The COVID-19 pandemic accelerated rather than caused many of the retail trends currently prevalent in the United States and worldwide economy. But what constitutes “the new normal” when it comes to shopping online, visiting restaurants and developing the next phase of retail centers? The coming surge of new drive-thru retail concepts, declining apparel sales, the importance of omnichannel practices and changing tenant mixes were among the topics addressed during a recent webinar sponsored by Placer.ai. Local retail real estate experts also weighed in on the subject.
A fundamental shift has occurred in consumer behavior and the threshold for excellent customer service, according to Tom Fidler, Executive Vice President and Principal of MacKenzie Retail.
“Delivery time and time to order completion is now more critical than basic pricing,” he explained. “Consumers have shifted slightly away from the importance of price and value on some items, yet the ‘experience’ of how an order is filled at a restaurant or at the counter of a soft good apparel company has become a more significant process to the customer. They know they have choices, either through online retailing, or more restaurants, and that is creating more challenges for the operator given constraints on staffing and physical challenges on site. Landlords are now starting to see the key to stabilized tenancy is not just about rental payments, but working with their tenants to adjust frequently and quickly to customer demand and habits. When the formula works for the customer, that creates loyalty and that, in turn, results in stabilized sales.”
“Due to constant and many times inaccurate media coverage, the average consumer believes the percentage of all e-commerce shopping constitutes 60-80% of the worldwide, $5.4 trillion in retail sales, when in reality it is closer to 20%,” stated Beth Azor, Founder and Owners of Azor Advisory Services. “The point is that, despite how the pandemic altered shopping patterns, traditional stores are still vastly important to the retail sector and people generally underestimate their role. Many people also forget that catalogue shopping used to account for 10% of all shopping, which is a fairly large number.”
“Despite all the retail changes over the past 18 months, a regression to the mean is coming because not everything we have seen is sustainable,” said Steve Dennis, President of SageBerry Consulting. “For instance, restaurants pulling tables and chairs into their parking lots was a response to customer preferences and a compromise that won’t last forever. The same goes for consumers purchasing goods online and then picking the order up at a store. We are seeing consumers slowly reverting back to their pre-pandemic habits.
“In some ways, the entire definition of e-commerce needs rethinking as retail shopping is now blended,” he continued. “Is that scenario just described a standard retail or an e-commerce transaction because I think it is both. Without traditional stores, retailers could not fulfill orders at an acceptable pace and, despite that fact, many are closing stores in the name of achieving profitability. This seems like a losing proposition as bricks-and-mortar stores encourage shopping and further the brand. It’s all about delivering an omnichannel experience to consumers by offering every shopping option including online, pick-up and in-store shopping.”
“Consumers have become extremely comfortable with using a drive-thru to complete a retail transaction and there just aren’t enough drive-thru locations nationally to support the demand,” Azor said. “When the pandemic first started, I implored a local bakery shop to dedicate one parking space for pick-up orders and this resulted in a 30% increase in sales. There is no question that pick-up for restaurants is a concept that is here to stay. When Starbucks Coffee closed its dining rooms, sales for the Panera Bread locations in our portfolio increased by 30%. This reinforced the importance of striving to elongate consumers’ stay in the store or restaurant.”
“The entire apparel category is in trouble and consumers have diminishing reasons to visit stores, with the exception of athleisure,” stated Dennis. “Even if the work-from-home model subsides, and it assuredly will, consumers have now gravitated to this lifestyle in large numbers and will be a significant part of the new normal. This is especially bad news for stores stuck in what I call the ‘boring middle’ as the value-oriented brands such as Marshall’s and T.J. Maxx grab more market share. Expect to see more mom-and-pop retailers getting into the sale of hoodies, sneakers and street-wear clothing.”
“Ten years ago, the average neighborhood shopping center might have a restaurant tenancy of 25%, but now I see that shifting to the 50% range, in response to consumer demand,” Azor said.
“One massive takeaway about the pandemic is that shopping center owners need to become involved with their tenants, understand where traffic is coming from and when, and analyze any shift. Then they need to stop and think about what they should do about it. Shopping experiences continue to evolve and owners need to become active participants to determine best course of action.”
“The grocery store category continues to be fluid in the Baltimore-Washington, D.C. region with existing players flexing their muscles, reconfiguring formats and shifting product lines to reflect changing consumer attitudes and shopping habits,” stated Tom Maddux, Principal at KLNB Retail. “From top to bottom, the sector remains among the strongest with large segments of the population at every demographic cooking at home during the pandemic. This has continued, as reflected by spiking spice sales.”
Consumers, he added, “were driven by safety when making grocery store choices during the early stages of the pandemic, but are increasingly cost-conscious now, which is good news for Aldi and Lidl. Shopper Food Warehouse, which was shedding real estate sites to the benefit of stronger players such as Giant Food, has experienced a mini-comeback. Wegmans Food Markets is working to complete its buildout of the market with smaller, 80,000-square-foot formats that fit neatly in urban mixed-use projects, particularly in the D.C. suburbs. The biggest wildcard is the impact of Amazon Fresh and its reception by local consumers to its two-hour delivery thesis.”