President’s Message: The Collision of Physical and Digital Retail

For quite some time now, you have undoubtedly seen the exaggerated headlines about the death of brick-and-mortar retail. How ecommerce—led by Amazon—would put physical stores out of business. How ironic is it now that these digitally native retailers are aggressively moving into the brick-and-mortar world?

In fact, Amazon is very bullish on opening new physical stores in all its various formats (Amazon Grocery, Whole Foods, Amazon Four Star, Amazon Books, etc.). And conversely, while Amazon is adding new stores, traditional brick-and-mortar retailers are determinedly expanding and beefing up their ecommerce platforms as well. Why? Because it provides multiple avenues and touchpoints to engage with and satisfy the demands of the consumer. It’s like two trains coming from different directions colliding in the same retail space.

We’ve already seen many physical changes occurring in brick-and-mortar retail stores as a result. Retailers and retail property owners are shifting away from the one-size-fits-all model and curating more personalized and experiential environments, a change that has been occurring for quite some time. Consumer safety features, BOPIS (buy online, pickup in-store), curbside pickup and expedited pickup zones for fast-casual restaurant establishments have all become the norm, even consumers’ expectations.

Retail real estate has certainly evolved over the years, but those who believed that brick-and-mortar stores were dying failed to understand consumers’ behaviors and preferences. Sure, specific retail formats and retailer stores have or will die, but overall, brick-and-mortar retail is healthy and here to stay. The onslaught of the COVID-19 pandemic further accelerated trends that were already beginning to occur and even proved that some types of retail are actually essential to consumers. The COVID crises also confirmed that retail centers are more than just for shopping. They offer healthcare services, wellness clinics, fitness, entertainment, community gathering places and social connectivity—all things digitally-native brands are now trying to capitalize on.

Moving forward, retail centers will only play a more critical role in everyday living and bringing communities together, and retailers must recognize and adapt to their role in this transformation. So, what can we expect to see for the future of retail?

• Rapid expansion of those retailers that have emerged as the winners. Grocery stores (value, ethnic and specialty) are performing exceptionally well and remain attractive tenants in retail centers. Off-price players, fitness, healthcare and digitally native brands will grow substantially.
• Constant and substantial physical changes to retail centers. Retailers will continue to alter store sizes and formats to adapt to consumer demands, such as convenience and safety (some may be larger, some smaller), more convenient front-of-store operations for customer pickup and quick product collection.
• Enhanced online ordering systems, technology integration and expedited pickup zones for fast-casual restaurants.
• Activation of common areas and outdoor spaces for restaurant and dining uses, entertainment, community events, and social gathering places.
• Emerging new retail and food concepts (e.g., food kitchens).
• Creative ways for retailers to use data mining and tech advancements to better engage with and attract customers into the physical store.
• Continual incorporation of brick-and-mortar in the supply chain as more stores are utilized as distribution and fulfillment spaces.

Brick-and-mortar retail is definitely not dead, but it will continue to evolve and transform at a rapid pace—and the collision of physical and digital uses of retail space will drive most of this transformation.

Understanding the implications of these changes and being ready and able to adapt will be critical for retail owners and operators. And, for those able to do so, there will be many opportunities in the future.

As the physical and digital retail worlds continue to collide, retailers and property owners will be forced to get on board or get crushed!