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How Next Generation Retail Can Compete With E-Commerce

Rendering of The Wharf's promenade in D.C.

The demise of shopping malls and the plight of big-box retailers have engendered a pessimism about the viability of brick-and-mortar establishments. Not all retail has been rendered obsolete by e-commerce, and opportunities for innovative smaller retailers abound. Even if not directly in competition, big-box stores' oversize real estate and market shares have for decades squeezed out smaller, specialty operations.

For many, e-commerce’s rapid growth in revenue and sophistication is an ominous indicator for physical storefronts, but online shopping still only represents around 10% of overall retail expenditures, and much less in some categories.

According to EBI Consulting account executive Stacy Peterson, things like restaurants, particularly fast-casual, experiential retail and convenience stores are thriving and relatively immune to e-commerce. Dining and entertainment venues are benefiting from Americans shoppers’ changing habits. In recent years, they have spent less on commodities and more on fun, investing in the promise of memories.

Paragon shopping center in Singapore

"Some forward-looking developers are incorporating bowling alleys and bocce ball courts along with culinary destinations into mixed-use areas," Peterson said.

By keeping parcel sizes small, they are excluding supercenters and traditional anchors while providing more room for small businesses.

Even stores more sensitive to e-commerce, like electronics and clothing outlets, are discovering innovative ways to get people in the door. They can entice with in-store exclusives and combat showrooming, where a shopper takes advantage of a store's expertise and inventory then leaves to find the best deal online. Employees are being better trained, equipped and incentivized to close a sale in-store.

President Barack Obama talks with an employee as he selects a bone for Bo.

Brick-and-mortar shops are leveraging technology for more efficient inventory management, some adopting a hybrid model where goods are shown and tested on the floor then shipped to customers later. They are also streamlining checkout, some by training employees to use tablets or phones to take payment, eliminating the need for the traditional counter.

Location has always been important for retailers, but now high foot traffic is critical to survival as millennials eschew cars for public transportation. Peterson said retailers can locate near transit hubs, especially metro and bus intersections, to capitalize on pedestrian volume. Retail integrated into mixed-use benefits from a built-in shopper base of the on-site multifamily residents and office workers seeking the instant gratification of walking out the door with their items.

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Related Topics: EBI Consulting