If 2018 is anything like 2017, expect major changes when it comes to downtown retail. While no one has a crystal ball, our work in nearly two dozen communities nationwide has led us to a few trends that we expect to see alot more of in 2018…
#1. Embrace social media, or else
Downtown organizations can support retailers’ efforts by supporting experiential activities in downtown public space, while also advocating for and marketing in-store events and activities through newsletters and social media. Downtown Morganton, NC, for example, has a robust and widely-subscribed weekly newsletter “D4U” that is populated with activities organized by individual stores downtown.
#3. Next stop for micro-manufacturing? Downtown.
The story of omni-channel retail parallels the meteoric rise of e-commerce that we’ve seen over the last decade. In that sense, the concept itself is not new. But the degree of sophistication and the improved efficiency in creating that seamless shopping experience have continued to evolve such that it remains at the forefront of any current conversation regarding best practices. The term can feel rather ubiquitous and carry broad application. Indeed, for brick-and-mortars early on, omni-channel selling was as simple as creating a consumer-facing website or electing to also sell your wares via an online marketplace like Ebay or Etsy. However, today we see omni-channel refer to the monitoring of customer internet searches and tracking of purchasing habits to assist in curating a more targeted physical inventory, determining optimal site selection for a store, or spurring the exploration of new innovative store formats that carry no inventory at all, instead functioning solely as high-touch showrooms where shoppers purchase online for later pickup.
#5. Are we seeing the beginning or the end of the food hall?
Pop-up brokers are firms that specialize in temporarily filling vacant retail spaces, functioning as the liaison between prospective tenants and landlords, often offering a menu of additional services to aid in the transaction and roll-out. These services can include assistance with brand activation and marketing for the tenant, provision of liability insurance for the landlord, and on-site security during special events. These agreements are typically accomplished through short-term licensing deals which make it easier for the landlord and tenant to do business while keeping terms flexible enough they won’t prevent the landlord from bringing in a long-term tenant should the opportunity present itself.
Pop-up tenants themselves come in many different forms. They might be an e-commerce retailer looking to transition into a brick-and-mortar concept in order to explore omni-channel strategies, the scrappy young start-up looking to test their product in the market, or even a well-established company looking for a short term venue for an experiential marketing campaign.
The overall allure of pop-up brokers has been their role as a stop-gap measure to address softening in the market for retail real estate. Whether spaces remain vacant due to online competition or high rents, pop-up brokers effectively capitalize the asset in the interim. For commercial district stewards, this helps avoid issues with “missing teeth” that disrupt the continuity of active street level building frontages—something critical for ensuring that customers shop longer, and cross-shop between stores. For that reason, these brokers may be valuable allies, at least within larger urban markets where they appear to predominate presently. But it’s not unreasonable to theorize that these brokers may have a larger role to play in the future as we continue to see an emphasis on more experiential retail concepts, shrinking retail floor plates, growth in co-retailing, and the overall churn of the market.
Increasingly retailers like Target and Walmart have been experimenting with smaller building footprints and a narrower selection of products on their shelves. This may not be a bad thing. Many have pointed out that the American market is overbuilt with more than 25 square feet of retail space compared to 2.5 square feet in Europe.
But for other retailers, it’s important to understand the tendency to shrink should be tempered with the additional understanding that brick-and-mortars are necessary to maintain exposure with customers. Steve Dennis, contributing writer at Forbes, is quick to assert that shrinking is not an “automatic gateway to better performance.” Storefronts are still the place where experiential moments occur. While books, music, and some select apparel may be more conducive to a predominantly on-line sales format, other high-touch categories are going to still need stores to act as showrooms, demo spaces, and advertising opportunities (i.e. billboarding).
#8. Expect an aging population to alter downtown investment priorities
As the Baby Boomers age, expect a heightened emphasis on making sure that downtown retailers – and the downtown environment as a whole – meets their needs. This demographic may be slowing down their spending, but they continue to be the most familiar and comfortable with in-store shopping and their sheer size in numbers means that boomer spending will drive retailer decision making for quite some time. Expect downtown managers to be more mindful of the physical environment, advocating for improvements that make downtown more comfortable for an aging demographic. More care will also be taken with the maintenance of sidewalks to keep surfaces even and easy to walk on, as well as larger, more visible signs that are easier to spot and read. This group will continue to spend on leisure-related categories, home improvement and staples, but will start pulling back their spending on apparel, footwear, home furnishing and casual dining.
#9. Goodbye to downtown parking minimums (we hope)