On January 1st, 2019, the Gazit-Globe Real Estate Institute at IDC Herzliya held a conference on "The Future of Malls in the Online Age." The conference dealt with various issues relating to the impact of the digital age on the physical shopping experience of people in malls. Among the conference participants were Prof. Amnon Lehavi, Dean of Reichman University's Harry Radzyner Law School and Academic Director of the Gazit-Globe Real Estate Institute, Chaim Katzman, Founder and CEO of Gazit Globe, Prof. Barak Libai of Reichman University's Arison School of Business, Dr. Efrat Tolkowsky, CEO of the Gazit-Globe Real Estate Institute, and senior executives in the Israeli shopping mall market. The conference was moderated by Amalya Duek, a Channel 2 economic affairs correspondent and news anchor.
In a conversation between Chaim Katzman and Amalya Duek about the future of commerce in malls, Katzman said, "We are expecting a very respectable year in shopping malls. Mall owners have realized that their businesses are not going to close, so we may witness a more reasonable year in the area. Everyone understands that e-commerce is here to stay, and the store has become the place you go to see the merchandise and get it."
Speaking about the added value of online commerce, Katzman said, "The main thing that e-commerce has brought about is price transparency. With the click of a button you can see the prices in all the other chains, and those who did not adapt themselves to this new situation have disappeared from the world. In addition, demographic location is very significant in the running of a business. The needs of people from Ashdod or Netanya are no different - but they have different options. The name of the game today is to be more user-friendly."
Prof. Lehavi discussed the future of shopping malls in the online age from various angles, including planning, regulation and law. "Along with online retail, one must think about the role of physical malls today in Israel, and in any other country in the world, from three perspectives: First, malls in and of themselves, those that are within the domain of a local authority or within a particular metropolitan area; second, the shopping malls versus the local commercial centers, which are typically partially covered and partially open-air; and third, the malls versus the small shops, especially those located on the main streets of the cities."
Prof. Lehavi added that "unlike the systematic discussions that still take place in the planning institutions regarding residential projects, and perhaps even with regard to office space, it is very difficult to find the systematic approach that is necessary regarding these aspects of planning for shopping malls, certainly at the national and regional level. This is something that is essential for the planning of our cities, whether it is via the gradual growth of existing cities by building in new areas, or through urban renewal."
Prof. Libai addressed the challenges faced by malls in the digital age. On the one hand, there are those who say that people will abandon shopping malls, and on the other hand, there are those who say that the experience of physically buying something in a store is irreplaceable. "Of course, everyone clings to the viewpoint that he or she sees and knows," Libai said, "but there is no lack of problems. The main thing to consider is the added value that the consumer receives - better price, convenience ... If the physical stores want to compete with their digital counterparts, they will have to create a buying experience that will take less time and resemble their electronic equivalent."
Participants of a panel discussion on the future of malls in the online era included Yaron Eshel, CEO of Gazit-Globe Israel, Arnon Toren, Deputy CEO and Head of the Malls Sector at Azrieli Group Ltd., Moshe Rosenblum, CEO of Ofer Malls and Deputy CEO of Melisron, Hay Galis, Deputy CEO of Big Shopping Centers, Ltd., Dr. Efrat Tolkowsky, CEO of the Gazit-Globe Real Estate Institute, and Yaniv Melamud, Co-founder and CEO of Alto Real Estate Funds.
Dr. Tolkowsky talked about the link between urbanism, transportation and commercial centers: "The place where we purchase things depends very much on how we move around. If we cycle, we will shop in a place that is within cycling distance of our home. With public transport it is the same situation. It seems that if we continue to get around using private cars, the roads will continue to be busy, shops will be a rare commodity, and we will buy more online. The issue of transportation is enormous, and whoever comes up with the ultimate solution will have the most significant effect on the success of commercial centers."
On the subject of adapting the buying experience to each individual client, Yaron Eshel said, "We have to give the buyers the right services in malls; we invest in the experience to bring in the customer." With regards to local commercial centers, Eshel said, "We look for city centers. We look for a concentration of 10,000-15,000 residents who live within walking distance of the center. We want people who will come three times a day. Local commercial centers are different - we are less vulnerable to online competition. Coffee is coffee, the gym is the gym, and that's the product you come to three times a day. I'm not competing with the big malls." Arnon Toren added to these remarks, saying, "Malls can and should develop tools to get to know the customers and approach them in a focused way. Today, there are many technological measures that can help with this - connecting the online to the offline."
Moshe Rosenblum mentioned Amazon's expected entry into Israel, saying, "By 2020 the world will be short 120,000 pilots. Shipping internet orders will cost a lot of money. The question is whether Amazon will continue to ship at competitive prices."
Regarding how to turn the "disadvantage" presented by e-commerce into an advantage for existing retailers, Hay Galis said, "We tried to take the customer experience to the edge in order to deal with the challenge of e-commerce. We created shopping centers that were open and beautiful - and when you give the customer a reason to leave the house and you offer a pleasurable experience, that's the name of the game. Shopping is not just about shopping, it's something a person wants to do because it's fun. It's a chemical thing - when a person buys something, something is secreted in the body that brings joy and pleasure. That's the reason that I think that physical purchases will never cease to exist."
Yaniv Melamud commented on the distinction between types of shopping centers, saying, "In Israel, the ratio between the closed mall and the open shopping center is about 1:3. There are about 100 closed shopping malls and another 300-400 small open-air commercial centers. In the US the ratio is 1:117. There are 1,040 shopping malls in the United States, and about 117,000 small commercial centers." According to Melamud, "The small open commercial centers find it much easier to survive. They provide services such as cafes, restaurants, hairdressers, gyms, and yoga, and technology helps them because customers can use apps to make their orders."
