Reports of brick-and-mortar retail’s death have been greatly exaggerated.
A lot of speculators claim Amazon and other online retailers are dominating the market, but the numbers say otherwise. While Amazon represents half of all online retail, in 2018, it was only five percent of overall retail sales. In the first quarter of 2019, all online sales totaled just 11.8 percent of overall retail.
But of course, retailers would be unwise to ignore the changing industry. What worked 10 years ago is not what works today. The brands with staying power will be those willing and able to evolve and blend technology and new retail concepts into their business.
A decade of retail evolution
When I started in retail nine years ago, new developments were springing up left and right. In the wake of the recession, the market had nowhere to go but up. Lumber Liquidators was leasing 40 properties a year. PetSmart was actively expanding, seeking out 30,000-square-foot spaces.
Now the market has shifted. The velocity of deals has slowed. Retailers are interested in more compact spaces. PetSmart, for example, is now opening stores closer to 12,000 square feet. Hub-and-spoke models have emerged in which one major retail location with a large warehouse feeds a number of smaller showrooms in the area.
That evolution has been driven in part by data analytics that deliver better intelligence about where to locate stores and what customers want in those locations, as well as omnichannel strategies that don’t require massive store footprints.
How retail can thrive over the next 20 years
When I see retailers struggle, it’s usually because their brand has grown stale and they no longer resonate with consumers. That typically happens for two reasons: They haven’t caught up with technology and/or they aren’t embracing experiential retail.
Consumers can easily overlook retailers that aren’t embracing technology. From social media to push notifications to omnichannel strategies, brands have any number of ways to get in front of their audiences, and should make good use of them.
Running Instagram ads, for example, and other social media activity are now a must. An omnichannel strategy in which customers have one seamless buying experience across your online and brick-and-mortar presence allows them to buy products in whatever way is most convenient for them. That might be ordering online and picking up in store or trying on clothes in store and ordering them online; the point is to provide customers the experience they want, whatever that might be.
Most critically, technology allows retailers to find the best shopping centers for their stores. Using the GPS on consumers’ phones, analytics can help retailers pinpoint a location to lease based on where their customers live and work.
In addition to technology, retailers need to consider the role experiences play in their physical locations. More than ever, customers are looking for ‘Instagrammable moments’ they can share with friends and family across social channels. Online retailers can never replicate certain experiences, and that gives brands an opportunity to make their physical locations stand out.
In any shopping center, food and beverage concepts have staying power because you can’t buy that experience online. That’s why more fast-casual eateries and other restaurants are increasingly taking up residence in shopping centers. Other retailers are differentiating themselves with everything from one-of-a-kind displays to in-store stylists and tailors to simply giving customers the opportunity to try out or try on the products they want to buy.
Landlords are helping out by driving redevelopment focused around a live, work, play atmosphere. Malls and shopping centers are typically well-positioned assets, central to train lines and highways, which helps drive the concept.
The Exton Square Mall, for example, recently added a 342-unit apartment tower to complement the Whole Foods Market and the Round1 bowling and entertainment center on the property, as well as the nearby offices.
Retail space isn’t going anywhere
Retail will always need a brick-and-mortar presence. Some customers need to touch, try on, and sample the items they’re purchasing. Some customers want to pick up an item faster than it can ship. Some customers need a place where they can easily return or exchange a product. At this stage in the evolution of retail, consumers are settling in as to how and when they prefer to shop, whether it is online or in-store. They have experienced both and the ratio between the two channels will meet an equilibrium and co-exist.
But retailers shouldn’t overlook the role technology and experiences can play in their success in today’s market and for the foreseeable future.
They should also always pay close attention to location, one constant that has always benefitted retailers. At Metro, one way we set up brands for success is by finding the best retail locations based on demographics, job growth, residential trends and development, and other factors to ensure retailers know where their customers are and where they’ll be coming from.
Brick-and-mortar retail is far from dead; it’s just evolving. The brands ready to adapt will be the ones we’ll still be buying from in 20 years.