Why retailers shouldn’t fear the words ‘bricks and mortar’

Richard Crenian is the founder and president of ReDev Properties.

In recent years, few words have brought out the doom merchants with such enthusiasm as “bricks and mortar.” They’ve been shorthand for the commercial real estate sector and how it is sliding into the abyss to oblivion.

And when you look at the headlines, it is difficult not to be swept up in the growing sense of pessimism. Today, it is e-commerce that has become the largest threat to traditional shopping, most notably the dramatic growth of Amazon.

But while it is true the industry is facing major challenges – in part because of new technologies – none are insurmountable. What is beginning to emerge is a realization that future success for the retail industry is possible with an understanding of history.

The world’s first covered mall opened in the United States just over 60 years ago as a response to the growing availability of cars. But private transport was not just changing shopping patterns, it was allowing urban expansion. Cars offered convenience, even if they remain parked 97 per cent of the time.

There’s now a concern that many malls will soon become deserted caverns and a beacon for urban blight. But fear is starting to give way to focus, and the realization that a more measured understanding is required that takes into consideration socioeconomic developments along with demographics.

That means the future of large malls or neighbourhood plazas will lie in consumer engagement spaces that are more in line with people’s lifestyles.

Here’s how that will unfold:

  • Convenience: we are likely to see more vertical housing that is built closer to malls and plazas that are also served by reliable public transit. Millennials, and younger generations, are driven by experiences, expressing a preference for “doing” over “owning.” That will mean less car ownership and a desire to live nearer to services (family doctor, etc.) and retail. Those outlets are likely to reflect a unique quality – the food store will stock locally grown organic vegetables, for example.
  • Loyalty: As in Cheers, where “everyone knows your name,” shoppers want to feel part of a community and, if they find a product or retailer they like, they are likely to remain loyal. Just because you have an unlimited choice, it does not follow that you keep changing. Millennials, in particular, use social media to spread the word about services and products in a phenomenon known as social proof. Retailers, be it a chain or a mom-and-pop operation, have to build loyalty by making the experience of shopping at their store significant. Authentic interaction is a stronger selling point than advertising.
  • Engagement: While price will always be a factor for many people, do not ignore the importance of personalization. Even if shoppers do their research online, retailers benefit when they can offer customers personal service and beneficial interaction (shared values and emotional connections).

As we see greater density in urban and suburban areas, retailers need to reflect the needs and wants of each community. A single store, or a conglomerate, will need to find ways to attract customers who share the same values. This will be the basis for establishing loyalty. And this interaction will also allow retailers to sense emerging trends in customers’ purchasing habits.

In the coming years, we will see more areas around neighbourhood plazas seeking to be rezoned to allow a greater mix of retail/service/residential. These have been dubbed “retaildential” spaces. They could be geared toward many groups, from young singles to the elderly. In Japan, some malls are being repurposed in response to an aging population.

The challenge for landlords and tenants is to look toward a future that demands more sensitivity to consumers and local demographic trends – something that existed before malls. For retailers to provide convenience, they must locate in an area that works for what they are offering. We can no longer assume anyone will drive across town to buy their favourite type of bread, for example. The clustering of people with like-minded lifestyles will become the target area for particular retailers.

In relative terms, e-commerce is still a small player but it is making significant inroads and disrupting the industry. Digital shopping is having a huge impact and earned the term “omnichannel retailing”. In the coming years, we can expect more buzzwords to emerge to explain our shopping habits; for retailers remaining focused on convenience, loyalty and engagement will adapt to this latest period of change.