The face of traditional retail space has changed exponentially over the past couple decades, particularly since the introduction of e-commerce in 1991. The many transitions the retail sector is undergoing have led some to believe that brick-and-mortar retail is slowly becoming a thing of the past. However, there is plenty of evidence to the contrary. More accurately, the retail sector has simply had to adjust its model to attune to the changing needs of the consumer. Let’s take a look at how some of the current trends have evolved.
Creating an Experience
The rise of e-commerce has given the consumer a whole lot of power. It’s now both common and irresistibly simple to get everything from groceries to toiletries to clothing and beyond straight from the comfort of your own living room. This has challenged retail businesses to offer an experience to their customers that they wouldn’t otherwise be able to get sitting on their couch. Simply put, this means that it’s not enough these days to just have a retail shop full of wares for consumers to purchase. People are looking for a tactile, sensory experience they can interact with. Even in commonly interactive settings, such as movie theaters and bowling alleys, business owners are beginning to generate new interest by offering more quality food choices and a broader selection of beverages.
More and more communities are beginning to implement Buy Local or Love Local campaigns to help support their local economies and small business owners. Movements of this type are taking hold! These programs are becoming hugely successful and there are a lot of good reasons for it. For one thing, encouraging citizens to support local retailers is also creating good jobs, increasing local wealth that recirculates throughout the community and decreasing the negative environmental impacts associated with packaging and shipping. Additionally, these programs are helping small retailers compete with the big businesses (such as Amazon and Walmart) that have cornered the retail market. As programs such as these continue to grow and thrive, the mom and pop shop is making a killer comeback! This trend doesn’t look like it’s disappearing anytime soon, which is certainly encouraging for small business owners nationwide.
Another trickle-down effect of the rise of e-commerce is the closing, downsizing, or right-sizing of big-box retailers who have dominated the retail market for a long time. It’s not all that shocking to turn on the news these days and hear that yet another commonly known retailer is closing up shop, unable to compete with the new industry giants – see Sears for example. This trend looks as though it will continue as the needs and wants of the consumer shift away from this type of retail model. Many smaller businesses who have relied on these anchor stores to draw foot traffic to them are finding themselves also having to reinvent to keep up with the changing tides. For some businesses, this means relocation. However, some large boxes have done well to break apart, and become a new multi-tenant hub, much to the relief of those smaller tenants that feed off the box’s traffic volumes.
Location has always been important in retail real estate (and every other type of real estate), but perhaps never so much as now. As previously mentioned, with the shifting or changing of many anchor stores, it becomes increasingly difficult to get the exposure necessary to grow. This leaves many retailers wondering whether it’s time to relocate to smaller shops in higher-traffic areas. However, the prices for these high-demand spaces are on the rise.
Real estate investors have also been paying attention to the shifting trends in the popularity of retail location. Understanding that the supply of affordable retail space in primary markets is falling far short of the demand, investors are moving into secondary markets now while rates still remain low. Due to this, many secondary markets have grown vastly in short periods of time. How this might play out in the inevitable recession that will come stands to be seen.
Despite what you may have heard, it is still absolutely possible to get funding for a retail endeavor, though interest rates are on the rise. Lenders are also seemingly much more meticulous when it comes to determining which ventures they are willing to support. This means having a concrete business plan in place has become increasingly more important. The strongest retail sector currently appears to be grocery centers, which are still thriving even as online food shopping begins to increase in popularity. For the foreseeable future, people still like to pick their produce by hand!
Technology has become a much larger part of the retail sector as of late, particularly as the need for warehouse space increases. Drones and robotics are being used in every facet of the retail industry, from assembly and production to distribution. Brick and mortar stores are relying more on infrastructure that can support their need for access to the latest technological advances. Even buying, selling and leasing retail property has become largely dependent on technology, as most listings are showcased online, and many transactions take place via online platforms.
Retail space has changed quite noticeably over the past few years and it doesn’t show any signs of being done quite yet. It will be interesting to see what changes occur next!
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