How Will Retail Survive in Our Post-COVID World?
The holiday shopping season is here, and 2020 is bringing changes to the way we shop for our holiday gifts, as it has brought changes to so many of the ways we live, work, shop and play. Retail had already been undergoing a transformation before the COVID-19 crisis began, and the pandemic will have both short- and long-term implications for the way we shop. Successful businesses will be those that find a way to reimagine the retail experience, and property owners need to understand how these implications affect them.
For decades, shopping malls were the primary destination for holiday shoppers, thanks to big-box stores and appearances by Santa Claus. But as consumer preferences and habits have changed, the mall experience has begun to erode. COVID-19 will likely accelerate this attrition, as Americans continue to avoid crowds and indoor gatherings. Deloitte’s 2020 holiday retail survey found that more than 50% of holiday shoppers feel anxious about shopping in stores this year.
It would be a mistake, however, to consider brick-and-mortar retail a thing of the past. While the current situation will certainly reinforce the popularity of e-commerce, brick-and-mortar retail still has a path to success. For years, successful retailers have adapted to consumer preferences by providing customers with an experience rather than just a mundane shopping trip. From in-store play centers, to celebrity appearances, to hands-on and virtual reality demonstrations, brick-and-mortar retail is evolving into “retailtainment,” sometimes called experiential retail.
Personal shoppers, group cooking demonstrations, and custom fittings might seem tone-deaf in the midst of a pandemic, but savvy business owners are already looking ahead to our post-COVID future. Some experiences simply can’t be provided online, and retailers who are prepared to shift their business models to a more experiential paradigm are more likely to weather the storm.
After a record year for retail property sales in 2019, retail real estate sales volume has lagged since March. In fact, sales volume in Q2 and Q3 2020 has been lower than we’ve seen in three years. But retail property owners shouldn’t lose hope. While empty retail spaces may be more plentiful now, Cushman & Wakefield’s Chief Economist, Kevin Thorpe, expects retail, and especially experiential concepts, to storm back after COVID-19. “People are pining to go out and shop, eat and be entertained,” said Thorpe. “Pent-up demand will be unleashed.”
It’s not just existing retailers who are buying in to the “retailtainment” trend. New businesses are already poised to take advantage of this pent-up demand. Consider the early success of Popstroke in Fort Myers, Florida, the Tiger Woods-designed golf, entertainment and dining venue which opened recently to crowds and fanfare despite the pandemic. Popular pre-COVID concepts like painting studios, therapeutic glass-breaking rage rooms and ax-throwing bars will see a likely resurgence in our post-pandemic future.
Even the much-maligned shopping malls are getting in on the action. Forty years ago, malls promoted trendy features like skating rinks and water parks to draw consumers away from downtown shopping districts. Today, malls like the Edison Mall in Fort Myers, Florida, are turning to similar tactics, looking towards adaptive reuse to fill vacant space and provide entertainment. Edison Mall recently became the home of the Southwest Florida Military Museum, a departure from the mall’s traditional retail model. New malls are also providing “retailtainment” venues. American Dream Miami, projected to be the largest mall in the nation, is expected to host an indoor ski slope, a Ferris wheel, an amusement park, and more.
It’s understandable for retail property owners to be frustrated in the current market, but with the proper data and positioning of these properties, retail spaces still hold value.
There is no doubt that shoppers will eventually head back to stores for items other than essentials, although with COVID-19 cases spiking across the nation, that shift is likely going to occur during this year’s holiday shopping season. “The issue with this recession has not been one of demand, it’s been supply led,” said Cushman & Wakefield Global Futurist Andrew Phipps. Phipps added that for many people who have been fortunate enough to maintain employment during the pandemic, “We haven’t had the chance to spend the money we’d like to, as opposed to not having the money to spend.”
Even though the 2020 holiday shopping season will continue to see challenges for the brick and mortar retail industry, it’s not time to sound the death knell for retail. Instead, as we inch closer to our post-pandemic future, expect to see the retail market evolve in new and exciting ways. The retailers that will survive will be the ones who anticipate – and invest in — this evolution.
Gary Tasman is the Founder of Cushman & Wakefield Commercial Property Southwest Florida and serves as its CEO/Principal Broker. The firm provides commercial real estate solutions, locally and globally, in every stage of the real estate process, representing clients in buying, selling, leasing, financing and valuing assets.
