By Tony Cho
Founder & CEO, Metro 1
The slow painful death rattle of retail was sounding well before COVID-19, although indubitably the pandemic accelerated the demise of big-box stores. Most recent victims include Hertz, Office Depot, and Pier 1 who join the likes of K-Mart, Circuit City, and Borders — once prominent and well-beloved chains. The disruption of retail is a process that began more than a decade ago, generated by the upsurge of the internet and the subsequent growth of Amazon and e-commerce. As even before COVID, e-commerce represented approximately 15–20% of all purchases, data corresponding to the current situation — where entire communities have been asked to shelter-in-place — should show a significant increase.
Unfortunately, the entertainment and hospitality industries, as well as smaller retailers have also suffered greatly in recent times. Cruises, airlines, hotels, and restaurants are hemorrhaging; Mom and Pop stores are hanging by a thread. The situation is dire, but not equally so for everybody.
Stores that sell essentials such as Publix, Walmart, and CVS, as well as those that entice with the promise of a “treasure hunt”, including T.J. Maxx and Ross, are very much alive and kicking. Shoppers will go to stores when they must fulfill basic needs and when they believe they can find better prices or more unique, one-of-a-kind items than they would online. Consumers are also hungry for “experiences”, which is a key reason Apple’s brick and mortar stores have generally thrived. In its retailing model, Apple has transformed a space where you go to buy product into a destination where you can share experiences with like-minded people.
Looking forward, what are the effects and implications of COVID? In a very general sense, the virus has caused us as a great human family to pause, evaluate our lives and reconsider our priorities; while we also take a long hard look at our governments, laws, and institutions in an effort to identify and ferret out systemic injustice and inequality. In relation to commercial real estate, COVID has also been a catalyst for substantial change.
Retail is not hopelessly doomed, but creativity, an understanding of today’s consumer, and long-term strategic planning are essential to survival. Stores that do not rapidly pivot and adapt to the times are headed for the retail graveyard. In considering how to use the vacant big-box space, we must look ahead approximately 10 years and evaluate what will be meaningful then, not just one year from now. The long view affords the development of viable plans with legs to take us into the future.
Developers and investors that are poised to succeed have their sights set on mixed-use spaces. People are drawn to the convenience of walkability and easy access to what they want and need; there is also an ever-growing commitment to reducing our carbon footprint. Mindful spaces that combine affordable housing with offices and retail are thriving ecosystems that will stand the test of time.
Vacant big-box space must be creatively repurposed and filled with new concepts, such as outdoor food courts. Even after COVID is no longer a major issue, we will have been primed to know that it is safer to be outdoors — a belief we are sure to carry with us going forward. Let’s imagine novel ways of providing experiences and destinations within frameworks that make today’s consumer feel comfortable. Again, creativity and understanding our targets are key.
Doubtlessly, independent businesses will struggle the most, post COVID. But they too must seek to differentiate themselves by developing an offering that is exciting and relevant. Having an online presence, something that smaller retailers have long resisted, is essential. Due to the pandemic, many shoppers who may have previously preferred going to brick and mortar stores, have now, out of necessity, become used to online shopping. They may now appreciate the ease of shopping from the convenience of their couch, without having to fight traffic, look for parking, or stand in line. Some of these new converts may never fully resume their old shopping habits, and independent retailers must be prepared to serve them on their terms.
Innovation and literally thinking out of the (big) box, has never been more important than it is now for the future of retail. There will be a tomorrow, but that tomorrow will be won through ingenuity, a thorough understanding of shifting consumer preferences and priorities, and being open to change. We may have to embrace new bedmates — including more partnerships between private and public sectors — and push ourselves outside of our comfort zones, in part by supporting local businesses like never before. But tomorrow will come, and if we are prepared and receptive to a new reality, it may be the best tomorrow for our children and our planet.
