Operators eye innovation as retail pops

Alongside a rebound in gross gaming revenue, Macau is enjoying a boom in retail sales, with operators seeking to drive further growth through innovative concepts, such as pop-up shops and retail cafes.

In the second quarter of this year, retail sales gained 23.6 percent, adding to a revised 25.9 percent gain in the first three months, with nearly all retail categories gaining, according to government figures.

A return of the high rollers has helped to drive luxury spending, although the visitor profile to Macau has also changed, with higher spending overnight visitors now accounting for more than 50 percent of the visitor base.

Visitors to Macau spent MOP16.5 billion ($2 billion) on items other than gaming in Q2, up 20 percent year-on-year, according to the latest visitor expenditure survey released by the city’s Statistics and Census Service. Overnight visitors spent more than four times as much than same-day ones. Their per-capita spending was MOP3,012, while the per-capita spend of same-day visitors stood at MOP819.

Shopping remained the largest-single category for Macau visitor non-gaming spend in the second quarter, accounting for 46.3 percent of the total.

The figures suggest the government’s efforts to push Macau to diversify its revenue sources away from gaming may be gaining traction, creating opportunities for operators to introduce new retail names across different price points and new experiences.

Galaxy Macau held a pop-up Prada event in December, featuring a mock railway carriage,

in a metal shell reminiscent of the American Streamliners of the ‘30s and ‘50s, with a floral patterned red silk brocade interior.

Christmas versions of life-sized Prada Robots acted as porters pushing luggage trolleys, and the ticket kiosk hosted a concierge to organise visits to the pop-up store and deliver purchases.

More recently, the resort hosted a pop-up from SmileyWorld, which sells a series of products featuring the smiley emoji. Galaxy noted the social media potential from the installation, which it said incorporated Instagram-ideal features, such as a 7.5-meter LED pillar and a Smiley chair.

Melco Resorts & Entertainment has also been seeking to push the envelope when it comes to its retail spaces.

“We believe retail can be an attraction, but also that it is a key component of our offerings to guests,” Frederic Jean-Marie Winckler, executive vice president, chief marketing and brand officer, said in an email. “And that as they travel and develop, they will demand more from stores and services. Retail is a strong source of revenue, and has the potential to continue increasing significantly.”

“We believe retail needs to offer clients both a selection of the brands they know and new and exciting ones, while giving them an experience that is totally unique. Today, nothing looks more like a retail mall than another retail mall. While the big brands do a brilliant job at creating products and environments, there is a huge gap to a more adventurous offer in Macau. That is especially true of smaller  brands and products from around the world. We have brought in a team of curators who scout the globe for the coolest brands to offer our clientele. We showcase these in a space that constantly changes in weekly cycles. Finally, we are dialing up personalization services for our guests.”

Melco reported higher non-gaming revenue in Q2 at City of Dreams Macau and Altira Macau, though saw a dip at its Studio City property. It didn’t provide figures for retail alone.

Sands China recently added almost 100,000 extra square feet of retail space at its Shoppes at Cotai Central, together with more than 25 new stores, including Macau’s first Apple Store. Many of the shops are high-street names reflecting a shift towards the mass market

“We believe it is vital to continue to develop and evolve the shopping experience, to introduce new brands to the market,” said David Sylvester, executive VIP of global retail. “We do this by constantly evaluating the retail mix at Sands Shoppes Macao and adjusting whenever needed, and by creating interesting and valuable campaigns to improve and add value to the customer experience.”

Last year, the resort hosted the first Sands Macao Fashion Week, which is set to return on October 18-24, 2018.

Mall revenues for Sands China for the six months ended June 30, 2018 were $233 million, slightly lower than the $235 million for the six months ended June 30, 2017.

Steven Kwok, associate partner at OC&C Strategy Consultants agreed that the gradual increase in the non-gaming side of Macau was helping to draw in new brands. Though he was sceptical that Macau could become a shoppers paradise.

“A large portion of revenue today still comes from the gaming segment of operators in Macau, typically making up c about 88 percent of total revenues, much higher than Marina Bay Sands in Singapore at c.74 percent and Las Vegas at c.65 percent,” he said. “While this has decreased slightly over the past few years, it has been driven more so by the downturn in gaming rather than aggressive growth in non-gaming segments.”

Despite attempts by the operators to bring a more imaginative approach to their retail offerings, Kwok said the majority still focus on the high end of the market.

“The current mindset is still largely based on a brand-name focused play rather than one of customer experience (e.g. interactive experiences, incorporating AR/VR, etc.),” he said. “Most of the offering outside of casinos are still very traditional shopping mall concepts with no new malls opening up recently.”

In terms of innovation, Macau could still do more. Pop-up concepts are becoming relatively common now and in and of themselves are unlikely to be a significant driver of extra revenue, though Kwok said OC&C has noted success in other markets when pop ups incorporate interactive elements, such as the Chanel Coco Game Center, which toured Asia earlier this year, featuring video games.