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Cities and Retail: The three revolutions

Cities have been through three revolutions in urban retail over the past 40 years as infrastructure and technology have evolved..

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Westfield Shopping Centre

This month we will be covering the issue of cities and retail.

For many cities, the early origins of their history are routed in commercial exchange and there is the unique role of early markets, food exchange systems, and wide range mercantilist behaviours in the DNA of our cities. But as infrastructure and technology have evolved, and patterns of human settlement have changed, so the role of cities in retail has also changed.

Three great revolutions have shaped the way that cities interact with shopping and retail in the past 40 years.

The first revolution has been the invention of the department store and the supermarket. Although these are very different entities they changed the way that consumers behaved in cities by clustering a large variety of products and good under one roof or through one door. The impact of supermarkets and department stores on high streets has been substantial. The retail industries have rationalised, adopted corporate structures, exploited economies of scale and built corporate consumer brands such as El Corte Ingles, Printemps, Tesco, Nordstrom, and Marks and Spencer. These stores now dominate high streets and had spectacular success in increasing their market share throughout the 70s, 80s, and 90s. The obvious implication for cities was that it needed to attract these ‘giants of retail’ and find floor space and infrastructure scenarios that would suit them, whilst accepting that many smaller unique shops would be restructured in the process. These days there are few inner city redevelopments that do not feature a supermarket or a department store as an ‘anchor’ tenant that create the logic for other things to cluster around it.

The second revolution was the response to the motorised consumer, the growth of the shopping centre, and in particular, the rise of the out of town shopping centre. There have been many charged debates about whether the growth of shopping centres has corrupted cities or whether it has energised them. After a period of the growth of the out of town centres, there has been an equal period of growth in town shopping centres often linked to urban regeneration processes, historic preservation, and re-urbanisation. The key insight of the shopping centre is the advantage of ‘total management’ of defined and constructed shared retail environment, in which multiple retailers benefit from common amenities, connections, promotions, and mutual draw to provide a great place to shop for large and diverse numbers of consumers. In many ways the best shopping centres have had the features of great cities, rather than being the alternative anti-city. They are well run, they have identities, and they provide a clustering opportunity that has a compelling logic for both buyers and sellers. No wonder that the success of shopping centres has prompted many cities to invest in new management techniques such as Business Improvement Districts, Town Centre Managers, and Marketing Alliances in an attempt to re-learn what the shopping centres have borrowed from them.

The third great revolution is the digital revolution; where online retail has gown and diversified in so many ways in the last decade that cities now need to succeed as retail destination within a multi-channel environment. The fact that is cheaper to buy many products online has led shopping centres into a re-think. That process of rethinking has also now triggered new responses by cities and their commercial districts. The first key insight has been that urban retail must be much more than products and prices, it must be about an experience, a place, a crowd, energy, and something unusual happening that can’t be replicated on the web. Cities increasingly look for way to make the urban retail experience unique, and also integrated with tings that can’t be done on the web, such as eating, socialising, and seeing live entertainment. A second key insight is that digital technologies and internet enabled retail can also be used to promote urban retail. Whether this is about searching on the web and then buying in the shop, or browsing in the shop and buying online, or even seeing the promotion on the web and meeting your friends at the store, the web and its ability to incentivise and provide choice is now being used to by city centre managers all over the world to promote urban retail as one great channel in a multi-channel universe.

So cities have been through three revolutions in urban retail over the past 40 years and in each case the city has adapted to the challenge with varying degrees of success. In all cases the cities that have succeeded have learned how to differentiate their offer whilst also integrating what is new into the mix. Over the next few weeks we will hear much more about how cities are adapting to the new opportunities of our current wave of retail innovation, and becoming leaders in adopting new ways to surprise and delight consumers.

Image: Mall Secrets

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One comment on this article

  1. On July 11, 2012 at 8:30 am David Marlow said:

    ‘Cities and Retail: Are we seeing a fourth revolution?’

    A perceptive summary of the long run trends in this important area. My experience is largely UK based and encompasses both city and town centre ‘high streets’. I think your three revolutions shape the ingredients of what makes a ‘great’ city/town centre today, but perhaps retails needs to reposition itself in terms of a fourth ‘revolution’ in the future of town and city centre retail ‘districts’.

    The first revolution – the department store – has been accommodated in city centres but at the cost of the ‘clone town’ risk of every high street looking and feeling the same. Contemporary responses include the reinvention of the independent sector through, for instance, themed high quality markets, and the ‘village-isation’ of major destinations within the metropolitan centre. In London one can think of Covent Garden and Borough Market or perhaps Hampstead and even Bethnal Green in this type of way.

    The second revolution – really the out of town shopping centre – became almost the ‘holy grail’ of high street reinvention in the boom decades leading up to 2008. The out of town centre was brought into the city centre, though developments like Bullring redevelopment in Birmingham or Liverpool One, and accompanied by (more or less successful) collaborative town/city centre management to try and diminish the ‘enclave’ risk of the revolution.

    The third revolution – the digital on-line shopping experience – is still in the process of being worked through. Contemporary responses include enhanced town centre management together with using online and interactive media to promote the high street and generate footfall, the rise of the multi-channel retailer, and incentivising the on-line retailer to locate physically on the high street.

    Village-isation and the reinvention of the independent, modern shopping centres at the heart of proactive city centre management, and embracing on-line and interactive media as integral to the city centre experience is an integrated and coherent response to the three revolutions – necessary, but maybe not sufficient.

    Are we seeing a ‘fourth revolution’ – one in which, in an age of medium-term austerity and changing social trends, shopping is no longer as central to our lives, and therefore to our city centres as hitherto. The recent work in the UK on town centres (which includes cities) suggests that retail roles and functions will no longer be the primary purpose of many of them. For these centres (possibly a majority), henceforth people will come to city centres to live, to work, to recreate/play/experience, to learn, maybe to receive support – and only, incidentally, to shop.

    Great city centres have always had a richness and multiplicity of purposes. Mediating and developing this diversity has been a major role of city leadership. The interesting challenge is therefore for the retail sector. Accustomed to being (on occasions, arrogant) ‘kings’ of the high street and ‘king-makers’ of city and town centre development, can they embrace new and sometimes secondary positions in urban hierarchies? Can they perhaps learn the skills and attributes of ‘servant leadership’?