HOW IKANO CENTRES ARE ARE BUCKING THE TREND IN A CHALLENGING RETAIL CLIMATE BY SIMPLY STAYING TRUE TO THEIR PURPOSE
BY Chris Prasad
Plagued by a sputtering economy and an oversupply of retail space in key urban hubs across the country, the performance of shopping centres has been less than stellar lately.
Exasperated by cautious consumer appetite, many new retail centres are struggling attract tenants, while more established ones are coping with shrinking occupancy as some brands have chosen to roll back their presence and reduce their number of outlets.
Alarmingly, the market has already seen occupancy rates at once-thriving suburban malls dip down to as low as 70%, and some new malls scrap to go beyond 60% prior to its scheduled opening. While the overall outlook is now starting to improve, the general sentiment is that it will be a sustained uphill battle for the retail sector should the current economic climate prevail.
Despite this, there are still extraordinary examples of those who are efficaciously bucking the trend. Among the most prominent is the success of IKEA’s Ikano shopping centres, which are not only enjoying robust occupancy rates of 97% and 99% for established malls, but is also registering a pre-launch take-up over 90% for its upcoming Toppen shopping centre in Johor – which will officially open this week on Nov 13.
What’s behind Ikano’s success?
Ikano centres are positioned as the exclusive shopping partner for IKEA across the Southeast Asia region. Currently, there are three Ikano centres in Malaysia, IPC Shopping Centre (Damansara), MyTown Shopping Centre (Cheras) and Toppen Shopping Centre (Tebrau, Johor), with a fourth in the pipeline for Batu Kawan in Penang by the end of the year.
With IKEA as an anchor tenant, each Ikano centre obviously benefits from the strong draw of a leading global brand of affordable and innovative home furnishing solutions. However, the consistent ability of these shopping centres to generate high footfall, regular patronage and enthusiastic demand for its retail space has captured the attention of market watchers.
According to Christian Olofsson, Shopping Centre and Mixed Use Director of IKEA Southeast Asia, there’s more to it than having a good location, the right retail mix, the right concept or even the right atmosphere, it’s all of these elements working in seamless unison to create a great experience for the shopper.
“There’s no complex formula or secret recipe. From the onset, it has always been our outlook to simply create a fantastic experience for shoppers… to focus on the consumer and the positive takeaways they get from visiting our centres,” said Olofsson.
“For us, this means making sure the experience we offer is all-inclusive and for all ages, not just a great destination for shopping, but also for leisure and spending time with family and friends. Staying true to this purpose has been a big part of our success,” he said.
Olofsson explained that creating the right retail atmosphere at Ikano shopping centres is about going beyond offering a vibrant range of goods and services. It is also about how shoppers engage with retailers, the lure of attractive F&B outlets and offering consumers the opportunity to discover fresh ideas and solutions for their daily needs.
“In Malaysia, for example, we have been quite advanced in accepting new retailing ideas. We’re always on the lookout for new and exciting brands that we feel will make a positive impact on the local landscape and will excite consumers. We have also been the gateway for noteworthy brands into the country in the past, which have now gone on to successfully expand their presence,” he said.
IPC Shopping Centre in Damansara, which set the precedent for Ikano centre success in the country when it opened in 2003, is home to Brand Outlet’s first concept store as well as Harvey Norman’s first Malaysian outlet.
Olofsson believes that continued success at Ikano centres comes with remaining focused on creating a positive shopping experience for all generations. This also means staying relevant to the ever-evolving needs of consumers, keeping them excited and adapting to changing dynamics.
“Our approach has always been to move away from the passive shopping experience to create a more engaging lifestyle experience, which requires us to be proactive about constantly refreshing what we offer at our shopping centres. We like to ask ourselves what customers want 10 years from now, so that we always anticipate customer needs,” he said.
Dealing with change and digital disruption
Among the prevailing concerns for the traditional retailers today is the impact of e-commerce on buyer behaviour, and the potential shrinking demand for retail space that comes with it.
From an overall perspective, Olofsson said IKEA is embracing change. Always progressive, it acknowledges the remarkable impact digital disruption has had on the retail landscape and foresees changes in its business model to stay relevant in the future.
However, the company continues to believe in the relevance, attractiveness and strength of its shopping centres because these are viewed as lifestyle destinations, and not just retail spaces.
“Our main focus has been to create attraction with the promise of an experience. The compulsion to visit Ikano centres is driven by the consumer’s desire to enjoy an environment, taste great food, explore new ideas, mingle with friends or spend quality time with the family,” Olofsson explained.
“From this perspective, we have already asked ourselves what we can offer at our centres that you can’t get at your fingertips at home, so that visitors are drawn to our centres with that specific experience in mind.”
Ikano centres are certainly not ignoring the way digital technology can enhance and personalise the shopping experience for its customers, and it is actually leading the way in that respect. IPC Shopping Centre has already teamed up with music streaming giant Spotify to create an app that offers shoppers a ground-breaking food and mood-matching tool.
Launched last year, The Mood Menu analyses the user’s recent Spotify playback history to track their current mood and match it with suitable flavours offered by the diverse range of dining outlets at the shopping centre. The app also features a store guide, parking information and information on the latest promotions.
Another key factor to maintaining success is the strong relationship Ikano centres has nurtured with its retail partners. This goes beyond building a good business relationship to also inculcate a sense of “teamwork” when it comes creating an enhanced shopping environment for patrons.
“We believe that excellence in operation is the basis of success,” said Olofsson.
“Because of this, we make the effort to consistently engage with tenants, so that we can build successful relationships that are based mutual goals and mutual benefits.”
He explained that this sometimes involves convincing retailers to embrace change and adopt new ideas to enhance the impact of their business. Sometimes it involves listening and accommodating their own changing needs, and sometimes it involves working together on concepts that will introduce new dynamics to the overall customer experience.
“We also often look outside the box, to reach out to successful retailers that can positively impact our shopping centres with their presence. In these cases, we work with them from the start to see how we can create an attractive environment for their brand in our centres, and often the goodwill from this positive relationship goes a long way,” said Olofsson.
What the future brings
Thus far, Ikano centres have contributed over 4.5 million square feet of retail space to the region. For perspective, this roughly translates to over 85 football fields.
It has established successful partnerships with 1,421 tenants in existing shopping centres (with more in the pipeline) and has attracted more than 85 million visitors to its Ikano centres and IKEA stores within South East Asia. In terms of business, in 2018 it saw a sales turnover of over RM380 million.
But there is also more to come. The immediate future will see the launch of the Toppen Shopping Centre in Johor’s vibrant Tebrau locale, introducing more than 1.25 million square feet of shopping space to the landscape (including IKEA Tebrau) and 300 new stores.
“Tebrau is a vibrant growth hub in Johor with a catchment population of about 2 million. Toppen will be the first shopping centre in the southern region to be anchored by IKEA, so we are very exited about our prospects there,” said Olofsson.
Toppen, he said, is poised to become a key shopping destination in Johor Baru, with exciting rooftop space with entertainment and international dining options.
Additionally, IKEA’s presence in Batu Kawan, Penang, will be boosted with the introduction of Ikano’s Batu Kawan Shopping Centre, which will bring new F&B options, interactive family spaces, green zones and an entertainment hub to the rapidly modernising locale.
Olofsson revealed that the new centre will also change the retail game by offering an innovative retail start-up incubator to help entrepreneurs showcase their products and services, while giving them a platform to launch their business.
“Ikano centres have come a long way since the success of IPC Shopping Centre in Damansara, and even on that front IPC is continuing to evolve, with upgrades, enhancements and expanded space coming into play soon.
“We’re proud of what we have achieved with our centres as well as the relationship we have built with communities and our loyal customer base. There is still so much we are keen to do, of course, and in Malaysia, we remain excited about future prospects ahead,” said Olofsson.