Shopping malls embrace space branding
By Dan Kim
Seven years ago, when I was in the electronics industry, the biggest issue was the combining of IT, telecommunications, consumer electronics and entertainment so called “Digital Convergence”. Today, everyone has an all-in-one device “Smart Phone”, functioning as a camera, TV, computer, dictionary, email and even GPS.
The desire for convenience and time saving has been in the retail market for some time and the idea of going to five separate shops to do your weekly grocery shopping has been replaced by hypermarkets with all the products needed for day to day living all under one roof. Now with the smart phone anyone can shop for everything they need from the comfort of their own home or on the subway coming back from work. However, when it comes to fashion, online malls have certainly made inroads into the traditional experience of shopping, but the retailers on the high streets of Korea are now fighting back.
Global fast fashion brands also known as SPA brands such as H&M, Zara, Uniqlo, and Forever21 who have had such success all around the world have left an enormous impact here in Korean and have changed the fashion business district map forever.
Previously confined to department stores, these brands are now on the high streets offering a new concept of one-stop-shopping system for the whole family with ladies, mens and kid’s fashion as well as shoes and accessories.
Convenience of the store isn’t however everything when it comes to people still shopping in traditional bricks and mortar buildings rather than online. The experience of seeing, touching and trying on what you are buying is something that online shopping will never be able to give you. The buzz of going into an H&M store and seeing the décor in an A-land store or the feeling of luxury and attentiveness you get from Tiffany gives you a positive feeling which is not something you can get from behind a computer screen. Retailers realize this and spend millions of dollars on the set up of a single store which customer are going to enjoy and with this increased demand for a quality shopping experience, malls have been developed around the country. Many have been simply created from previously obsolete land such as Times Square in Yeongdeungpo or the newly opened D Cube City.
But where the real change has been is in the high streets. In the case of M-Plaza located in Myeong-dong, leading real estate service provider Cushman & Wakefield turned several dozen small market style mom and pop shops into a highly desirable place to shop. International investment company Lehman Brothers purchased the building and went through extensive renovation and obtained a new life as a shopping center. It was a fairly simple development, and we managed to get the mix just right with Zara and the first Forever 21’s store in Korea sitting side by side. We also have local lifestyle brands like Kosney and Daiso that both occupy large amounts of space giving the visitor to the mall more than 1,000 different kinds of products to purchase. M Plaza was one of the first renovated shopping mall buildings to offer diversity and a shopping experience outside of the department stores. This trend is set to continue as the idea of malls becomes more engrained in Korean shopping habits.
Retailers selling space, not products Multi Shop
Multi-shop brands such as A-land, Spicy Color, and Wonderplace are emerging as the new hot trend in retail industry here. They have a clear distinction from existing category-killers like ABC Mart, who solely retail shoes, whereas these multi shops give customers the choice of all kinds of apparel and accessories. Not only do the shops offer a wide range of products to choose from but also provide consumers with many similar but different brands.
Therefore consumers are no longer limited one single brand at each shop, but they can see and choose exactly what they want without having to visit many shops. This provides shoppers with the ease of browsing the internet as well as the experience of shopping.
Competition for the space
The retail trend enticing consumers by displaying hundreds of charming products in a single large shop completely overthrew the common sense in the real estate industry that smaller premises yield higher rents. To take a close look at the prime high street shopping areas such as Myeong-dong, Gangnam station and Garosugil, existing smaller shops are being forced out and being replace by single large brands occupying the whole building.
These new brands are generally paying higher rents than the previous multiple occupiers, which is good for landlords and creates a much cleaner and better environment along the high street. This is particularly being seen on Garosugil where the foot traffic is strong with people wanting to spend money.
The coffee shops and the Grade B offices above cannot afford to pay as much rent as a retailer who is going to draw more people to the upper floors of the building and generate much larger revenues. Unfortunately for budding entrepreneurs, the demand for these spaces is at an all time high. With a limited amount of space and a limited number of buildings where a floor plate is larger than 1500 square meters is, deliverable rents continue to grow year on year with some places seeing double digit growth.
The demand for well designed shopping malls is equally as competitive; there are fewer than 10 shopping malls in Korea and with every new mall that comes up, the demand for space is for outweighing the supply.
Bright future for retail real estate
The invention of the smart phone and the ability to shop from anywhere is certainly a great thing, but looking into the technology of the future, there is nothing that is going to replace the feeling of actually being in a store and the ability to touch, feel and try on what you are buying.