, when we talk about online to offline and vice versa.
IMRAN: This hybrid experience you speak of, we have a previous guest of how she had a friend that specifically chose the click and collect form of collection. And when asked why, it is because number one, I want to go to the shop, and if it doesn’t fit me, i want to do a fit change on the spot. And I want to confirm chop, the shoe is available before I go down. Because I don’t want to waste my time. It is interesting to see how these experiences are going between a hybrid of, or spectrum of purely physical to purely online to now, various mixes in between. I have a next segue, which is, when we are thinking of omni channel experiences in a mall, and I think you alluded to this and we talked about it a few times in our conversation. What are the new experiences that you think will be unlocked in the future, either now or very soon, within the malls, from a customer experience point of view, the kind of technology that we may see moving forward? I will give you an example, CapitaLand just said we are entering the metaverse. Which is a very interesting and exciting thing right now. But a lot of people don’t really have a clue yet what that actually means moving forward. What do you see this trending towards?
ETHAN: A lot of the malls are really trying now very hard to one, understand what consumers and shoppers want in order to cater to the changing trends and behaviours. And the other thing is that tech has evolved tremendously in the last few decades. We see a lot more new technologies in different parts of the world that have applied those parts of technology to retail. For whatever reason, we are a little bit slower in adopting such tech in retail in Singapore. I think that, one of the reasons could also be because of the cost of implementation is quite high in Singapore, which naturally also means that the cost of failure would be very high if it doesn't succeed. So retailers are more hesitant when it comes to application of new technology unless it is tried and tested and proven to be successful. We do see that because of Covid, that has changed the playing field to really reward those retailers who are risk taking and are able to adventure forth to put in new technologies and innovate their product offerings to their customers. What I can share is that we can see that the reasons why shoppers go to a mall now are much more varied compared to pre-covid times. It is no longer functional shopping that I need to pick up a loaf of bread so I go to the shop and buy a bread. Obviously there is still a substantial stream of shoppers who go in for functional purposes. But we also see a growing need or demand from consumers for other things like socialising, like I want to go to a mall to meet up with a friend or connect with my friend over a cup of coffee, or share a good meal with my family. We also see them trying to pick up a skill, for example. I go out because I want to learn something, I want to learn how to bake, I want to learn how to do pilates, to keep fit, to do something, to develop myself better. We also see another reason is also a purpose that they got to a mall is to be entertained. We have seen quite a few malls trying to also appeal to the entertainment part. When you come to the mall, it is also a form of entertainment for you. You see Marina Bay Sands, you have the canoe. It is something that is entertaining. It is to keep the shoppers coming back because they feel entertained at the mall. And then the last thing is aspirational. If they associate themselves with going to a mall because they want to do something for the community, for example. It is really something that these different types of modes. I call them shopper modes, because they go into a shop, a mall because they want to achieve one of these different things. Sometimes it is not clear cut. I can go in because I want to achieve all 5. Or I have 2 or 3 out of 5 that I want to achieve. These are the things that a mall of the future will have to understand, which modes, how to engage the consumers when they are in a certain mode in order to transform the experience. If you are there for aspirational purposes, it will be different from him who is there for functional purposes. So how do I appeal to you if you are in an aspirational mode, and I want to create an experience that helps you to achieve your need to feel connected with a larger community, for example. The answer is really not so straightforward, it is a big melting pot, inside there are so many ingredients that you can put in to achieve a certain end result. And that end result can vary from mall to mall, person to person, and even retailer to retailer.
JUN: Do you think in moving forward, in the future, even the new or existing malls, like just now you mentioned about the few functions. What are the extra steps for the mall to adopt this?
ETHAN: I guess your question will be that last bit, where if I know my customer what they want, I know what I can provide, then how do I stitch them all up using tech, using entertainment, using sensory aids, for example sound, visuals, interactive platforms. I think that we are seeing more of this sort of new ideas coming up from malls, how do we engage the customers such that when the shopper comes in, straightaway if they want to go to a certain shop, they can pull up an interactive panel and touch the interactive panel to guide them on where they can find certain place that they are looking for. We also hope to see more of such technology in retail, for example, interactive fitting rooms. In China that is very huge. In other parts of the world they have that as well. In a fitting room, where you have interactive mirrors that can tell you based on your colour tone, you should look for clothes of these certain colours. And based on your skin tone, you can choose certain colours for your cosmetics. Things like that.
IMRAN: Very interesting points right. So you are talking about this new interactivity, the various shopper modes. If I am trying to place myself in the POV of a management of a property company or landlord, the other question I would ask is then, when does my P&L come in. It is not just about buying and installing the technology because that is just a pure cost center to me. The next part of the question, which is a bigger part is, how does my business plan evolve together with this. If I am going to have more customers come in, and I know more of them are going to click and collect, or if I know more of them are going to come in and buy another time. When will my revenue come in? Is it destined to tank? How does the business model evolve to let’s say, I can take some reward together with the investment that I am making with the e-commerce players coming into the mall. I think this is an important question and these are the questions that we are facing when we talk to some of the other landlords. I don’t think there is a clear answer yet, but what do you think about this?
ETHAN: We are beginning to see more landlords and tenants engaging actively regarding the lease terms, the way how the business model might have to evolve. With such technology that you correctly pointed out. Definitely there will be the cost implementation, and the cost implications that the landlord will have to consider when implementing these sorts of things that benefit the overall ecosystem. If they are designing all these things to the benefit of the shoppers, which would in turn come to the malls to patronise the shops there, which will of course benefit the retailers. After all, the landlord will also benefit, because the tenants will be able to sustain their rentals and everything. What we are seeing more of now is that landlords are more willing to explore the percentage of sales structure so that they kind of reduce the upfront risk for the tenants when they come in. Instead of a high base rental, they may allow them to have a hybrid structure where it comprises a base rent and a percentage of sale model. Previously, landlords were a little bit more reluctant to go towards these models, because it is hard to project earnings, especially if it's a financial entity, like a REIT, where they have to project certain earnings to their analyst every quarter. That's the reason why REIT shareholders like the public, because the REIT shareholders are actually the members of the public. That's why people like to buy REIT, it is very predictable. When I buy certain REITs, I know my earnings. Because the three year rentals are locked in. Due to Covid, now everything has changed. Landlords are now more prepared. It’s a good step in the right direction, because it is an equal partnership, it is more of an equal partnership. I won’t say completely equal, but we are moving in the right direction, where the landlord is seeing the tenant as a co partner. How do we then, you do your part by putting in, if you are the landlord, you do your part by making the mall be well managed. Investing in technology to make it entertaining for the customer to walk into the mall, and engaging the shoppers when they are there at the mall. Then my duty is to make sure that my retail offerings and products that I have spent money on advertising, onr marketing, making sure that people come and buy those products from me. And making sure that my products’ quality is good so I would invest more in R&D. They are beginning to have this sort of conversation, which is good. It is really ultimately the whole retail ecosystem will benefit if everybody sees their role, they understand their role, and they work towards that.
JUN: Very, very interesting. Malls start to develop a building, renting out a space, per square feet how much. Fixed rental. Then they will move forward with having GTO, they start to care about the shopper journey. Not only about renting the space, but creating the whole customer experience. Previously, landlords’ only customers were merchants. But now, there are landlords, merchants, and shoppers. I believe in the future, when we talk to a lot of guests, a lot of people’s views will be, retailers will be finding a space to rent won’t just be a space. They will be looking at what kind of value added services the mall can provide to the retailer to give the entire shoppers the best shopping experience. For Aimazing, we are getting the transactional data. What do you see that these transactional data can help in the future, or right now. Can they do tenant mix? The end goal is to create a good shopper experience. What is your view if the landlord is able to get this transactional data.
ETHAN: For the landlords, if they can have more data to show them where they’re shoppers are shopping. What they are buying. What kind of shoppers come into their mall, at what time and with who. How long do they spend in the malls? As well as what kind of spending levels per person, for example, average bill pax. They can then tailor make their own tenant mix in a better way, because they know that if you are here because the kids like to go to a certain indoor playground. And after the indoor playground, they will go have a certain kind of meal at a family restaurant. At the family restaurant, they will order these sorts of food and these sorts of drinks because the kids like that. They can also be there maybe to bring the kids to tuition on a Saturday or a Sunday. When they know all these metrics, they can then tailor make the experience better. My profile of my shoppers that come to my mall, maybe kids. And then when I look at my transaction data. These kids come every week because they have tuition upstairs, then they go to the indoor playground because the parents will reward them with playtime. Then during the playtime, the parents will go for a massage or go for a spa. They can track how the customer experience, the shopper experience, from start to end. And with transactional data, they know where they are spending, then they can tailor make these experiences to suit them better. Without this data, they don’t know who are these, who are my customers, where they are shopping, what are they coming here for, I don’t understand. But if I do know this family of 4, a couple with two kids will always come in through the car park system, and then they step into this lift lobby. That whole journey starts from the minute you enter the mall, it transforms based on the data that you capture.
JUN: From our understanding, you also represent the retailers. You are helping the retailers to find the right space to rent. If you are representing the retailer, what kind of data point that you think the landlord can share with the retailers, that can help them, or can differentiate with other landlords. Can help the retailers make the decisions that yes, this is the place that we want to.
ETHAN: I go back to your earlier point, which was very true and very interesting to note. In the past, you correctly mentioned that it was a very cold transaction when it comes to rental, retail space, tenant-landlord relationship. Because it was just renting a physical space. I was just in the business of real estate, so I have this real estate that you want, you pay this amount, I give this to you, you pay me a certain amount of rent. After three years you can go or you can stay if we can agree on a newer rent. And it is very clinical that way. Today, you cannot have that kind of relationship. Today we are in a very different situation, because finally the tenants have better bargaining power. Malls are suffering, they suffer more when the tenants leave. Because they can’t fill up the spaces fast enough. Because the retailers are finding it very hard to hold because of Covid. So now, the landlords cannot just look at physical rent. They cannot just be in the business of renting out space. They have to think of ways to assist their tenants to survive in order for their tenants to do well, then they will get paid in terms of rental. You correctly pointed out that it is not about the business of real estate. It is the business of how I create community. A community of tenants. A community of shoppers. And I being the landlord, I own the real estate. How do I engage these communities to interact with each other, by providing that landscape, that environment. It is very much, last time was hardware, now is very much software. The mall owners that can really identify the areas that I can create a better software, or operating system, in your terms, that make all the elements communicate more effectively and engage more effectively, to create the memorable experiences that keep them coming back. Those will be the winning strategies.
IMRAN: Okay thanks, Ethan. Now moving on to the closing questions. If you have one mall manager in front of you, one retailer in front of you, what would your one piece of advice you would give to them?
ETHAN: I will actually tell both of them, you need to first identify who is your customer, you need to know who are your customers. And then you need to know what are you, what are you good at. And how do you then work on your own core attributes to strengthen what you can provide to your customers. Ultimately, it is how well you can serve your customers. That is one question every business owner will have to ask themselves. Whether you are a landlord, or a tenant, or a tech application operator, you will need to know who are your customers and what are your core strengths that you can put together in order to serve the sector. And if that sector that you can serve is a very small group, so be it. There is nothing wrong with serving a very small group of people very well and be the best in class. I am always a passionate advocate for being the best in the area that you do. And if you are a specialist, you are a specialist, there is nothing wrong. That is why we have luxury retail, we have mass retail, we have lifestyle retail, because they all serve different sectors. You can’t serve everybody, because we all have limited resources. You just have to choose and you need to know what you are good at, and what your customers want from you, and just do it very well.
JUN: And our final question, do you think that the physical retail can still remain king?
ETHAN: Oh, for sure. Physical retail, like I mentioned, from the onset of time, has always been physical first, because people being human beings, have a natural inclination towards physical connection with another human being. You can’t do everything online, you can purchase things that you need like consumer products, essential items online. But there are certain things you can’t do online. You can’t have a meal online, you can watch a movie online, but if you want to watch a movie on a big screen with better sound systems, with better visual effects, you might want to go to a theatre. You can’t have a massage online, you can’t have a facial online. I mean you can do online tuition, but that interaction that your kids have when they mingle with other kids teaches them certain things, skillset that a computer cannot. So I think physical retail will always have relevance in the world, it’s just what type of experience that you can get when you walk into a shop. Last time it could be just, if I want to buy something, the shop would have certain things on display. And you just walk in and you buy and you go. But right now, you might not go in to buy something, you might go in to see something, test something, try something, Ask a salesperson how does this product works and show and demonstrate to you, before you go back and you can transact somewhere else, on the go even. Those sort of questions you have to ask, we will continue to evolve. It’s a continuous process in this whole time spectrum. We are just at this spot currently. It will change as we progress.
IMRAN: How’s about that for some perspective. We have come to the end of the episode. Very power packed. Thanks Ethan for coming down and sharing with us. If you have any questions viewers, please comment on our socials. I am sure Ethan will be more than happy to answer any of them. Follow us on LinkedIn, Apple Music, Spotify, so on and so forth. And with that, we will see you in the next episode.
-- End Transcript --