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Clicks vs. Bricks? Retail Trends in 2019 and Beyond

by Chris Harden

Park Lane 8020, Dallas, TX, photographed for Beck Group

If you take a moment to consider today’s retail environment, it’s clear that times are changing. It seems every week a new national retailer announces store closures or declares some form of bankruptcy. Having been in the retail real estate industry for more than 17 years, I have to say this is one of the most disruptive eras I’ve ever seen. But not without good reason.

Retail is about evolution, and there is significant change happening now. The industry has always adapted to constantly-changing consumer behaviors and preferences, and the best retailers are those that change with the consumer. After all, last year’s fashion is no longer in style, and electronics companies are constantly improving technology with the once high-tech gadgets of today becoming obsolete and irrelevant tomorrow.

Physical shopping environments and virtual stores of retailers are really no different. Yes, online retail is a huge disrupter in the way consumers shop and buy goods and services; however, consumers are still driven by the same four fundamentals:

  • Value
  • Convenience
  • Experience
  • Ethos

As retail goes through yet another huge evolution, I see several key trends emerging:

Equilibrium of the symbiotic relationship

Clearly, there is proof that online retail is competitive with bricks and mortar, but I believe that the retail real estate industry is adapting to this competitive pressure. After all, it’s much faster to create a website than it is to open a store or build a new shopping center.

Instead of viewing online retail as purely competitive, and an “either-or” situation, I would suggest there is a symbiotic relationship between physical stores and an online presence. Many online retailers are adapting to this reality. Consider Amazon, which has a nearly 50% market share of all online sales in the U.S. Amazon made a momentous shift with their purchase of Whole Foods in 2017. The company now has 527 physical stores but wants to add another 3,500! If 50% of the e-commerce has that outlook, one might assume other online retailers will follow suit with their overall business strategies.

Retailers are only beginning to optimize this symbiotic relationship. In many cases, due to online sales, they just don’t need the same number of stores, so they are closing them. In other cases, the retailer’s product or business model is defunct and doesn’t have the financial capability to modernize, so they go bankrupt. Some retailers are better positioned to evolve their business model through this symbiotic relationship than others, but all will have to do it.

Eventually, all retail will adapt to this symbiotic relationship, and the industry will find an equilibrium. We’re already seeing this with Amazon’s online market share capture, which has slowed significantly.

Clicks to bricks

We’ve all seen online-only retailers like Warby Parker, Bonobos and Untuckit begin to open physical locations in the Dallas area. These stores are attractive to consumers because they give them a chance to experience the brand and the products in person. To attract shoppers, these stores focus on the customer experience, both by establishing a presence in lively entertaining districts such as Legacy West, and by creating Instagram-worthy interiors that are destinations in and of themselves.

As a bonus, opening a brick-and-mortar location also improves an online retailer’s brand visibility. In some cases, online sales have increased up to 30 percent in a given area after the opening of a physical location, simply due to more people seeing and hearing about the company.

The evolution of the department store experience

Startups like Neighborhood Goods, which recently opened in Plano, are challenging the traditional model of a department store, which features fixed displays and specific brands, by infusing the concept with new life in a way that’s particularly attractive to younger generations.

Described by “a department store with a story,” Neighborhood Goods sells a continually-changing selection of products and brands, in an always-evolving configuration—almost like a series of pop-up shops under one roof. With something new happening all the time, shoppers find themselves more immersed and more engaged in the experience, and much more likely to return again and again.

More shared retail space

Just as stores like Neighborhood Goods are finding success by displaying a variety of brands in a shared space, food halls are quickly becoming a prime example of how the “sharing” economy has infiltrated retail. As Cushman & Wakefield’s Retail team just explored in their recent report, “Food Halls: The Sharing Economy Meets Mealtime,” consumers love the broad selection and fun experience that food halls provide, while restaurateurs appreciate the lower operating and food costs and steady customer base. The wide selection of restaurants in one place harkens back to the focus on the consumer experience.

“Today’s fast-casual approach offers artisan restaurants and other food-related boutiques under one roof—this is more than just sustenance, it is an experience,” said Phil Colicchio, industry expert and co-lead of Cushman & Wakefield’s new F&B, Entertainment & Hospitality Consulting team.

As we start the new year, it will be interesting to see what other retail trends emerge and take hold. Beyond a craving for unique experiences, consumers are also driven by other motivations, such as environmental consciousness and authenticity. That’s why the Millennials and Generation Z are so focused on socially responsible brands that stand for something—because they crave authenticity. We will likely continue to see the proliferation of mixed-use environments that appeal to value, convenience, experience and ethos. Also expect to see a lot more retail on the ground level of office towers!

So many factors play into retail trends, but one thing remains true, year after year: Consumers will always want and need to shop (both online and in stores). Retailers and property owners should prepare to evolve accordingly.

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© 2017 Cushman & Wakefield, Inc.