PLANNING AHEAD

RETAIL EXPERTS ARE LOOKING BEYOND TODAY’S TRIBULATIONS TOWARD TOMORROW’S TRENDS

What better time than this economically gloomy present to focus on the future? This is precisely what some owners, managers and retailers are challenging themselves to do. They cite the simple reality that cycles always turn, and they hold the optimistic view that the long-term prognosis for global retail is brighter than the headlines might suggest.

“A big challenge is keeping perspective,” said Faith Hope Consolo, head of retail leasing and sales for Prudential Douglas Elliman Real Estate. “You can’t let yourself get drawn into the daily doom and gloom.”

Yes, such present-day trends as stalled retailer expansion plans and a rash of bankruptcies among national chains will have a lasting impact. But in coming years and decades, these observers argue, the retailing and shopping center industries will be shaped more profoundly by trends in demographics, technology, environmental sustainability, consumer psychology and global trade than by the recession. Contemplating this today can lead to smarter moves tomorrow, they say.

Technology, for example, promises to create new markets by making shoppers across the globe more informed and sophisticated, whether they live in industrialized or developing nations, in the country or the city, says consultant Jeff Green, head of Jeff Green Partners, Mill Valley, Calif. “The explosion of the Internet over the last 10 or 15 years has brought information to everyone,” Green said. “We are all on a more level playing field now, and that bodes well for us getting out of discount shopping and into affordable fashion.”

The frozen credit markets will inevitably thaw, and the international cross-pollination of retail and shopping center concepts that began in the 1990s will regain momentum, creating opportunities even as it blurs national boundaries, says Greg Maloney, president and CEO of Jones Lang LaSalle Retail. “Over the next 20 years, we’re not going to draw distinctions between retailers as American, European or Asian,” he said. “People will not say, ‘H&M is a Swedish retailer.’ Retail will become a single commodity.”

And even as technology shapes consumer habits, it will help chains around the world expand beyond their borders for the first time, says Robert J. Gibbs, an urban-planning consultant and the founder of Gibbs Planning Group, Birmingham, Mich. “I work for a lot of institutions, and I find that Asian, European and South American retailers see America as representing huge growth potential,” he said. “With Internet shopping and the ease of logistics for transportation, they will be able to open a couple of hundred stores in the United States pretty easily and dramatically increase their sales.”

Britain’s Marks & Spencer, Chile’s Falabella and Germany’s Metro Group are among the chains trying out technologies that could pave the way for such growth by making their inventory-control processes more efficient, says Michael J. Liard, director of radio-frequency identification (RFID) and cashless payment systems at ABI Research. Even as they use traceable radio tags to tighten their supply chains, these retailers are tinkering with applications that hint at what future in-store environments might look like.

As part of a pilot program launched in September 2007, every item in the menswear department at the Metro store in Galeria Kaufhof, in Essen, Germany, now bears a tiny RFID tag packed with product information. Rather than taking inventory by having employees laboriously count racks of merchandise by hand, Galeria Kaufhof can track exactly what is in stock with the sweep of a scanner. “Marks & Spencer is doing this in the United Kingdom,” Liard said. “They’re tagging more than 100 million items per year.”

Companies are hard at work envisioning how such technologies might spice up stores in the future, Liard says. A shopper could one day stroll into a clothing store and wave her all-in-one device — something akin to a next-generation version of Apple’s iPhone — over the RFID tag on a blouse. The screen on that mobile device would then display an anatomically exact, 3D image of the shopper wearing that same sweater. She might push a few buttons to see it in different colors, cuts, patterns or sizes, or browse through a menu of accessories.

Given the pace of technological change, making ironclad predictions about exactly which gadgets will own the future would be a stretch. Fewer still would place bets on the fate of specific stores. (Wal-Mart is a possible exception.) Nonetheless, longtime observers of the retailing industry have lots of ideas about the overarching trends most likely to shape things to come — and what retailers will need to do to capitalize on them.

Demographic change is the proverbial elephant in the room, Maloney says. In the U.S. two generations — the baby boomers and the so-called millennials — will account for 52 percent of the shopping center industry’s customer base by 2015. The boomers were born between 1946 and 1964. The millennial generation includes two subgroups: The first, Generation Y, constitutes those born between 1977 and 1994; the second, sometimes called the echo boomers, is made up of those born between the early 1980s and the early 2000s. With its roughly 86 million members, the massive millennial generation outnumbers the 79 million boomers now hitting retirement age.

Understanding and appealing to these younger shoppers will be critical, Maloney says. “Retailers and landlords are going to have to adjust to this new purchasing power,” he said. “These shoppers will have the majority of the disposable income in the next 20 years.”

Market research points to some of the millennials’ key traits. They tend to be wired multitaskers, at ease with the latest technology, unlikely to equate style solely with money or brand, more diverse ethnically (some 40 percent of millennials are nonwhite) and committed to the “green” movement. Only those chains capable of marketing themselves in compelling ways across multiple platforms will succeed in striking a chord with these highly individualistic and techno-savvy shoppers, says Michael Calman, a former marketing executive at Bergdorf Goodman and Coach who is now head of New York City–based Calman Consulting.

Savvy retailers could use clever mobile-device applications to help shoppers browse and shop brick-and-mortar or online stores, or marketing campaigns that maximize the power of social networking sites such as Facebook. “Whatever the offer is, it needs to be engaging, in a media and visual-merchandising sense, and it needs to be fun and quick,” Calman said. He gives today’s retailers low marks for the clumsy way in which they often relate to shoppers. “Relevant communication is the key,” he said. “Most marketers are basically just e-blasting their customers. The frequency of the e-mails is staggering, and they aren’t tailored to consumers’ implicit or explicit needs. Personalization will be a big trend going forward.”

When it comes to personalization, though, brick-and-mortar chains will continue to face stiff competition from the likes of online giant Amazon.com, says Kate Newlin, head of New York City–based Kate Newlin Consulting and author of Shoppertunity! and Passion Brands. With its constantly expanding product offerings, easy-to-use search engine, popular loyalty programs and personalized product suggestions, Amazon is a force, says Newlin. The company does not just react to consumer demand, it shapes demand through innovations like its Kindle e-book reader. “Amazon is using technology in fascinating ways,” Newlin said.

But brick-and-mortar environments can offer things that are unavailable on any Web site, namely face-to-face service and psychologically rewarding experiences inside actual centers and stores. Moving forward, mall retailers’ best chance of competing against Internet sites or bargain-basement discounters is to give shoppers the experiences they crave, says Newlin. Her Shoppertunity! includes a detailed study of the ideal shopping experience, which she says is marked by four things: anticipation prior to making the purchase; the thrill of the hunt for the product itself; a feeling of significance while buying that item; and the sense that it will grow in monetary or other value. (An iPod gains value after being loaded with a person’s entire music collection, and a musical instrument after the shopper learns to play it.) It is a challenge, but salespeople can be trained to help create such experiences by engaging with customers in sincere ways. “Disney World’s first recruitment screen is for optimism,” Newlin said. “If you’ve got people you can recruit and train to provide personal service, there’s nothing quite like that.”

Coming generations will also seek different kinds of products and fashions, Maloney predicts. The highly individualistic millennials will favor retailers that turn inventory rapid-fire and offer myriad ways to customize fashions. (H&M and Forever 21 offer a glimpse of such.) “You won’t go into a store, see 50 identical dresses and think 50 different girls will buy them,” he said. “Not one of those girls will want to buy a dress if they might be exposed to someone else wearing it.”

These shoppers already are perfectly happy mixing, say, old boots from Goodwill or a top they bought at a yard sale into their wardrobes. This flexibility eventually will lead to new retail concepts, Gibbs says. “The boomers’ kids are rebelling against name brands,” he said. “If it is a name brand, it doesn’t have to show on the label. We’ll see a lot of nonbrand stores emerge.” Millennials are also likely to reject the sugary colas and oily fast foods their parents consumed. This health consciousness, along with their green sensibilities, will spark demand for offbeat restaurants offering locally grown, organic, vegan and vegetarian fare, predicts Maloney.

And just as the green movement will shape how younger generations shop and eat, it will also influence where they choose to live, with major implications for retail development. Millennials will favor urban, mixed-use projects rather than their parents’ suburbs, Maloney says. “They hate all of the driving, the wasted time,” he said. “It bores them to death. As they get older and into a life-decision mode, they’ll figure out ways to avoid that.”

Does this all mean the shopping center of 2020 or 2030 will swarm with digital gizmos and offer tenant mixes in which luxury boutiques and thrift stores rub elbows? Will it be filled with health-food stores, covered with solar panels, smack in the middle of a thriving downtown? Pondering such matters is an inexact exercise. For now, it is more fun than trying to predict the future of a 401(k).