Think retail is dead? Think again. The industry may no longer be dominated by indoor shopping malls and big-box stores, but stakeholders aren’t ready to throw in the towel just yet.
Landlords and brands alike are responding to 21st century socio-economic changes and the rise of online shopping by reimagining the way in which brick-and-mortar locations are used. They’re betting that even if buying an item using an app on a phone is easiest, shoppers everywhere can still be persuaded to personally visit a store for the right reasons.
“We are still social creatures, which is why we all like to go out and do things,” said Andrew Turf, senior vice president of high street retail at CBRE Group Inc. “It’s why we don’t bring our lunch to work every day.”
As the retail landscape shifts, here are five retail trends to watch this year:
Experiences
Experiential is the retail buzzword of the year.
“As retailers enter 2018, they are already seeing that if customers are going to visit a store, it needs to be about more than just the transaction,” says a KPMG report about retail trends. “Retailers need to offer something you can’t get online. They need to offer an experience.”
National retailers have been adding activities and personalization to their brick-and-mortar locations to draw people from the comfort of their homes – where they often shop online.
For instance, a Nike store in New York offers a basketball court, a program that simulates running in other locations, as well as a shoe bar where you can personalize your shoes. Beauty store chain Ulta has in-store salons and brow bars where shoppers can treat themselves to a variety of beauty services. Crayola has opened a few “Crayola Experience” locations that offer everything from a making your own crayons to play areas.
Buy Online, Pick Up In-Person
Nearly three-fourths of people who shop online say they have used the pick-up in-store option at one point for their purchases, according to a study from by Internet Retailer, a digital news and analysis service. Many did it to save on shipping costs.
Retailers – thrilled for those online shoppers to come into the physical store where they may spend more – are already adjusting to this increasing trend.
Several larger chains are moving toward dedicating real estate space to accommodate online orders that are picked up in person. Target is adding specific desks inside its stores where shoppers can pick-up their online orders.
In some locations, customers don’t even need to come inside. The retail giant is rolling out a curbside delivery program at some locations, where Target employees will bring a shopper’s order to their car in a dedicated spot outside. Walmart is offering a similar service for its groceries.
It follows a similar trend happening at many restaurant chains, such as Olive Garden, that have long offered a curbside delivery service for to-go meals.
This article is the latest in a series CoStar will be providing live from the floor of RECon, the International Council of Shopping Centers’ global retail real estate convention in Las Vegas. Check for frequent updates beginning on Monday.
Community-Focused Brands
In the past, landlords limited the amount of space dedicated to non-apparel or non-home goods focused businesses. That’s changing now, and landlords are giving more weight to retailers who bring a buzz with them.
Brands such as spinning studio Soul Cycle and caffeine-supplier Blue Bottle Coffee bring a built-in community of loyalists to their locations. What’s significant isn’t that they are a spin studio or coffee bar, but the vibe they cultivate.
“People are excited about the brand more than the service they’re offering,” said retail real estate specialist Michael Lagazo, vice president of SRS Real Estate Partners.
As a result, investors aren’t as quick as they used to be to sign the national credit tenant over the cool regional operator, he said.
“Consumers are spending money differently but investors are also positioning assets and portfolios to follow the consumer trends,” he said, noting that landlords are adding more space to accommodate these popular food and drink providers as well as fitness and entertainment users.
Alternative Retailers
Despite the glut of space left over by chains such as Toys “R” Us closing, retail properties continue to show high levels of absorption across the country from some unusual tenants.
“Pull-back the curtain at who is opening up shop and it’s often not retail stores at all,” said Rafael DeAnda, a market analyst with CoStar Market Analytics in Los Angeles. “For example, in the Los Angeles metro, we’ve had at least two college campuses expand into retail centers over the year. Gyms and medical offices taking space at neighborhoods centers is becoming much more common as well.”
Indeed, fitness clubs, urgent care centers and schools are opening all over the country where big box stores once stood. Many big-box retail locations have the kind of similarly-desirable demographics that these types of users covet.
These types of tenants also have larger-than-average footprints, which helps out landlords too. It’s one of many reasons mall developers have been courting gyms in recent years. In fact, more than half of Westfield’s 33 U.S. malls now host a type of health club, a 10-percent increase from a decade ago.
Another reason is that the fitness industry is growing, much like the other less traditional retail users filling these spaces.
With an aging Baby Boomer generation and rising health care costs, urgent care locations nationally rose more than 22 percent in 2016 from 2014, according to the Urgent Care Association of America. That trend is projected to continue.
Pop-Up Shops
If you’re scratching your head at the concept of pop-up shops becoming a trend, consider that the Museum of Ice Cream – a pop-up art installation that started in New York – sees 25,000 visitors a day at its current San Francisco location. That Instagram-famous phenomenon has plenty of other brands planning ways to emulate its success.
In fact, the demand for pop-up shops – a temporary store or installation – is so high that new companies are forming as matchmakers between landlords with empty space and brands or people who want to open a concept for a short period of time.
One such firm is Appear Here, which allows landlords in London, Paris and New York to list spaces for temporary use by brands and artists for short-term retail use.
Brands love short-term space because it allows them to test products or provide a limited-time only allure in a brick-and-mortar location. Landlords love the income from what may otherwise be an empty storefront.