Retailers are rethinking the bricks.
Pressured in the current climate to make more of their stores, retail executives are deploying fresh tactics in their approach to real estate portfolios as well as the role of physical stores. These include closing stores and breaking leases to save money, as traffic slows and shoppers gravitate to online venues. Simultaneously, retailers are reimagining their stores as destinations. They are carving out space for pop-ups and in-store shops. They’re also stepping outside of their core offerings by experimenting with new categories.
Jerry Birnbach, a retail real estate expert at RDD Associates, believes there are some aspects of brick-and-mortar that consumers still want — and need. But traditional stores require change, and Birnbach said many retailers are, unfortunately, too set in their ways.
“The retailer is behind in capturing the customer,” Birnbach explained. “A pretty store won’t work.”
He says retailers must figure out “their point of difference, and create the reason the shopper wants to come to you and not someone else.” But just having a differentiator isn’t always enough to drive traffic. With the ease of e-tailing, companies have to create compelling reasons for people to make the journey to a physical store.
Birnbach thinks retailers need to use the online world to drive customers into the physical world.
“Use social media and that type of fanfare to drive customers from the clicks to the bricks,” he said. Creating a strong online persona and brand will motivate shoppers to want to experience the physical product.
Some retailers are finding success by reinventing the in-store experience via in-store shops. These brands usually have their own following on social media, which can drive traffic to the host store.
One example is Sephora, which has built cosmetics stores inside J.C. Penney Co. Inc. The marriage has worked so far, and the retailer said two weeks ago that it would roll out more units as a result.
For its part, Macy’s is adding Blue Mercury cosmetics stores and Finish Line sneaker stores as well.
Naveen Jaggi, president of retail brokerage and capital markets at Jones Lang LaSalle Inc., said retailers also need to try new categories outside of apparel and other core offerings — as long as it speaks to their customers’ lifestyle.
“Look at Urban Outfitters. It’s the number-one seller of vinyl records now,” Jaggi said. “They even curate the selection to appeal to the local environment.”
Other experiential retail strategies include free yoga classes at Lululemon — a natural for the seller of yoga apparel. Lululemon also opened a community space for classes in its Japanese showroom and it is now one of its strongest performing showrooms.
Shopping centers are adding more consumer services, upscale food and entertainment, according to the International Council of Shopping Centers. White Hutchinson, a design and consulting firm with a focus on malls, said shopping centers are now devoting up to 35 percent of their space to entertainment. It seems to be paying off, as big mall operators like Simon Property Group and General Growth properties have said that mall traffic is steady, and developers are continuing to invest in projects like the newly opened Westfield World Trade Center and Brookfield Place in lower Manhattan, and King of Prussia mall in Pennsylvania, which just underwent a two-level expansion that added 155,000 square feet and 50 retailers and restaurants.