by Casey Pollock | October 30, 2017
Whether you are a commercial real estate industry professional, a business owner, a landlord, a teacher, a mom, a runner or just a kid in a candy shop… you are ultimately and undeniably, a consumer. As a consumer of goods, services and information, you have certainly read the sensationalist headlines about the dire state of retail and felt some sort of way about the massive store shutterings of established brands like The Limited, GAP and American Apparel, just to name a few.
For those in the CRE industry, receiving The Real Deal’s second annual National Retail Market Report with “RETAIL IS F*CKED” outlined so boldly on the cover page certainly struck a cord. Is retail truly dead or is it just transforming with the advances of e-commerce, technology and consumer behavior? Are the 300-plus retail bankrupt stores filed this year all victims of the retail apocalypse or did they just fail to recognize and adapt to the changes of the modern day shopping experience? Have the digital disruptors of the retail sector put brick-and-mortar retail as we know it 6-feet-under? Not quite. For the first time in history, brick and mortar retail finally has competition. Those who don’t adapt will die, those who do will thrive. Yes, it’s really that simple.
“Yes, e-commerce is growing at a much faster rate, but revenues in physical stores remain positive (1%-2% growth depending on the source),” stated Forbes contributor, Steve Dennis, who writes about the reinvention of retail in the age of digital disruption. “There is also a sense that online shopping is becoming the dominant way most people shop. In fact, even with a dramatic share shift, e-commerce still represents less than 10% of total retail sales and is expected to remain below 20% even 5 years from now.”
In order to survive the retail apocalypse, brick-and-mortar retailers must evolve and reinvent themselves in a sector that has become dramatically different. Brick-and-mortar retail brands are embracing different operational models and integrating more closely with online and mobile channels. Retailers like Warby Parker and Restoration Hardware are using physical locations purely as showrooms, a new trend that appears to be gaining significant traction (source). “These click-to-brick retailers have come to realize that not only do many customers prefer to shop in actual stores, but also that physical locations bring many important economic advantages,” noted Steve Dennis. “The beauty of these brands starting with a blank sheet of paper when it comes to designing stores is that they can pick the best locations and create a highly experiential and remarkable shopping experience that leverages the best of online and offline into a more relevant and harmonious whole.” Retailers can and should continue to play to the strengths of their physical assets, pick a purpose and better connect with customers to survive in an e-commerce era (source).
We are seeing a greater amount of microstore concepts introduced to the market, designed from a customer’s point of view and synchronistically utilizing both online and offline shopping experiences. On October 3rd, 2017, Nordstrom Department Store debuted a microstore concept known as Nordstrom Local in West Hollywood, CA. Nordstrom Local is just 2% of the average size of its 140,000 SF mall-anchored retail stores and does not hold any inventory. Instead, the 3,000 SF Nordstrom microstore provides a personalized shopping experience by offering manicures, in-store alterations and tailoring, same-day in-store pickup of online orders, and maintains select merchandise on display for appointment-only personal stylists. Rather than buying clothes in store, shoppers have the option to buy online, pickup in-store and Nordstrom can order merchandise from other mall-anchored, big-box department stores (source). Nordstrom Local demonstrates a design model shift meant to streamline the shopping experience, save time, and act as a neighborhood hub for its customers. Although the retail industry is still in the early stages of adapting to the turmoil of digital disruption, there is more than just a light at the end of the tunnel for retailers that embrace these types of omnichannel shopping experiences. As with any seismic shift in any industry, graves will be dug, but fortunes will be made.