E-commerce is reshaping the landscape for traditional retailers. Store closures and consolidations in 2017 are on pace to eclipse the total number of stores that failed in 2008, in the depths of the Great Recession. Just two months ago, Credit Suisse forecasted that 20-25% of malls will close by 2022.
Eric Lagerberg, AIA, NCARB, LEED AP, EVP and Global Practice Group Leader, Retail Stores at CallisonRTKL, says, “In five years, it is likely that most, if not all, of the most recognized brands will have undergone a marked transformation in how they conduct business, capture consumers’ loyalties, and sell their products. From the mechanics of the transaction and the supply chain behind it to the physical environment and experience within it, nothing will be as it currently is.”
This market volatility is compelling retailers to replace traditional merchandising and marketing approaches with strategies that enable the store environment to engage with customers in ways online retailers can’t.
“Savvy retailers are using in-store programming to create opportunities for education, community connection, and other activation strategies as a means to get customers to connect with the brand,” says Aaron Birney, LEED AP, Firmwide Retail Practice Area Leader with Gensler.
NYX Cosmetics equips its headquarters office and retail stores with studio environments to activate trend-savvy customers. “By hosting events and seminars by well-known cosmetics artists and industry video bloggers, they have created an amazing following with younger, more progressive users,” says Birney.
Technology is enabling retailers to create hands-on experiences that can only take place in a physical store environment. New Balance features an interactive demonstration and shoe-making assembly area in its flagship Boston store, designed by Elkus Manfredi Architects. At the retailer’s NB1 Customization Bars, customers can review color and material swatches and use iPads to design their own shoes, then watch them being made right in front of them. “This immersive experience seamlessly integrates a technology-driven digital experience with a tried-and-true, hands-on shopping experience,” says Greg Skalaski, Vice President, Retail, Shawmut Design and Construction.
Even e-commerce retailers are experimenting with physical environments. Amazon has opened a handful of bookstores in major cities and is toying with grocery and convenience store formats, as well as pop-up stores and kiosks at shopping malls.
Mixed-use sports and entertainment districts like Waterside Live! in Norfolk, Va., provide a strong foundation for adjacent retail. These mixed-use developments integrate retail, restaurant, and green space to create high-impact destinations for sports fans and tourists. The Cordish Companies.
CONSUMERS STILL PREFER PHYSICAL STORES
E-commerce accounts for less than 10% of total retail sales, although it continues to expand exponentially. Still, according to recent research by Cowen Group, consumers prefer shopping in physical stores 75% of the time. And despite persistent reports of failure, many Class A malls are still thriving.
Retail owner/operator GGP is moving ahead with The SoNo Collection, an upscale shopping center in Norwalk, Conn., anchored by Nordstrom and Bloomingdale’s, with 80 to 100 smaller lessees. In downtown Miami, the 10-block Miami Worldcenter mixed-use development under construction will give special billing to a high-street retail component developed by The Forbes Company and Taubman.
Urban sports venues continue to provide a strong foundation for adjacent retail. The Cordish Companies has engaged FRCH’s retail mixed-use studio to design sporting and entertainment districts in Philadelphia, Detroit, Cleveland, Atlanta, and Norfolk, Va. These mixed-use developments integrate retail, restaurant, and green space to create high-impact destinations for sports fans and tourists.
There’s also growing interest in adaptive reuse, as developers recognize the benefits of conserving and reimagining historic structures. In Chattanooga, Tenn., The Woodbery Group is redeveloping a 1916 textile manufacturing facility into Signal Mill, an urban retail, restaurant, and office development. Hefferlin + Kronenberg Architects and builder EMJ Corp. are repurposing the building’s first and second floors to accommodate boutiques, specialty food shops, and restaurants.
Outdoor retail cooperative REI chose the long-vacant Uline Arena as the location of its flagship Washington, D.C., store, designed by CallisonRTKL. REI was the first tenant in the redeveloped historic brick masonry structure, which now houses 244,000 sf of office and retail space.
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Regardless of a store’s size, location, or format, retailers remain focused on connecting with customers to build and sustain brand loyalty. “We view retail as a form of hospitality—any environment that caters to the customer, anticipating their needs, shifting behavior, and evolving sense of the world,” says MJ Munsell, IIDA, Principal and Retail Studio Leader with MG2.
Gensler’s Birney believes the competitive landscape for retailers has never been more formidable. “Retailers are no longer just competing with other retailers. They’re competing with anything people might do in their free time: spending an afternoon at a museum, seeing live entertainment, or eating a great meal,” he says.
He advises traditional retailers to “connect with audiences in more meaningful ways” by embracing the idea of their store as “a platform for multiple means of engagement and community building.”