What’s the future of retail? Everyone wants to know. The sector plays a fundamental role in our lives in the way we distribute goods, enjoy leisure time, and connect with the people around us. Despite its importance, retail is becoming increasingly replaceable by the digital economy. The preferences of younger generations and efficiencies of online business support this shift. But physical stores provide a service to society that even Amazon’s best machine learning cannot replace, right?
With many people working from home, eating at home, and relaxing at home, there’s something strangely comforting about the experiences retail provides. A friendly smile from the local barista, a happy dog licking vanilla soft serve off the ground outside the ice cream shop, a good book recommendation from a stranger in the checkout line – often it’s the little interactions that add some joy to our days. There’s no lack of uncertainty around which impacts from the pandemic will have lingering or lasting effects. Retailers can’t help but wonder what the future holds for their businesses and what they can do to evolve while staying true to their roots.
There are a variety of ways retailers can morph with modern times. Some think keeping pace with new tech is the key: “magic mirrors” that use augmented reality, smart digital displays, QR codes, mobile app integrations, and cashier-less checkouts. The lines between digital and physical commerce are starting to blur, bringing efficiency and plenty of buzz to the sector. Another school of thought is that a price adjustment for leasing retail space will have to take place, especially in certain urban markets, as lower foot traffic will directly impact retailers’ profitability. Not to mention the current supply glut in the market, weakening landlords’ negotiation power.
Maybe mixed-use properties and hybrid models will be retail’s saving grace – blends of complementary businesses bringing together commerce, culture, and leisure to create a vibrant atmosphere for people to gather. Or perhaps retail will essentially become a micro-distribution network, using the existing physical footprints and methods like curbside pick-up to serve the growing e-commerce economy.
Innovative Business Models
Some innovative models have been emerging in response to the challenge of how to maximize the value generated by retail assets while still providing quality customer experiences. In 2016, the startup Spacious began renting out spots in high-end restaurants during their off-hours as a flexible alternative to traditional co-working. It was a clever idea, providing another source of income for the restaurant owners and creating new utility from the existing infrastructure. WeWork heedlessly bought the company for $42.5 million and then promptly shut down the operation during consolidation, just four months after the purchase. But that’s beside the point. New tech-enabled, hybrid retail models are emerging quickly.
Another company innovating within the industry is Guesst, a provider of creative sales software for retailers. Their product, “Pop-share” allows digitally-native brands to access shelf space in like-minded “host” stores. It serves as an alternative to pop-up stores for brands wanting to experiment with a physical presence and engage with customers in a new way. The “host” retailers earn a second stream of income as the “guest” brands pay a fee for shelf space and products are sold through a consignment system. Trends like this may usher in a new era of co-retailing where companies can easily collaborate and spread the weight of the monthly rent payment. Innovative software will be key in enabling transparency between all the stakeholders.
Partnerships between physical and digital companies are taking new forms and may prove to hold strong synergies if executed properly. E-commerce fashion rental service Rent the Runway and retail giant Nordstrom are teaming up in the LA region by placing drop-off boxes for RTR subscribers in four of Norstrom’s stores. The physical drop-off and pick-up locations help with convenience and last-mile logistics while also promoting RTR’s service to Nordstrom shoppers. Nordstrom hopes to benefit from the additional foot traffic brought in by the drop-offs and may use this as a launching point to form deeper ties with the digital brand.
Best Buy and Apple have also joined forces as Best Buy has become an authorized repair partner of the tech giant. Best Buy will leverage its 1,000 store locations and its Geek Squad base to help Apple expand its network of trained technicians. This partnership should be a win-win as it will provide greater access to repair services to Apple customers and will reduce wait times while bringing in additional foot traffic to Best Buy’s brick and mortar stores.
New partnerships, technologies, and business models can certainly be powerful methods for adapting to the current environment and meeting customer needs. Tactful decisions that create effective omni channel touch points will be crucial for brands as brick and mortar retail experiences consolidation. But beyond pivoting and modernizing, deeper conversations about retail are occurring as it relates to the issue of holistically modernizing our cities.
The Built Environment
Both policymakers and industrialists are coming to terms with the impacts the built environment has on our global ecosystem. Urban planners are envisioning more sustainable cities designed to serve the citizens, as the role of “main street,” big box stores, malls, and e-commerce are designed to function as a more unified system. Infrastructure constraints around increased deliveries will be approached, and eco-friendly mixed-use buildings will be designed to revitalize neighborhoods while maximizing the utility and sustainability of urban space.
Retail is an ancient concept, dating back to the open-air markets filled with craftsmen thousands of years ago. Today’s market participants are finding ways to keep pace with innovation, but the future of retail will likely be tied in with the broader picture of reimagining our built environment. Creating better urban spaces that serve the citizens and their evolving lifestyles will be essential. As we aim to build a better future, retail hybrids, partnerships, and technology that leverage existing infrastructure and improve the efficiency of commerce are good steps forward. Incorporating this new era of retail into the municipal plans of the sustainable, smart cities of the future is the next destination.