Despite the U.S. retail sector applying significant amount of focus on the legacy companies who are either closing or rapidly downsizing, influencers in the industry are optimistic towards the future of physical brick and mortar stores. This is backed up with the likes of Amazon starting to experiment with brick and mortar stores, and multinationals like Apple, Microsoft and Tesla demonstrating the value of “showrooming” their latest and greatest products to early adopters / affluent customer base. The global landscape is definitely changing from a retail perspective but those retailers who innovate and ride with this change will survive and thrive.
In early 2017, large retail chain JCPenney revealed their plans to close 140 stores, while Sears is shutting 150 and Macy’s is closing 68. Smaller brands who were previously the dominators in suburban shopping malls are also struggling. Fashion retailer Bebe announced that it was closing 168 of its U.S. and Canadian brick and mortar stores to hone in on online sales, while Payless Shoes announced they will close nearly 400 of their stores.
Other multinational franchises like Starbucks and Nordstrom have published plans about how their businesses are adapting in correlation with the evolving retail landscape.
MG2 – a retail architecture and design firm published insights they have gathered about gen Z. Defined as individuals born between 1996 and 2010, this group possesses an annual purchasing power of $44 billion in the United States. Expectations are that this number will grow to $200 billion by 2020 – statistics which undoubtedly demand the attention of retailers.
Generation Z has been influenced significantly by the past experiences of their parents – Gen X’ers who suffered from the Great Recession. Those in Gen Z are also impacted by the fact they are the most digital savvy users to date. These factors produce a culture of shoppers who are savvy, informed and vigilant towards inauthentic or inaccurate branding and advertising. Social media influencers who promote products to their vast audiences are now for the most part required to declare when they are being paid to promote something – removing an element of trust and credibility from their audience.
The question now becomes – how are big retailers responding to the requirements of young, demanding, tech-savvy consumers whilst also meeting the needs of older shoppers who are increasingly being conditioned by technology to expect services instantly?
Three ways of maintaining relevancy throughout industry changes:
- Combining online and in-store shopping
- Having the flexibility to offer various types of service a customer may require
- Working to offer in-store experiences that can’t be replicated online
One example of implementing these methods is Nordstrom – who are offering customers the option to pre-book a changing room of clothes they want to try on before they get to the store. The backend of this from the store’s perspective is to ensure sales staff are knowledgeable and prepared to offer fashion tips. suggestions that a customer would not necessarily achieve by clicking through a website. Nordstrom has also experimented with pop-up shops within a store.
It is fully reasonable that every store can’t be everything to everyone, but stores also can’t be rigid. A common requirement for a lot of customers is that they simply want to order something online and pick it up the same day from a store close by to their office or place of work. Nordstrom adapted to this by offering same-day curbside pickup for online orders.
Similarly, Starbucks has been implementing a similar strategy of adaptability in recent years. On the contrary of attempting to make individual stores meet a large range of needs, the company has been constructing various locations that meet different needs. One end of that strategy sits the Starbucks Reserve Roastery in Seattle’s Capitol Hill district. The +15,000 square foot location features an ornate interior, slow attentive service, fancy equipment to hand-make espresso and coffee – all the elements one would expect from a hip, third wave coffee shop.
Starbucks recognized that its brand was starting to become ubiquitous, the having a presence on every street corner type company. McGrath Reported “The Roastery was our answer. It’s not about driving profit. It’s about taking back the message of authenticity.” Starbucks has plans to open an additional Roastery in NYC along with including elements of their experience into other stores positioned at customers seeking to kick back and relax with a coffee.
The other side of that strategy involves the company experimenting with stores who provide fast service – getting customers in and out quickly, along with stores that only take mobile payments. Focusing beyond mobile payments Starbucks are also considering elements like how to include drive-through stores with shared ride services such as Uber or Lyft. “Transportation is going to be changed over the next decade,” according to Dennis McGrath, VP of Global Ops Innovation at Starbucks. “Could end up with 3,200 obsolete stores. What if you could incorporate Starbucks order into your Uber app?”
As time passes, it is highly unlikely that the statistic of 90 percent of people making purchases in physical stores will last. Industry influencers like McGrath and Bombacie are confident that retailers who apply an innovative approach to rapidly changing customer expectations, along with keeping their hand on the pulse in terms of predicting what customers will want, will be successful. Although this study is focused on the U.S. a recent CBRE study of global retail construction found that construction workers completed 134.5 million square feet of retail centers globally in 2016. Another interesting find was that 7 of the top 10 markets for retail construction projects are in China, Mexico City, Moscow and Melbourne.
Scouting the Best Retail Property for your Business
When searching for real estate, it is a known fact that location is the number one priority, and this fact completely applies to retail spaces. Your business’ location is crucial to your success and by not researching your options extremely well you are potentially shooting yourself in the foot in terms of long term potential ROI. Knowing what to look for relating to your specific business needs is integral.
Before commiting to a large decision like this, consider absolutely everything. Question yourself on things that will assist you clarifying your ideal niche. What are the unique features of your product? What vibe / tone are you trying to push in your retail space? For example if you are an aspiring coffee chain, having a presence in a mixed-use property space could be ideal as you’re generating demand from people living in the apartments above you. The answers you come up with to these questions will significantly help you to identify your target market / demographic and help you put together what your ideal location and property type looks like.
An additional requirement you should know is the exact percentage of the local population that meets your specified criteria. Multiple websites exist that can assist you in analyzing the demographics of your potential retail space. The cost involved with this could ultimately be the difference between failure or success, making it worth the additional funds.
Your retail space requirements will change based on what type of retail business you wish to open. A key tip is to be aware of what you are up against in your environment. New retailers in particular rely significantly on high footfall. Ensuring your business is accessible and on view for all to see is also crucial.
If you are launching a business in an area that is fairly seasonal, you may want to ensure that your location of choice has enough local traffic to keep you supported. What hours will your business be opened? Is the area safe and well-lit at night time or for when it gets dark in the evenings? Is there adequate parking available if you’re planning on attracting a high volume? Overall, you will be required to check your local zoning regulations ensuring they comply with your business’ potential needs.
Using Reonomy to identify potential retail spaces for your business
Reonomy is a commercial real estate technology platform with over 47 million off market commercial properties listed nationwide. The tool’s search features can be manipulated to find that diamond in the rough property, depending on your depending on your needs. For example by using filters such as search by location, search by asset class, search by year built.
Below is an example of a typical search for a retail property in New York. As you can see there are 69,564 different retail properties in the state of New York.
To narrow the results down further and make the number more manageable to analyze, we have selected only convenience stores in New York state. This now gives us a figure of 178 to work with.
Another option provided by the tool is to apply the “not sold in x years feature”. In this instance we will search for convenience stores that haven’t been sold in the last 10 years as they are properties which will likely be considering selling soon. This provides us with a much more manageable figure of 89 properties to sift through images of, property ownership information and any other information we might want.
Looking to purchase a new retail property? Or simply want to see the power of the tool? Sign up for a free trial here today.