Experience Teaches Us That Change is the Only Constant
One thing experience has clearly taught us is that change is the only constant.
This observation, applies to most facets of life, and certainly holds true for retail real estate. The inefficiency of the real estate business is one of its greatest elements and a dynamic market equals opportunity. From changing demographics and growth patterns to new technology, we understand the changes, challenges and competition that our clients are facing. It might seem daunting, but in order to stay successful, and more so thrive, it is imperative for companies to evolve with the retail landscape.
To evolve, we must embrace and adapt to each of these experiences, as they are invaluable catalysts to our growth.
When we launched The Retail Connection fourteen years ago, the cornerstone was a team-oriented approach to provide our clients with the premiere research, advisory, strategic, and investment support that would help them understand their customers, deliver exceptional experiences, and grow their business. Our commitment to provide best-in-class service to our clients continues to be our top priority, and our knowledge-driven platform is built on this mission.
Strategic thinking underscored per deep market insights continue to enable us to provide the same level of service and support our clients have come to expect over the years. Right now, developing trends such as seamless omnichannel interactions, experiential real estate, and a rising popularity in mixed-use real estate spaces are converging to impact the ways in which changing customer bases interact with retail. Here is what we can expect to continue to see over the next several years.
We have seen the landscape of our industry become digitized and omnipresent, but that does not mean that physical stores are any less important. In fact, 90 cents out of every dollar of retail sales continue to take place in brick and mortar stores and the most recent industry reports show robust leasing, strong foot traffic and rising retail rates. Digital and physical experiences are complementary and well executed, extend the reach of one another.
The future successful retailer will embrace omnichannel sales, using their digital assets to drive consumers to stores for related experiences.
Brick-and-mortar retailers, in return, will drive customers to digital assets for choice and convenience. Merchants will need e-commerce to market and compete, and e-commerce retailers need physical stores to optimize their distribution channels and the customer experience. Retailers must meet their customers how, where and when they want to be met, and as such, place an emphasis on upgrading all distribution platforms, both physical and digital, creating a seamless omnichannel experience for their customers. Long-term strategic shifts, such as the continued growth of ecommerce and pricing transparency are a must.
No matter what changes need to be made, retailers will clearly benefit from providing a seamless experience across all channels. It may seem like an overwhelming proposition for some, however, losing clientele by not keeping up with changing demands will be an even larger sacrifice. This latest round of retail downsizings and store closings provides the confirmation for this point, and are the result of once strong chains losing their edge, under-delivering to their customer or allowing themselves to become over-extended.
So yes, you are reading this right. Brick-and-mortar retailers are not going anywhere.
In fact, a recent Pew study found that 64% of Americans indicate that, all things being equal, they prefer buying from physical stores to buying online. But that does not mean every store is safe. In our omnichannel world, the brick-and-mortar retailers that are thriving are providing authentic experiences. According to a study conducted by PwC, more retail stores will be transformed into places that sell experiences, rather than goods. Since most products can be bought online these days, physical stores are becoming unique for their ability to provide opportunities to experience something new before committing to a purchase.
Retailers at the top of this trend allow customers to try out their products in real-life scenarios that are built into their retail space. For example, specialty stores [for kitchen, home and garden, food, sporting goods, etc.] are providing classes, events, and spaces for customers to interact with one another and with the company itself. The more transparency customers can get, the more positive they will feel about the experience. Being able to interact with products and talk about them with others lends transparency to the purchasing experience. As the experiential real estate trends grows in the coming years, we will continue to provide our clients with insights and resources to help them navigate this new reality.
The customer experience is changing along with the customer.
Millennials value quality and social causes. Every time they interact with a retailer, they should have a positive experience and one that they will remember and hopefully share with others. To ensure that ever-changing customer bases remains satisfied at every touch point, make sure they have a compelling experience in your store and/or retail projects. This includes the purchasing experience, which should be first rate in terms of quality, value, and transparency.
The Pew study also found that two-thirds of online shoppers generally prefer buying from physical stores, although pricing differences are ultimately what drives most Americans purchasing decisions. Customers have easy access to competitor pricing, which they can access even when they are in another store. Millennials, especially, are sensitive to price, so make sure to keep tabs on what the competition is offering both online and in location proximity. As we emphasized earlier, let customers interact with products within a physical space to increase transparency.
Be agile and flexible. Anticipate challenges and embrace them.
Be hyper attentive to the market and keep your finger on the pulse of its waves of change. Respond to evolving demands quickly, and update your back-end operations and infrastructure. Invest in creating unique spaces for customers to interact with your locations in new ways. Make sure all touchpoints of your operation create a positive and engaging experience for your customers. In our experience, working together with intelligent, thoughtful, motivated teams benefits all parties.
So, on that note, as always, we embrace our incredible relationships, our tenant-driven business model and geographic location, all of which continue to enable us to measurably grow our business in all environments as we continue to innovate, create, extend our reach and leverage our unique advantages. We look forward to 2017 being another exciting and productive year of expanding our platforms and providing superior experiences for our team, clients and partners.