5 Signs That Traditional Retail Isn’t Dead

February 16, 2017

Is e-commerce destroying the retail sector in your market? Can traditional brick-and-mortar shops and big-box retailers survive in a turbulent market that is constantly adapting to technological advances and bold moves by companies like Amazon and Wal-Mart?

Shifts from brick-and-mortar locations to online vendors, the rise of omnichannel approaches that blend online shopping with traditional retail, consumer desire to find the lowest price at any cost, and heightened customer expectations for delivery have forced innovation and led to downsizing for traditional stores like Macy’s and JC Penney’s. Can brick-and-mortar weather these transitions?

These questions might matter more than you think. According to The International Council of Shopping Centers (ICSC), 1-in-11 jobs are related to shopping centers and retail is the largest employer in more than half the states in the U.S.

“Retail is very healthy,” says Tom McGee, President and CEO of ICSC. Despite all of the upheaval, McGee is confident the downsizing of traditional anchor stores is merely a sign of adaptation, not a cause for panic. “More than 90% of sales still happen in a store,” says McGee, noting industry enthusiasm about what he sees as a blend of “bricks and clicks.”

Four commercial real estate experts told NAR’s Commercial Connections magazine about adaptation in their own markets, echoing McGee’s optimistic outlook:

  • “E-commerce can’t paint your nails, cut your hair, or serve you a burrito,” says Travis Carter, CCIM. “Consumers still need to see, touch, and feel those tangible goods,” Carter says, noting that the biggest change in retail he’s seen in his Greensboro market is visible in the dynamic of the shopping center tenant mix, which continues to shift towards businesses that provide services. Heightened competition in the retail sector has raised the stakes, even for national chains. “Retailers have more real estate options and consumers have many more options in retailers.”
  • “Retail is about connecting and forming loyalty to consumers,” says Barbara Tria. “They connect with the core product and that builds loyalty to the brand.” Tria is excited about the innovations between merchants she is observing in her Miami market. Because of e-commerce, she sees many retailers doubling down on engagement with their clientele, even partnering with other merchants in their trade areas, creating an exciting atmosphere of experiential retail.
  • “A decade ago developers would do speculative projects in hopes that tenants would come along,” says Ken Robberechts, CCIM. “You don’t see that as much in Chicago now. In general, developers communicate well with the community, organizations, and alderman in order to deliver the right tenant mix on a development.” Robberechts sees e-commerce really impacting retail in the inventory off of Main and Main. “Those mom and pop type startups may not want to be in the middle of the block to test their proof of concept as e-commerce provides an alternative avenue. That is where you’re seeing landlords having to get more creative on vacant space.”
  • “I don’t think it’s lip service to speak to the importance of experiential retail,” says John Propp, CCIM. “I can see the pendulum swinging back away from everything happening online.” Propp’s Denver market is in the midst of a commercial real estate boom unlike anything he can remember. He feels the last real impediment is the issue of sales tax. Purchases made online don’t typically include a state sales tax, a decision stemming back to a 1992 Supreme Court decision. “Once this is settled there will be even less conflict between the two.”

While no one can predict the future, it seems reports on the death of traditional retail are greatly exaggerated. Anchor stores continue to change, pivoting from big-box retailers to smaller service providers, medical facilities, restaurants, and multi-unit residential. National chains are downsizing and refocusing on personalization, catering to more specific clientele rather than trying to be everything to everyone. Omnichannel approaches and experiential retail continue to take root in all facets of the market, from e-commerce giants like Zappos to boutique boot shops in Memphis.

Source: "Pixels & Mortar: The Continuing Evolution of Retail ” Commercial Connections (Feb. 3, 2017)