Special thanks to our Coro Fellow Eric Danowski for his research and writing on this article.
Retail is, as always, rapidly changing. While some are hoping last year’s retail trends will die quietly (this includes kitschy wallpaper as selfie backgrounds), new trends are already starting to pick up, with significant implications for downtown practitioners. Here are six retail trends to look out for in 2019:
1: The Showroom
Retailers have been using brick-and-mortar space as showrooms for a few years now, but expect to see more brands jumping on the bandwagon. Just as many click-to-brick retailers are embracing the low-footprint, no-stock model of showrooms, other brands are utilizing the same strategy with some success. These highly designed retail spaces showcase products, materials, and services, and often hold limited to no stock. Customers leave stores empty-handed and see their products shipped to their homes. Companies like Peloton and Allbirds have designed their retail stores as branding strategy, not sales floors.
The showroom model might pick up more traction with subscription-based products as well. In the summer of 2018, meal kit company Blue Apron ran a pop-up in New York that offered cooking classes, chef panels, and other in-store experiences. Other subscription-based companies like Dollar Shave Club and Birchbox have also ran physical locations promoting their monthly products. Showrooms have the potential to redefine how retail space is best used for brands and customers, departing from the traditional sales floor model.
Note: Downtown practitioners should review their zoning and regulatory codes to make sure that these innovations don’t run afoul of existing code requirements or trigger a change in use which might be subject to permitting or special licenses.
2. Creative Locations and Unlikely Partnerships
In the past few years, we have seen businesses from different industries partnering to co-locate a product or service. There have been Tesla kiosks in Nordstrom stores, and currently Capital One and Peet’s Coffee have partnered to offer the “Capital One Cafe.” While retailers partnering with each other for branding is not a new concept, these examples show companies from far removed industries -automobiles and department stores, or food and beverage and banking- opting to share a physical space and co-create a new physical experience.
Creative ideas for experience-centered retail have been on the rise. The concept pays attention to shoppers who want something more out of a visit to a location, bringing more personalization and comfort to the in-store experience. This is why cross-industry partnerships like the Capital One Cafe, which aim to bring in people who otherwise might not step foot in a bank, are dynamic ideas for shaking up the retail world.
3. Amazon Continues to Grow
Amazon has rolled into the new year with a retail footprint that is sure to grow. On the topic of creative retail space partnerships, Amazon has already begun to place themselves in unexpected locations in an effort to address and minimize last-mile supply chain logistic issues. In mixed-use environments – as many downtowns are – the challenges of door-to-door delivery when not every building has secure locations for drop off is an acute challenge. As a result, Amazon Lockers are increasingly a solution. These originally started in 7-Elevens and Whole Foods and can now been found in Chase branches as well. Amazon has also opened up many pop-ups in Kohl’s stores to showcase their devices calling the pop-ups a “smart home experience.” Lastly, the company is reportedly looking to increase the number of Amazon Go stores by 3,000 in the next three years, with 50 in major markets this year.
The internet giant has showed no signs of slowing down or falling off. With the successes of Amazon Web Services and Amazon Prime Video, and the controversy surrounding its new HQ2 locations, Amazon will continue to stay at the center of attention.
Note: Downtown practitioners can conduct an assessment of supply chain issues in their community to determine the need for Amazon lockers. Do residential buildings have door men? Or sufficient storage for deliveries? Are there enough loading/unloading zones for delivery trucks? The answers to these questions will help determine the need for off-site lockers such as these.
4. More Online Retailers Opening Physical Stores
This is good news for downtown practitioners. With Amazon and a handful of other online retailers, the “click-to-brick” wave is already in full swing, and we think more stores will follow suit and expand their physical retail presence, particularly in already strong “Class A” downtown markets. Whether it be pop-ups or full-fledged retail locations, online retailers are realizing the advantages of having customers interact with their products and brands in real life. Click-to-brick retailers have used their storefronts for a variety of purposes that often depart from a traditional sales floor. These locations can host custom fittings for a shirt or dress, or displays detailing the materials used in their shoes that shoppers are encouraged to touch and feel, or Instagram-able events that bring people in the door.
Successful online-only retailers have the potential to flourish in the physical retail space when they get the funding. Warby Parker has raised $290 million from private investors over eight years, and Bonobos was purchased by Walmart for $310 million in 2017. These are significant investments, and if investors continue to see the advantage of the click-to-brick storefront, the industry will continue to see national expansion, frequently in mixed-use urban settings.
Dockless bicycles were a good start, but the mobility trend moving forward belongs to e-scooters. A number of cities have been breeding grounds for e-scooter startups. Scooter companies Bird, Lime, Scoot, and Spin, and rideshare companies Uber and Lyft (we can’t help but wonder if a monosyllabic name is a requirement!) have all entered the dockless electric scooter industry in cities across the country. These companies have received millions in dollars in funding and are pushing large cities for favorable regulation. In some places they are working closely with municipal agencies to implement lessons learned from early roll-out cities.
While not directly retail related, micromobility has the potential for significant impact on shopping habits in cities. Shoppers normally get around by walking, especially in downtown commercial districts. With the expansion of dockless transportation around the city, especially electric scooters, which are less physically demanding than bicycles, shoppers have a reason to expand their travel distance. A more mobile shopper means a larger trade area, and the potential for more commercial growth. Let us also not forget that this mode of transportation adds an element of fun to a downtown visit – which is critical to enlivening downtown retail environments. The possibilities are endless. For example, cities can begin building and marketing itineraries for visits, including safe routes between destination drivers that help lengthen time of stay in downtown and encourage cross-shopping and cross-visitation.