Retail Real Estate: Consumer Needs Are Critical to Success
Last Updated on May 17, 2023 by Morgan Beard
Retail real estate has thrived recently. The core of that success is that consumers are eager to be in physical stores. Although e-commerce is here to stay, there has been a resurgence in retail real estate. Why? Because consumers are craving something only brick-and-mortar stores offer: connection and experience. Retailers and real estate professionals who understand those consumer needs, and cater to them, are poised to capitalize on the thriving market.
Retail Real Estate Is Booming
The retail real estate boom directly traces back to consumers’ needs for in-store shopping experiences. Retail locations that ignore this consumer need will struggle to compete — the old ways of fluorescent lights and clothing racks stuffed to the brim are fading. Instead, retailers are employing high-touch hospitality strategies to invite customers into their stores and provide commercial experiences that cannot be replicated online. This renewed focus on customer experiences is the foundation of success.
Retailers are employing hospitality tactics to offer personalized shopping experiences. There is a clear need for it: In 2021, 64% of United Kingdom citizens surveyed by Barclaycard had chosen to shop closer to home. This meant customers were visiting stores, interacting with workers, and buying their products in person — not through e-commerce channels. Customers continue to want in-person, face-to-face shopping experiences and want stores to be places where they can connect with retail brands. The demand for brand connection and experiential shopping has affected how retailers approach their physical spaces and all aspects of their real estate buyer journey.
Online to In-Store Customer Journey
E-commerce created a convenience economy where nearly everything can be delivered in just hours. Instant gratification lives in consumers’ pockets with a few clicks or swipes. The intense competition brick-and-mortar stores face against online shopping delivery solutions means that storefronts must offer different value propositions. They won’t win on the “quick and easy” battlefield.
Retailers have focused on providing unique, high-value customer experiences — knowing they need unique offerings that focus on what only physical stores offer. The strategies go deeper than the buy online pick up in-store trend, and real estate professionals should note the evolving in-store strategies.
Retailers are using varied strategies for meeting clients where they are on their buying journey.When consulting retail clients about their store site needs, it’s important to keep a few things in mind about retail location priorities:
Online to In-Store Expansion:
Numerous direct-to-consumer brands have expanded their presence from solely digital to including in-person offerings. Warby Parker, for example, launched in 2010 as strictly e-commerce. Fast forward a decade, and Warby Parker has more almost 200 locations. The brand’s stores have expanded to complement and amplify its original online presence directly. Customers still try on glasses at home, but they can also get an eye exam at a physical location. The store’s functional space promotes a seamless experience and creates a single chain for customers to order and purchase.
Zero-Inventory Stores:
Many stores are adopting a zero-inventory approach. This model, which Bonobos was an early pioneer in, calls for sparse inventory. In many cases, stores that follow this approach carry only one size and color for each style they sell. The decreased inventory means less overhead and payroll spent on restocking and organizing, which promotes increased customer interaction time. The customer has a space where they can see colors and feel textures in a way they cannot online and ask specific questions from staff. Once they make a selection, the consumer can order from off-site inventory and still enjoy the convenience of e-commerce.
Retailtainment:
This strategy is a blend of retail, entertainment, and experiential marketing. The jeweler Tiffany & Co. brought this concept to life in New York City by pulling inspiration from the cult-classic film, “Breakfast at Tiffany’s.” The store decided to pay homage to the 1960s fan-favorite movie that catapulted the flagship store into popularity. Now, the store serves breakfast at its 5th Avenue location and maintains a long waiting list of people eager to dine in. By tapping into the entertainment potential of their brands, retailers can not only create traffic for their core businesses, but also create other revenue streams.
Real Estate Strategies to Support Retail Evolution
Understanding what’s powering the resurgence and future of retail allows real estate professionals to begin applying real estate experience to customer service strategies. Real estate professionals can help retail clients by understanding their location needs and recommending the right technology for retailers to manage this dynamic environment.
Retailers need guidance acquiring tech stacks that support collaboration, automation, and data insights in their lease portfolios — and then guidance on optimization. By guiding retailers to lease management software that tracks information, such as critical dates, expansion clauses, rent escalation, expansion rights, lease accounting, and sophisticated site selection data, retailers and brokers can collaborate on the entire lease cycle.
Retail has shifted in a way that creates room for both e-commerce and brick-and-mortar stores to be on the same playing field. Retailers and brokers who understand how each other’s skill sets and insights can build a store that brings customers in continually will share in a mutually beneficial relationship. The shoppers have spoken — they want in-person store shopping experiences. The most successful businesses will be ones that can keep customers coming back. Below are three themes that tie together what consumers are looking for in their shopping experience:
Personalization
One of the key drivers of retail success is personalization. Consumers are seeking tailored experiences that resonate with their individual preferences and tastes. Retailers can leverage personalization strategies in-store to enhance the customer journey and create a unique shopping experience.
One approach is to incorporate technology-driven solutions, such as retail data analytics and artificial intelligence, to gather insights on consumer behavior and preferences. By understanding their target audience, retailers can curate offerings that align with customers’ interests. Furthermore, personalized marketing initiatives, such as targeted promotions and customized recommendations, can help retailers connect with their customers on a more personal level, fostering loyalty and repeat visits.
Community
Building a sense of community within retail spaces is another crucial strategy to support the evolution of retail. Today’s consumers are not merely seeking transactions; they desire a social and engaging experience that extends beyond the purchase itself. Creating a vibrant community atmosphere can encourage customers to spend more time in retail spaces, leading to increased footfall and sales.
Retailers can foster community engagement by organizing events, workshops, and social gatherings that cater to the interests of their target demographic. For instance, hosting pop-up markets, live performances, or educational sessions can create a sense of excitement and draw in diverse groups of people. Additionally, incorporating communal areas such as seating zones, interactive installations, and gathering spaces can facilitate social interactions and provide opportunities for customers to connect with each other.
Hospitality
The integration of hospitality elements into retail spaces is a strategy that has gained significant traction in recent years. Consumers now expect a seamless and enjoyable experience when visiting retail destinations. By incorporating hospitality-inspired features and services, real estate teams can elevate the overall shopping experience and differentiate their properties.
Including amenities such as comfortable lounges, upscale food and beverage options, and convenient concierge services can transform retail spaces into inviting and experiential environments. Creating spaces that prioritize customer comfort and convenience can encourage visitors to spend more time in the area, increasing the likelihood of making purchases and developing positive associations with the property. Additionally, providing exceptional customer service and personalized assistance can further enhance the hospitality experience, fostering customer loyalty and positive word-of-mouth.
Here at Occupier, we are proponents of commercial real estate as a space that facilitates human-centric experiences. So our lease management software is built to empower retailers, restauranteurs, and office occupiers to take control of their lease portfolio and save time on administrative tasks so you can focus on creative strategies to meet your target consumers. If you’re interested in working with real estate experts to help you manage the dynamic retail market, reach out to us here!
