NAIOP: Retail’s Changing Landscape
The Current State of Retail
Brick-and-mortar retail was built on a traditional mindset with the shopping mall being designed around the idea that shopping habits were going to remain consistent through time. According to Ben Fischman, Founder and CEO of M.Gemi, we need to switch our mindset to believe that nothing is here to stay.
With an alleged Retail Apocalypse threatening these traditionalist ideals in retail, it’s time for brick-and-mortar to adapt.
The Future of Retail
The lines between e-commerce and brick-and-mortar are slowly blurring, but for retail to continue to survive and thrive, the concept of physical retail space needs to be rethought. Modern shoppers are asking for an emphasis on experiential retail: incorporating non-traditional anchor tenants; integrating artificial intelligence (AI) into physical stores; rethinking long-term leases; considering the impact of social media on store design and architecture; etc.
Shopping malls were intended to serve one purpose: shopping. Over time, we have adapted them to include several forms of formal and informal dining and other “experience” based retailers (i.e. Build-A-Bear.) As traditional anchor tenants fail to adapt and leave malls, it paves the way for a more extensive experiential approach to brick-and-mortar retail.
Incorporating non-traditional retailers like co-working spaces, urgent care facilities and fitness centers into vacant anchor tenant spaces creates a multi-purpose user experience.
Douglass Karp, President of New England Development, highlights that brands want to open in innovative “malls” and shopping spaces, and that the innovation of your business is based on the innovation of the space itself. Following this innovative “mall” model, these spaces will become places that people spend more personal time in rather than just going for the purpose of shopping.
One of the key reasons that click-to-brick stores tends to do so well is that online retailers have large amounts of data about their customer. They know where they shop, how they like to shop, and their demographics before a physical location ever exists. For brick-and-mortar retail to compete with Digitally Native Brands in today’s marketplace, artificial intelligence is key.
Rethinking The Lease
The standard lease term for a traditional shopping tenant can stretch anywhere between 5 and 15 years and in some cases, even more. With Digitally Native Brands now taking to physical retail, they are bringing with it the idea of fluidity, the ever-changing shopping patterns of the modern customer, and short-term leases and pop-up stores.
These standard leases, while providing fiscal security for the landlord, can also provide a grey area. What if this brand goes bankrupt before the term is up? What if attractive tenants are turned off by long-term leases and the shopping center stays vacant? Restructuring leases to be shorter-term to appeal to the modern, flexible culture of new age brick-and-mortar and digitally native brands allows for the opportunity to have an ever-changing mix of relevant retailers in multi-purpose spaces.
In addition to a shorter-term lease, pre-designed pop-up stores- think Newbury Street Pop Ups- are a great supplement for tenant spaces that may be too expensive to offer short-term leases for, but would also be too expensive to leave vacant. These spaces typically come pre-designed and furnished with the pop-up lease being responsible for simple branding.
Today, the lines between e-commerce and brick-and-mortar continue to blur and in order for traditional retail models to survive, the concepts of what physical retail spaces are and should be needs to be revamped. While more and more digitally native brands enter the brick-and-mortar space, traditional retailers must welcome innovation in and adapt in order to compete. Bringing in AI, rethinking long-term leases, and considering the impact of social media on store design and architecture is just a few ways that this can be done. Innovation is happening fast and traditional brick-and-mortar retail spaces need to follow suit in order to keep up.