Real Estate Weekly
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The retail sky is not falling, but there will be pain for those who don’t adjust

By Jedd Nero, Principal and Executive Managing Director, Avison Young


Despite lots of opinions to the contrary, the retail sky is NOT falling and the world is not coming to an end. The retail landscape is indeed evolving, morphing and transforming into something new, however, these are challenging times for many retailers as they try to navigate unchartered territory.

But it is also an exciting time for many who have embraced the challenges created by the rapid advancement of technology that has propelled online retailing ahead at unprecedented speed. Those who stand still are likely to suffer the consequences.

The overwhelming success of Amazon, which by 2020 will be responsible for a remarkable 10 percent of all purchases made in the U.S., has raised consumer expectations for speed, convenience and free shipping that has set the bar for everyone to follow. This “Amazon Effect” has considerably raised consumer expectations and exacerbated long-time customer frustrations with brick and mortar stores, including limited stock, lack of knowledgeable sales staff, readily available product information and long checkout lines. Retailers need to improve and streamline the shopping experience and checkout process to respond to these increased expectations with a unique, personalized experience to attract consumers to their stores. Those who get this right should be able to increase sales, manage costs and increase profitability.

The retail landscape will be dramatically different two years from now. In five years it may be unrecognizable. No one can predict what it will look like a decade from now. The years ahead will be very exciting to say the least. Tenants will experiment, with some succeeding and others failing.

What strikes me is that the pendulum has already begun to swing. Existing retailers that have ignored or have been behind the curve on technology need to step it up in the online space, while successful cyber retailers have already recognized the need to expand their footprint to the brick and mortar world as they seek to connect further with shoppers and establish themselves as brands rather than just online outlets. There is a real need to find balance between these two very different worlds.

As a retail real estate expert for more than three decades, I am struck by the research that says that 65 percent of Millennials prefer to do their buying in physical stores. They may do their “shopping” online, but with the popularity of Snapchat and other social media platforms they enjoy showing off their prospective purchases with friends – and getting opinions of peers — before actually buying. Baby Boomers, on the other hand, seem to have fully embraced the speed and convenience of online shopping, as it fits their busy lifestyles and avoids the hassles sometimes involved in going from store to store when they already know what they want.

And of course, there will always be those who just enjoy the physical shopping experience.

Brick and mortar retailers and restaurants are starting to embrace touch screens and other technologies as ways to connect with their changing customer base. The vast majority of shoppers do not wish to be “jumped on” by sales assistants the moment they walk through the door, but they sure do want someone (or something) around when they know what they want and have questions. Once they find what they want, they expect a quick check-out process. Technology can fill some of these roles nicely.

Restaurants and fast food outlets are leading the way in this arena. There are more food tenants than ever and the industry seems to be trending toward a “fast casual” approach offering both speed and healthier choices for customers. Many are implementing technology with smart table apps for menus and ordering, as well as app-based programs for smart phones, which cut down on the need for expensive investment in new equipment.

These advancements help food tenants to keep costs down as the minimum wage goes up. Some fast food chains are experimenting with automation and robots to do everything from flipping burgers, making and serving coffee to taking orders and delivering to tables. This trend has its advantages: Computers and robots don’t take vacations, don’t take sick days or show up late or require health insurance. Robots don’t take offense if you short them on tips!

Of course, this trend could have a major impact on food service industry employment, and some people will always prefer a personal, human touch to service. Employees will have to be trained to maintain and repair these devices and to work in harmony with them. It certainly is a brave new world we can see emerging.

While brick and mortar stores are still the kings of retail, there is no way to ignore the $111 billion spent last year in online purchases, up 16.2 percent from the previous year. Cybershopping opens a whole new world for retailers that stretches beyond traditional geographic boundaries and is good for the bottom line.

As experiential retail development continues to be another growing trend, and augmented reality shopping destinations are on the horizon and no longer a far-off dream, it will be those retailers who find the right balance between the physical and the cyber world who will thrive and succeed as this brave new world of retail continues to evolve.

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