The model for modern retail is changing quickly. E-commerce has completely altered the way people shop and the transition between generations of shoppers is forcing retailers to reevaluate the way they do business. Many have despaired of traditional physical retail and announced the imminence of a “retail armageddon." However, 2017 research is telling a bit of a different story.
A 2017 survey by BigCommerce found that though Americans are split nearly 50-50 on whether they prefer online to in-store shopping, 64% of people surveyed spent their budget in-store and 36% spent it online. This means brick-and-mortar is far from obsolete. Rather, its role is changing, like everything else in retail.
“Physical stores are more than a place to sell goods,” Weitzman Executive Chairman Herb Weitzman said. “Brick-and-mortar can make potential customers comfortable with a business in a way that an online-only presence cannot.”
Amazon’s titanic move into brick-and-mortar grocery with its purchase of Whole Foods is evidence of Weitzman’s claim. Jeff Bezos did not just buy grocery stores. He bought 431 well-placed physical footholds in major, wealthy markets where his online brand can be seen and felt in the real world.
Retailers are also moving to a showroom model. Instead of creating full-fledged, costly storefronts, businesses are distilling their products and services into a curated customer experience. Perhaps the most recent and buzzy example of this is Nordstrom’s new store concept launching next month in LA. The store will have no merchandise, functioning instead as a hub for customers looking for style advice and a bridge between the online and physical shopping experiences.
The shifts in the retail market are also reflected in the changing identities of retail anchors. Traditionally, the anchor was a large discount or department store, but now the focus is on customer experience and the type of store that can anchor is much more flexible. Today’s ideal anchor provides the kind of experience online shopping cannot. In other words, it is a popular, destination business that drives a lot of traffic.
So where does Texas stand in the shifting sands of modern retail?
According to Weitzman, retail is healthy in the major Texas markets, with occupancy at a near record high of 93% in DFW, Austin, Houston and San Antonio.
This high level of occupancy is mainly the result of an increase in demand for retail space against the backdrop of a strained Texas construction industry. Instead of building costly new storefronts, retailers are moving into old power centers or other advantageously located existing spaces in their markets.
“Because new space is not keeping up with demand, we see expanding retailers leasing at existing centers, resulting in many well-placed older centers seeing their highest occupancy in years,” Weitzman said.
Want to know more about the retail market? Join us at Bisnow's Big Retail South Event, an all-day conference Sept. 19 in Dallas.
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