Social interaction adds indispensable value to physical retail

Managing Director of Cadena, Dilip Khullar, talks about the need to improve retail assets on a social and structural level

August 30, 2019Real Estate

Dilip Khullar is the Managing Director of Cadena; a Spanish real estate development and investment management company, specialising in all the different types of retail assets. 
 

How can retail assets improve and set themselves apart from the competition?


Every company has a variety of skills, and I think some companies need to really look at themselves in the mirror and say ‘what do we want to do?’ and figure out how to best apply their skills to the right issues. What we do for example is buy poorly performing retail centres in Spain, either with our own capital or funds, and turn them around. And as we do this, we try to incorporate a lot of higher social uses within that centre. 

For example, we have a retail centre in Albacete that works with an NGO to provide professional training for people with a range of disabilities. We then try and plug them into the system of it, where our retail tenants are more inclined to take on the people that we’ve trained up. So with this we identified a social use and approached it in such a way that benefits our business and the community it exists in. Is this program big? No. But does it help turn around a pretty screwed up retail centre? It certainly does. 

A very hot topic at the moment debated by academics around the world is the role of the company in promoting social good and community. Industry leaders that I’ve talked to, from both sides of the political spectrum, really are starting to realise that they have to be more conscious in order to attract a much wider audience. 

Of course you still have to compete on a basic level. If you run a coffee shop and your coffee tastes bad, no ones going to come. And you’re not going to go and drink bad coffee just because they have amazing corporate social responsibility. It’s a secondary objective of course, but it’s definitely an important part of business now that can really set people apart from their competitors. 

 

How is e-commerce affecting Spanish retail?


Well definitely in Britain, its created a very challenging environment and Amazon is seen as a very serious disruptor. Having said that, external factors such as Brexit is also going to result in a loss of consumer confidence in a variety of different ways. 

What I will say is this: physical retail space will not be irrelevant, ever. It’ll still be relevant and even complementary to the online shopping experience. The question is whether or not retail/shopping centres will stay relevant. It’s a different question because if you take Spain for example, shopping centres only ever took up about a fifth of total retail spend, and that was at the best of times. The ones at the top will be fine and adapt, but the mid market and below ones are going to have a real hard time staying around. 

 

"Physical retail space will not be irrelevant, ever. It’ll still be relevant and even complementary to the online shopping experience."


Perhaps the best thing that shopping centres can do at this point is to make the environment more appealing. People naturally respond to good architecture and a nice environment; they won’t want to sit in the apartment all the time, regardless of how good e-commerce becomes. We’re now seeing a push towards these centres becoming more than just retail: there’s currently a $5 billion shopping centre in development just outside New York that’s just under 50% retail, because the other half is all food and drink and leisure including an aquarium, an ice rink, a ski park and so on. 

 

Is there something that physical retail can do in terms of innovation that can propel them to being a more competitive asset - technological or otherwise?


I’m not saying technology’s not relevant, but if you ask me quite honestly what I think physical retail tenants need to do to compete, it’s by upgrading the jobs of sales assistants to be something more like being an expert in their field. At the end of the day, people attract people. 

I run quite a bit, and get involved with half marathons and stuff like that. When I recently went to a trainer shop closeby, the guy in there genuinely knew what he was talking about when it came to running shoes. He was a runner himself, so he knew what to recommend in terms of what helps my style of running best. You don’t get that experience online. 


For more insight into the European retail market, join some of the most senior real estate investors, developers and lenders active in the region at Europe GRI, which takes place on 11-12 September in Paris.

Article by Matt Harris