Comment: Smart cities – the benefits for eCommerce operators in the retail industry?

One of the trending topics in property circles at the moment is the rather confusing term ‘smart cities’. Whilst there is a great deal of buzz around the topic the main question is what exactly is a ‘smart city’?

Although there is no set definition, there are a number of key examples which show how the world is evolving through technology and how these changes will impact the way in which cities will operate in the future. Whilst some see smart cities as a way of using technology to allow individuals to feel enabled, others see it as a way of using technology to increase efficiencies.

With the emergence of crowd-funding platforms for civic projects, and digital platforms to obtain feedback from the people on the ground, the ability to find out exactly what individuals need from the city they live in through data collection has never been more prevalent. The aim of such technology is to give people living in cities a platform to voice their views and provide feedback on matters which they feel need to be addressed.

Such platforms might be useful when individuals are knowingly providing data or feedback to such providers. However, with the emergence of more sophisticated technology operators are being able to reach consumers without any such direct interaction.

At the moment, it appears as though anything that can be made digital is being converted to digital. With the likes CDs and DVDs, as well as photographs, all transitioning from the physical to digital world, the retail industry is clearly being greatly impacted by the shift over to the e-commerce way of doing things. Retailers have already started to move away from having physical high street stores and are moving their products on to an online platform. The reduction in rent and the need for numerous employees on the shop floor will allow such companies to focus resource on other aspects of the business, such as marketing and communication, which will possibly allow them to reap greater rewards.

With increased technological connectivity and consumer touchpoints operators are now able to assist retailers’ marketing focus, making it easier for them to utilise changes in technology to target consumers more effectively without the need for any direct interaction.

Through collecting smart phone data and GPS tracking, operators are provided with inside knowledge of the behaviour patterns, likes and needs of individuals. This data can in turn be used to target advertisements, allowing, for example, advertising billboards to change according to the preference of the person walking by. Even without the active collection of such data, e-commerce operators are taking steps to find more indirect methods of targeting consumers with the likes of integrated cameras in advertising boards or shop fronts which are able to detect the gender and age of the passerby to trigger targeted advertisements.

Similarly, operators are assisting retailers in store by enhancing the buildings they occupy and allowing them to target consumers through the use of smart technology. This technology can take the form of anything from digital walls on the shop floor to virtual changing rooms that are personalised to individuals based on their location and preferences.

Wider interest in operators taking on low level real estate such as pay phones and converting these into kiosks is also noticeable. These can provide high speed Wi-Fi, charging points, information services and display screens with messages and advertising.

Advertising and marketing and enhancing the consumer shopping experience are clearly points that operators are seeking to leverage using smart cities. However, business strategy is another area which is being enhanced by operators. For instance, operators are now able to accurately measure the footfall of people passing certain store locations on a daily basis with details of time and day allowing companies to consider store locations more strategically and feeding that data back to the e-commerce arm of the business.

The impact of the smart city phenomenon is far reaching. With modifications in the retail market and in the way consumers shop and are targeted, we might see a change in the development of shopping centres and in what retailers need from the premises they are in. There is also likely to be an emergence of digital advertising, with advertising companies needing to take greater care when determining which sites they take on and whether they have the technological connectivity required for the new modes of advertising they wish to put in place. Negotiation of lease space for such unique modes of advertising, whether in store or on the street, is clearly going to be more complex than what the market has been used to, so it is extremely important for retailers and operators to be clear at the outset of what they require out of the sites they take on.

Aman Sahota-Dhatt is an associate in the real estate team at Lewis Silkin LLP.