Retail has had a tough time over the last several years, with a 23% decline in shopping activity in just the first half of 2016.
By mid-year of 2016 retail was 20-25% lower then it was in the 1st half of 2015. At the same time, average monthly deal volume through May totaled 6.1 billion, whereas previously it was half that. Every month since 2000 has averaged around 3 billion per month.
While some sectors in the retail market, such as power malls and regional centers, have performed dismally, others seem to depend largely on location and the product offered.
Class A centers, for example, continue to do well. In fact, some investors are saying that the closing of so many weaker retail centers has only strengthened the strong performers.
Other experts, on the other hand, disagree and feel that the impact of online e-commerce will continue to hit retailers hard. These experts suggest that in order for retail centers to succeed, they need to focus on the experience they can provide for consumers.
Rather than creating a place where consumers can buy a product, successful retailers look for ways to give people an immersive experience that leaves them wanting to come back for more.
Moving walls or changing up the design isn’t enough; consumers are looking for personalized experiences that offer them something more exciting, exotic, or individualized than what they receive when they shop online.
In the same vein, some of the more forward-thinking retailers have been mixing in an element of online shopping to their brick and mortar stores in order to woo customers.
For example, shoppers can search for a particular product at a store’s website, and can see instantly if a product is in stock, and what the available styles are, in real-time. They are then able to go to the store to see or try on the product, or they can pay for it with an in-store app that lets them skip the line at the cashier.
In order to make these changes work, retailers and owners need to work together to collect and analyze the data and test their assumptions about what will work to reel in consumers again.
There Are Some Retail Properties That Are Doing Well Despite E-Commerce.
- Grocery-anchored centers, for example, remain unaffected by e-commerce and can be added to most types of centers as an anchor. Some investors prefer to use specialty groceries, while others mix a standard grocery store with fast-casual restaurants and a mini-anchor. Either way, both bring in a regular flow of shoppers and increase profits.
- High street retail is the second category of retail property that is immune to the effects of e-commerce. Traditionally these included stores in well-known locations such as Fifth Avenue or Rodeo Drive. Over the last several years these stores have branched out to include streets such as Melrose Avenue, Soho, and a handful of select streets across the U.S. Although small, these properties are expensive on a per-foot basis.