Retail TouchPoints – Retailers are hoping that a solid 2018 holiday season will usher in an even better 2019. There’s certainly reason for optimism: high consumer confidence, low unemployment and low fuel prices are generally a winning combination. But as in previous years, every customer dollar will be hard-won. The retail transformation (some called it an apocalypse) that swept the industry in 2017 is still shaking things up, and will continue to do so for the foreseeable future. The 13 retail industry experts contributing to the Retail TouchPoints Outlook Guide bring a wide array of viewpoints and experience to their predictions for 2019.
Reimaging the Definition of Retail
Brian Brunk, Principal, BRP, Retail Consulting Firm
I’ve previously highlighted the “Great Retail Transformation” — the historic wave of disruption that is sweeping through retail. We continue to see the negative side of this disruption, with more than 5,000 store closings and 16 U.S. retailers filing for bankruptcy in 2018. However, we also saw some positive news with strong retail growth, 2018 YTD retail sales up 5% (through November), and great stories about retailers that are adapting their in-store experiences to experiential retail concepts that meet new customers’ expectations.
As we consider the evolving store of the future, we find ourselves asking fundamental questions like, What is retail? and What is a store? While the definition of retail has evolved, it has always centered around the concept of a market — from early local markets, to the growth of mercantile and department stores, to shopping malls, to whatever is next. Regardless of format, brick-and-mortar retail remains a real estate game. Now, we’re seeing the rise of creative uses for retail real estate, as brands create a customer experience that breaks the mold of traditional retail perceptions. The trick is to morph your store into new experiential forms that appeal to consumers.
- Complementary Brands: Store-within-a-store is nothing new, but we’re seeing more retailers sharing real estate with complementary brands. One great example: Target and CVS, two brands that traditionally overlapped and competed. Now, Target has turned over its in-store pharmacy operations to CVS. JCPenney has experienced success with Sephora shops in its stores, and Best Buy carved out space for Sony, Samsung, Microsoft, Pacific Kitchen and Magnolia in many of its stores.
- Multipurpose Space for Food, Beverage and Events: A growing trend is multipurpose utilization of real estate. An interesting example is the focus on adding food and beverage options, such as space for a café or restaurant. This has been a trend with both small, boutique retailers and large fashion retailers like Brooks Brothers and Tiffany’s, which have added or are exploring cafes, tea rooms, bars or even dedicated private event space, to better engage customers and maximize their real estate. Every segment seems to be exploring this in its own way, with more grocers, such as Whole Foods, adding restaurants. As shopping behavior continues to change, we expect this to become a much larger play for retailers looking for new experiential brand strategies to increase store dwell time and generate much- needed additional revenue.
- Real Estate Sandboxes – Brands and Specialty Renaissance: As the retail landscape changes,
online retailers are opening physical stores, and traditional retailers are experimenting with new store concepts. We are also seeing several traditional manufacturing or wholesale brands now expanding their retail presence for greater control of their brand experience. With the retail landscape morphing, we also expect to see a renaissance of more curated, specialty retail as customers demand more options and in-person experiences with knowledgeable associates. Manhattan is a great model of this, as new entrants look to take advantage of vacant retail space. For example, Brookfield Property Partners recently bought property on Bleecker Street to create an incubator space where new entrants can test brick-and-mortar strategies.
- Virtual Showrooms – Beyond The Four Walls: With AR and VR adoption spreading, especially in certain segments, the idea of what represents retail real estate is transforming and expanding. It’s no longer just the store — it can be almost anywhere, including the customer’s home. Retail stores have traditionally been the focal point for the theater of retail, but now AR and VR allow the customer to directly control where that experience happens. Macy’s is a recent example, as they’re currently rolling out a new virtual VR across 70 locations — combined with an AR app for home use — to offer an immersive furniture shopping experience that allows browsing and visualization of a much larger assortment of furniture than a typical store. Sephora’s “Virtual Artist” app uses AR to scan your face, figure out where your lips and eyes are, and sample different looks on your smartphone.
Retail offers the vision, value and convenience offered by the curator. That is what defines retail. Consumers want to shop versus just source items, and that is what they need and want from retail. Traditionally, retail space is the theater where this takes place. The future of retail remains very interesting, as we see themes like the renaissance of specialty, brand expansion and the evolving experiential theater creating headlines that define the store of the future.
Read full report: 2019 OUTLOOK GUIDE: Top Trends Driving Retail Growth