Retail real estate has thrived recently. The core of that success is that consumers are eager to be in physical stores. Although e-commerce is here to stay, there has been a resurgence in retail real estate. Why? Because consumers are craving something only brick-and-mortar stores offer: connection and experience. Retailers and real estate professionals who understand those consumer needs, and cater to them, are poised to capitalize on the thriving market.
The Retail Real Estate Market Has Been Growing Recently
The retail real estate boom directly traces back to consumers’ needs for in-store shopping experiences. Retail locations that ignore this consumer need will struggle to compete — the old ways of fluorescent lights and clothing racks stuffed to the brim are fading. Instead, retailers are employing high-touch hospitality strategies to invite customers into their stores and provide commercial experiences that cannot be replicated online. This renewed focus on customer experiences is the foundation of success.
Retailers are employing hospitality tactics to offer personalized shopping experiences. There is a clear need for it: In 2021, 64% of United Kingdom citizens surveyed by Barclaycard had chosen to shop closer to home. This meant customers were visiting stores, interacting with workers, and buying their products in person — not through e-commerce channels. Customers continue to want in-person, face-to-face shopping experiences and want stores to be places where they can connect with retail brands. The demand for brand connection and experiential shopping has affected how retailers approach their physical spaces and all aspects of their real estate buyer journey.
Online to Offline Integrations Have Changed Retailers’ Real Estate Strategies
E-commerce created a convenience economy where nearly everything can be delivered in just hours. Instant gratification lives in consumers’ pockets with a few clicks or swipes. The intense competition brick-and-mortar stores face against online shopping delivery solutions means that storefronts must offer different value propositions. They won’t win on the “quick and easy” battlefield.
Retailers have focused on providing unique, high-value customer experiences — knowing they need unique offerings that focus on what only physical stores offer. The strategies go deeper than the buy online pick up in-store trend, and real estate professionals should note the evolving in-store strategies.
Retailers are using varied strategies for meeting clients where they are on their buying journey.When consulting retail clients about their store site needs, it’s important to keep a few things in mind about retail location priorities:
Online to Real-Life Expansion: Numerous direct-to-consumer brands have expanded their presence from solely digital to including in-person offerings. Warby Parker, for example, launched in 2010 as strictly e-commerce. Fast forward a decade, and Warby Parker has more almost 200 locations. The brand’s stores have expanded to complement and amplify its original online presence directly. Customers still try on glasses at home, but they can also get an eye exam at a physical location. The store’s functional space promotes a seamless experience and creates a single chain for customers to order and purchase.
Zero-Inventory Stores: Many stores are adopting a zero-inventory approach. This model, which Bonobos was an early pioneer in, calls for sparse inventory. In many cases, stores that follow this approach carry only one size and color for each style they sell. The decreased inventory means less overhead and payroll spent on restocking and organizing, which promotes increased customer interaction time. The customer has a space where they can see colors and feel textures in a way they cannot online and ask specific questions from staff. Once they make a selection, the consumer can order from off-site inventory and still enjoy the convenience of e-commerce.
Retailtainment: This strategy is a blend of retail, entertainment, and experiential marketing. The jeweler Tiffany & Co. brought this concept to life in New York City by pulling inspiration from the cult-classic film, “Breakfast at Tiffany’s.” The store decided to pay homage to the 1960s fan-favorite movie that catapulted the flagship store into popularity. Now, the store serves breakfast at its 5th Avenue location and maintains a long waiting list of people eager to dine in. By tapping into the entertainment potential of their brands, retailers can not only create traffic for their core businesses, but also create other revenue streams.
Real Estate Strategies Should Support These Revamped Retail Focuses
Understanding what’s powering the resurgence and future of retail allows real estate professionals to begin applying real estate experience to customer service strategies. Real estate professionals can help retail clients by understanding their location needs and recommending the right technology for retailers to manage this dynamic environment.
Retailers need guidance acquiring tech stacks that support collaboration, automation, and data insights in their lease portfolios — and then guidance on optimization. By guiding retailers to lease management software that tracks information, such as critical dates, expansion clauses, rent escalation, expansion rights, lease accounting, and sophisticated site selection data, retailers and brokers can collaborate on the entire lease cycle.
Retail has shifted in a way that creates room for both e-commerce and brick-and-mortar stores to be on the same playing field. Retailers and brokers who understand how each other’s skill sets and insights can build a store that brings customers in continually will share in a mutually beneficial relationship. The shoppers have spoken — they haven’t given up on in-person stores. The most successful businesses will be ones that can keep customers coming back for engaging shopping experiences.
If you’re interested in working with real estate experts to help you manage the dynamic retail market, reach out to us here!