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BRAVE NEW WORLD OF RETAIL

SCIENCE FICTION IS BECOMING SCIENCE FACT AT THE SHOPPING CENTER

By Joel Groover

A science fiction writer might cast the mall of the future as a kaleidoscopically rich visual realm where boundaries between cyberspace and the physical world, or even man and machine, blur. Shoppers at this fictional mall might use brain–implanted artificial intelligence units to “cognitively surf” store Web sites. They could custom–order jeans, hunt for shoes or buy tickets to the future equivalent of today’s Imax films even as they sipped lattes at Starbucks (surely Starbucks would still exist). The transactions would happen, not on a computer screen, but in the mind’s eye. Those who lacked such laptop–like gray matter might rely on an all–in–one device, something akin to Apple’s iPhone on steroids, to manage their shopping needs. They could use it, for example, to find their electric cars in the parking lot, or to buy T–shirts, gadgets, snacks or even underwear at stores manned entirely by rows of wireless vending machines. No lost quarters in those machines, and no more cleaning crews to scrape tarnished pennies out of mall fountains. Cash would be a relic of a bygone age, replaced by biometrically protected “electronic wallets” stored in all those supercharged phones.

This futuristic scenario is not the setting of a sci–fi potboiler in which, say, a grizzled space detective nabs a rogue cyborg outside of Aéropostale. Instead it is drawn from possibilities gleaned by mall executives and futurists who keep close watch on how scientific discoveries, fast–changing technologies and emerging consumer trends might change the shopping experience in years to come. In fact, nifty gizmos like wireless vending machines already are popular among shoppers in Japan and South Korea, where U.S. futurists routinely travel to scout trends.

The challenge for shopping center owners is to make decisions now that will better position their properties to adapt to the future, whether near–term or truly far out, says Kenneth P. Wong, president of Los Angeles–based Westfield America. “If among your teams and in your own mind you can move back and forth across that time spectrum, you’ll be open to both scary and fun ideas,” he said. “Our attitude is that leadership means you think way openly, way forward, but that you execute today.”

Westfield, for example, is installing new Internet technology at all 59 of its U.S. malls that will enable shoppers to surf the in–store inventories of specific tenants. This infrastructure should be in place by the end of summer 2008, Wong says. No brain implants yet, but the potential for custom–ordering jeans or reserving the hottest Christmas toy for same–day pick up clearly is there. “It will allow, in its most robust application, total search–ability of the retail shops in a mall,” Wong said. “The obvious truth is that we will depend on the retailers themselves to participate with data. Some already are working with us to get down to size, color, finish.”

With today’s retail technology, the task of serving up all that information in real time will be formidable for some tenants, Wong concedes. Within five years, however, widespread adoption of radio–frequency identification (RFID) tags could bring the type of retail omniscience envisioned by Westfield and others, including Wal–Mart and Germany’s Metro Group, within reach, said Allen H. Kupetz, futurist author and president of Orlando, Fla.–based Kpartnerz, which helps businesses break into Asian markets. “RFID changes everything,” he said.

The tags transmit radio signals that can be used to glean an extraordinary amount of information about the products in which they are embedded, including their real–time locations. Both Wal–Mart and Metro Group are pushing their suppliers to adopt the technology. They hope RFID will enable them to keep track of all the goods in their supply chains at once, thus boosting efficiency and lowering overall costs. The technology also promises to yield big benefits for customer service, promotions management and more, said Michael J. Liard, director of RFID and cashless payment systems for ABI Research.

On the consumer side, an RFID reading device inside, say, a Crate & Barrel or Macy’s store could give shoppers instantaneous snapshots, accessible online or through in–store kiosks, of exactly what goods were on the shelves. Future shoppers might use handheld RFID readers stored in their smart phones to scan items for their nutritional content or even the labor and environmental practices of the countries in which they were made. “The RFID tags could be rewritten on the way out of the store to show that the item was paid for, the date, the store number, the amount,” Kupetz adds. “This would make it very easy to return that product. The store would never be able to say, ‘You didn’t buy it here,’ and a Borders bookstore would never have to return books that somebody actually bought at Amazon.com.”

Unlike simple barcode scanners, RFID readers can keep track of thousands of radio tags from hundreds of yards away, Liard said. This creates tantalizing possibilities. A shopper carrying an RFID–enabled e–wallet or credit card, for example, might be able to walk into a store, fill up her shopping cart and stroll out without ever dealing with a cashier or standing in line. “You walk into the store and your RFID credit card, if you have pre–registered it with that company, is instantly validated,” Kupetz said.

Retailers all over the globe are looking hard at the technology, Liard says. Some applications already are in consumers’ hands. Examples include ExxonMobil Speedpass, a wand that can be waved in front of scanners either at the pump or inside convenience stores, and so–called contactless credit cards, used at drugstore chains like CVS and even at some airport vending machines. The cost of a finished RFID tag — about 15 to 20 cents for the simplest units — is the chief barrier to widespread adoption of the technology, Liard notes. But within five years, as major retailers like Wal–Mart force their suppliers to package RFID into their goods, the price will drop low enough for near–universal adoption, Kupetz predicts.

What happens, though, if a shopper walks into an RFID–wired store with a stolen e–wallet or credit card? A crook surely would salivate at the idea of using an illicit card to fill up a shopping cart and breeze away without ever being asked for an ID. This type of security nightmare could make shoppers and stores reluctant to embrace promising new retail technologies, which is why some futurists see biometric security systems as integral to the next evolution of retail. “Biometrics will play a big role,” said David R. Warwick, author of Ending Cash: The Public Benefits of Federal Electronic Currency. “It adds a lot of security to the transaction.”

But how will shoppers feel about submitting to fingerprint, retina or voice–pattern scans? And who will collect and store all that data? Retailers might try to build and maintain massive biometric databases of their shoppers, but it would be far more efficient, and raise fewer privacy concerns, if the tests were just built into consumer technologies like e–wallets, smart phones and 21st–century credit cards, Kupetz says. These devices simply wouldn’t operate without biometric confirmation. “People would use e–wallets if they weren’t worried about, ‘What happens if I lose my phone?’ and that type of thing,” Kupetz said. “There is no reason for you to steal my phone. The e–wallet inside of it has no value to you.”Indeed, fingerprint scans already protect devices like laptops, personal digital assistants and portable hard drives from unauthorized use. Global Industry Analysts, a San Jose, Calif.–based research firm, predicts the compounded annual growth rate for the world biometrics market will top 33 percent for the period from 2000 to 2010. The American biometrics market will reach $6.5 billion by 2010.

Rapid growth in biometrics might boost consumer confidence in a new wave of cashless payment systems, but mall owners and retailers would reap the greatest security benefits if shoppers ditched cash altogether, Warwick says. The shoplifters and boosting gangs that, according to the National Retail Federation, steal up to $34 billion worth of goods each year, for example, would be hard–pressed to fence those items. Today’s rampant counterfeiting would end, and violent robberies and drug deals would be less likely without hard cash to fuel them. According to Warwick, the governments of Finland and Singapore already have started issuing official e–currencies. Truly cashless societies, however, will remain the domain of science fiction until governments actually get rid of minted coins and bills. “I don’t see any signs yet of that happening,” Warwick said. “The technology is the least of the barriers. It is getting governments to think about it.”

Still, as consumers grow more comfortable with unconventional cashless transactions, new retail modalities become more likely, said Lisa Bodell, founder and CEO of FutureThink, a New York City consultancy. “We’ll see more vending coming to the United States,” she predicts. “People are already more apt to use credit cards in vending machines for larger transactions, like vending their iPods [to download media] at the airport.”

Major cities in Japan and South Korea provide a window into what that future might look like. In Tokyo, for example, consumers use cell phones equipped with smart cards to buy anything and everything from vending machines. “When I was there I vended my breakfast,” Bodell said, “but you can vend underwear right on the street. I did not vend underwear.” Popular Japanese retailers like Uniqlo offer some exclusively vend–only stores. “There is no sales staff,” Bodell said. “The Gen X and Gen Y crowd love it.”

Might vend–only retailers one day move from the streets of Tokyo to in–line tenant slots at U.S. malls? Will wireless vending machines one day jockey with traditional carts and kiosks for choice territory in mall common areas? Clearly, anticipating exactly how new consumer technologies will transform malls is a bit of a guessing game. By knitting their portfolios together with high–tech infrastructure, however, mall owners like Westfield and Simon Property Group aim to make adapting to whatever technologies that do emerge as easy as possible.

Simon spent the last year installing nearly 2,000 high–definition screens at 50 malls in its top designated marketing areas. This test rollout for the OnSpot Digital Network, a 50–50 joint venture between Simon and the French media giant Publicis Groupe, certainly gives Simon’s malls a futuristic look. But the network, which gives advertisers the ability to reach an estimated 500 million visitors yearly, also enables Simon to tell shoppers about the ways in which it is adapting its malls to changing technology and consumer trends, notes Stewart A. Stockdale, Simon Property Group’s chief marketing officer and the president of Simon Brand Ventures. If Simon has a new Internet site, smart–phone based promotional campaign or the like, the Indianapolis–based REIT can use OnSpot to market those efforts. Likewise, its huge gift card business, which Stockdale says will exceed $580 million in sales this year, has given Simon lots of experience with the dynamics of cashless payment systems. That experience should come in handy as such systems evolve. Rather than plastic, for example, the “gift card” of tomorrow might be something shoppers download into their smart phones from Internet kiosks. “There are a lot of technologies out there and there’s no shortage of applications,” Stockdale says. “The challenge is to pick those that will truly be embraced by customers and that scale across a large portfolio.”

In the end, Wong says, enduring macro trends will matter more than whiz–bang gadgets. For example, digital ubiquity (the idea that consumers one day will have unlimited access to all information at all times) and mass customization (the reality that technology is making it easier and cheaper for shoppers to get custom goods at low cost) are guiding principles at Westfield. “Forget about the delivery device for a moment — today’s phones, PDAs and [global positioning systems] will all be replaced with retinal implants or artificial intelligence of an even higher order,” Wong said.

Awareness of these key trends can help owners and retailers make sure future shoppers (even those with computerized brains) keep going to the mall. “The extreme end of this might be, ‘Well, no one will ever come to a shopping center because of technology.’ We believe exactly the opposite,” Wong said. “There are some basic human needs, wants and desires. Fortunately one of them is to be out with and discover things in the company of others. Shopping is somehow encoded in us as a social activity. Our job is to ask, ‘What role can technology or a range of technologies play in our efforts to produce the best possible experience?’ ”