Sponsored by CORFAC International
By Trent Rustan
While news headlines would lead you to believe that retail as we know it is dying, this is not an either/or scenario. Both traditional brick-and-mortar retail and e-commerce play important roles and can thrive together. The true winner will be those companies that are best able to serve the changing demands of consumers in any format.
There is no doubt that online retailing is capturing an ever-growing share of consumer spending dollars. E-commerce has brought endless choices, convenience and price efficiency to the modern consumer—all very powerful components of the consumer’s decision-making criteria. E-commerce is more efficient for products such as flowers, travel/tickets, and foreign goods. And online retailers continue to find ways to deliver goods quicker and cheaper.
But e-commerce falls woefully short in delivering unique and qualitative experiences for shoppers. The ability for people to socially interact with the physical world as hunter-gatherers has guided their shopping behavior since the beginning of time, and they are unwilling (and possibly neurologically unable) to totally give it up.
The overwhelming majority of retail sales still occur in physical stores and many online retailers see this. The most interesting aspect of this movement has been the demand from online retailers to add traditional brick-and-mortar locations as part of their distribution platform. This can be seen in Amazon’s recent move into neighborhood grocery/convenience stores and physical bookstores. “Buy online - pickup in store” has been a direct result of the competition among online and physical retailers and this emerging trend is expected to continue.
The “social experience” is changing consumers’ expectations. Nowhere is this concept more evident than the shopping mall. Nontraditional uses such as hotels, condos, entertainment venues and schools have begun backfilling vacant big-box spaces formerly occupied by department stores to create a more mixed-use offering and urban village feel. Restaurants are also playing a major role in this transformation and for the first time in history, total restaurant sales have overtaken grocery store sales.
Retailers and commercial real estate developers/investors must adapt to this changing environment by rethinking the design and flow of shopping centers as well as the actual physical location. Artificial intelligence is making the entire economy more efficient. The acres of non-revenue producing parking stalls that used to house cars can soon be replaced by much smaller and efficient queuing lines for autonomous vehicles and repurposed into interactive space for people and sales.
The configuration of physical space must adapt as well. Suites will likely downsize to smaller units with showroom/demonstration space in the front and warehouse/stock in the back or transform to kiosks altogether. Customers still want to interact with products, so to offer this experience and combat the penetration of online retailers, traditional brick-and-mortar companies must offer options for their customers like “click & collect” or “buy online - pickup in store.” They must keep the point of sale focused on their own location by delivering an immersive entertainment experience infused with virtual reality and social reward.
The future of retailing lies at the intersection of the virtual world and the physical experience where the choices are infinite, the gratification is immediate, and the service is personal. The companies that can pair the two platforms to deliver their products in a manner in which the experience of the purchase is as rewarding as receiving the product itself will ultimately win. n
Trent Rustan of Commercial Properties Inc.CORFAC International, is an accomplished real estate professional with over 25 years of industry and transaction experience. Trent is a recognized expert in the acquisition and sales of commercial property for real estate investment companies and developers. Primarily specializing in retail and office transactions, Trent has successfully negotiated over $500 million of acquisition, disposition and leasing deals throughout Metropolitan Phoenix and the United States.
Learn more at www.corfac.com.