In the age of newCommerce, physical stores are now only one piece of the ever-evolving omni-channel equation for retailers. eCommerce is fueling demand for more warehouse space and innovating logistics networks around the globe; fulfillment centers are an industry standard, leveraging breakthrough technology for efficiency and scale. To be successful in this climate, a retailer’s footprint must factor in these three important elements: experiences, design, and convenience.
Creating a Fresh Experience
Millennials became the largest generation by population, accounting for $1.3 trillion in annual consumer spending.[1] They are the driving force behind the shift towards services and experiences – 78% would choose to spend money on a desirable experience over buying something desirable.[2] But, while Millennials may drive trends, Baby Boomers account for the majority of wealth and consumer spending – nearly 39% of all consumers’ expenditure.[3]
Still, Generation Z is the most digitally-inclined and has the potential to be the largest cohort. They are quick to adopt technology and latch onto trends, but still value the in-store experience when shopping. In a study conducted by Accenture, researchers found that bricks-and-mortar stores are the preferred method of shopping for 77% of Generation Z shoppers. Digital engagement is also growing in Generation Z. In the same survey, 70% of respondents have written reviews on products and 40% provide feedback online often, showing us that cross-channel shopping is a stand out characteristic.
Consistent messaging and branding across omni-channel delivery is vital to success and provides opportunity to further develop a brand. eCommerce platforms must blend with physical stores to keep customers engaged and deliver a streamlined user experience. Leveraging new technology online or offline, such as augmented reality to visualize a potential purchase or 3D printing to create custom products in an instant, can enhance the user experience and bolster a retailer’s appeal to drive sales.
Creating innovative and unique ways of interacting with the target consumer coupled with complementary services are a win in driving retail foot traffic. Apparel eCommerce sales are expected to increase $73 billion, 20%, in the next five years. Department store consolidation, with struggling retailers shutting their doors or being bought out, continues to have a major impact on Class B and C malls. Coresight Research estimates about one-fifth of department stores, nearly 1,200, will close by 2023. The majority of these closures will occur in lower-tier retail malls. In addition to eCommerce growth, services are becoming a more common discretionary expense. Retail centers that offer a variety of services to cater to shifting demographics and eCommerce sales growth will be strong performers.[4] A great example of this in our local market is the mall development known as Regency. The Richmond area mall, originally built in 1974, is being redeveloped into a new neighborhood center. The development will feature experiential retail options such as an updated movie theater, indoor trampoline park, aquatics facility, and several fast casual dining options. Additional retail space will also be built to accommodate new tenants, significant roadwork will improve the site’s visibility, while a multifamily development is also planned neighboring the site to help drive foot traffic.
Designing to Connect People
Beyond a retailer’s shopping experience, the retail center and physical store design can captivate consumers and further a community. Shopping centers should seek attractive and accessible designs. As social media becomes further intertwined with the Millennial and Gen Z shopping experience, design elements such as artistic wall murals, open kitchens, or vertical gardens can garner the attention of a visitor who soaks in a unique design feature, snaps a photo, and shares it on their social accounts – organic and free online advertising for the restaurant, retailer or shopping center.[5]
Common areas and shared spaces are creating opportunities for designers to implement urban design features and new technology to engage visitors. Comfortable seating, free-wifi, play areas, or dog parks can cater to families or working professionals. These amenities may lead to more sales, while also increasing the likelihood of patrons to visit the shopping center again. A retail space can provide much more than goods, they can be transformed into gathering spaces with a sense of authenticity. A retail development that does this incredibly well in the local Charlottesville market is Dairy Central, which will include one of the first food halls in Central Virginia. The market will be anchored by a local brewery and feature local and regional products and restaurants.
While retailers focus on methods to drive foot traffic through the omni-channel experience, mixed-use retail developments can help support retailers looking to draw customers to their stores. A variety of uses caters to different needs throughout the course of a day. A potential shopper may head to the gym before grabbing a cup of coffee and getting a haircut. Incorporating these types of residential amenities to a retail center can help develop a community and increase the frequency of consumer visits.
Offering Convenient Services
The emergence of fast-casual restaurants, pop-up shops, and showrooms is indicative of the changing retail landscape. Class A malls continue to stay relevant by embracing experiential and interactive retail.[6] Convenient options are relevant for both shoppers and retailers: technology, transportation, and logistics are paving the way for a seamless shopping experience.
Technology is creating new options to test products and facilitate purchases. Wallet-less purchases, augmented reality, and beacon technology are beginning to be used to innovate and simplify how customers shop. Nontraditional channels are also estimated to reach $17 billion in sales by 2023, largely in place of traditional retail. These categories include rental, resale, and subscription services that are cheaper or more convenient for consumers.[7]
Transportation options can make shopping centers more accessible to all consumers. A shopping center can be the focal point of a transportation network. Bus stops, bike storage, or e-scooter stations improve accessibility and may contribute to more foot traffic, while drive-thru access can facilitate transactions for customers on the go.
Fulfillment center demand is not slowing and delivery services make receiving goods even more convenient. Retail and the supply chain are interdependent. Proximity to consumers will be vital to transport goods quickly and efficiently. Brick and mortar retail space can offer strategic locations to support same day or last mile delivery for logistics providers.
Carytown Exchange is a Richmond redevelopment taking advantage of its strategic location in one of Richmond’s most coveted submarkets. The center will incorporate a high-visit frequency grocery store to accompany a best-in-class selection of retailers and will reflect Carytown’s local character in its design and a merchandising mix of local and national, service and retail tenants. A development of this kind has never been possible in the submarket. Carytown Exchange will be an iconic retail destination for many years to come.
Despite national headlines continuing to tout store closures, retailers that have adapted to the digital age and are thinking of their physical stores as an extension of their brand are thriving along with the economy. Retail is immersed in our daily lives as eCommerce delivery becomes even more convenient and social media influences modern trends. By focusing on the customer and an experience-driven retail environment, shopping centers have an opportunity to become iconic work-live-play destinations in their community for years to come.
[1] Boston Consulting Group. How Millennials Are Changing the Face of Marketing Forever. January, 2014
[2] Eventbrite. Milliennials: Fueling the Experience Economy. July, 2014
[3] Bureau of Labor Statistics (BLS), Consumer Expenditure Survey 2016.
[4] https://www.chainstoreage.com/real-estate/five-trends-in-five-years-will-reshape-u-s-mall-mix/
[5] http://www.baskervill.com/the-rise-of-retailtainment/
[6] http://blog.cushwake.com/retail/newcommerce-malls-class-a-and-everything-else.html
[7] https://www.chainstoreage.com/real-estate/five-trends-in-five-years-will-reshape-u-s-mall-mix/
