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Is Retail Theft Stealing the Shopping Experience?

Is Retail Theft Stealing the Shopping Experience? 1440 428 ASG

After allegedly stealing more than $75,000 in items from popular retailers like Target, Nike, Best Buy, REI and Dick’s Sporting Goods, two men are facing prison time for their roles in the thefts that stretched from June 2023 to January of this year. The San Jose, California, incidents are among those garnering national attention as retailers continue to look for solutions to combat a problem that has long been an issue for businesses worldwide.

From employing undercover surveillance teams to sticking items behind locked cases and removing self-checkout kiosks, many businesses have begun taking matters into their own hands to crack down on retail theft.

While there’s little doubt that retail theft is detrimental for businesses, some experts question whether retail theft is truly as formidable as media reports claim. Is it truly the cause of lack luster revenue performance for certain retailers and, true or not, has the perception impacted how customers shop?

Organized Meets More Violent Retail Crime

A National Retail Federation survey found that retailers reported a 26.5% increase in organized retail crime incidents in 2021. Organized retail crime (ORC) groups often operate with a high degree of sophistication, often out of the public view.

They may:

  • Use advanced techniques, tools, and strategies to carry out thefts, evade detection, and quickly move stolen merchandise.
  • Focus on high-value merchandise like electronics, designer clothing, and more that can be easily resold on the black market.
  • Leverage technology to aid in their criminal activities. This could involve the use of electronic counter-surveillance tools, communication devices, or techniques to disable security systems.

On the flip side, viral TikTok videos of smash and grabs are making consumers fearful, and retailers are being forced to take action – not just to protect their property and profits, but to ensure that their customers feel safe when coming into the stores.

Market researcher and journalist Pamela Danziger explained in an article in Forbes, “Retail crime is far from a victimless crime committed against a faceless corporation that can absorb the losses. Real people are the victims. And increasingly, retail criminals are using terrorist tactics of aggression, intimidation, even violence to put anyone off who might interfere with their crime.”

Target CEO Brian Cornell revealed to Investor’s Business Daily that the company saw a 120% increase in theft incidents involving violence or threats of violence during the first five months of 2023 and that inventory shrink would reduce profits by more than $500 million compared to 2022.

Is Retail Theft Really the Reason Stores Are Closing?

Recently, the National Retail Federation was forced to walk back serious claims about retail theft losses. Originally, the organization claimed that “half of the industry’s $94.5 billion in missing merchandise in 2021 was the result of organized theft.” However, retail experts estimate that number is closer to 5%—an extraordinary discrepancy.  Perhaps even more noticeable to consumers are the store closures of popular retail chains like Target after theft and organized retail crime in cities like Seattle, Portland, San Francisco and New York City.

Though employee and customer safety should not be overlooked, The Robin Report says blaming retail closures on organized retail crime may be exaggerated, and some of those closures may simply be attributed to mismanagement.

While shoplifting, employee theft, and organized retail crime may all play a role in undermining retail profitability, some of the culpability for retail closures may lie with inventory management issues and operational decisions as well.

In fact, retail analysts have pointed to inventory management as a significant challenge in the past few years amid excess merchandise and missing demand forecasts. They say better inventory management processes and upgraded systems can be a top strategy in loss prevention.

In Reality, Shrinkage Hasn’t Changed Much Year Over Year

According to the National Retail Federation, “… the average shrink rate in FY 2022 increased to 1.6%, up from 1.4% in FY 2021.” These numbers were “in line with shrink rates seen in 2020 and 2019,” according to the 2023 Retail Security Survey.

According to the same survey, external theft accounted for 36% of losses, yet 27% was attributed to process, control failures, and errors, leading Just Style to ponder whether “organized retail theft has become a convenient cover for internal flaws such as bloated inventories, heavy discounting, and employee theft.”

In a conversation with PBS, Neil Saunders, retail analyst at Global Data questioned the reality of the claims that retail theft is out of control.

“I think one of the reasons retailers mention theft so much is that it provides a narrative for things that are happening elsewhere in the financials,” he said. “So we have had a lot of retailers this year, for example, saying, well, our profitability is slightly down, our margins are slightly down. One of the reasons for that is because rates of theft have increased.”

Retail Theft: Impact on In-Store Experience for Customers

While some theft prevention measures can be successful, it’s important for businesses to understand that they may also influence the customer journey. Retail theft can have a significant impact on customer experience, affecting both the immediate shopping environment and the long-term relationship between retailers and their customers.

Balancing security with a positive shopping environment is crucial for retailers seeking to retain and attract customers. Here are several ways in which retail theft and the prevention strategies can influence customer experience:

Increased Prices

To compensate for losses incurred due to theft, retailers may raise prices on their products. This can result in higher costs for law-abiding customers, impacting their budget and diminishing the perceived value of shopping at a particular store.

Intrusive Security Measures

Visible security measures, such as surveillance cameras, security personnel, and anti-theft devices, can create an atmosphere of suspicion and discomfort for customers. Excessive security measures may make customers feel as if they are being treated as potential criminals.

Stockouts and Reduced Variety

Retail theft can lead to stockouts and reduced product variety. When items are frequently stolen, retailers may choose to limit their availability or discontinue them altogether. This limits choices for customers and may lead to frustration.

Increased Security Checks

Some retailers implement more stringent security checks at the checkout to prevent theft. This may involve additional bag checks or scrutiny of purchased items, leading to longer wait times for customers and potentially causing inconvenience.

Unpleasant Shopping Environment

Retailers may rearrange store layouts or use locked cases for high-value items, making the shopping experience less convenient. Disorganized displays and locked cases can contribute to a less pleasant and efficient shopping environment.

Stricter Return Policies

To combat fraudulent activities associated with retail theft, retailers may implement stricter return policies. This can inconvenience legitimate customers who may face more hurdles when returning products.

Damage to Brand Image

High levels of retail theft can tarnish a retailer’s reputation. A perception that a store is a frequent target for theft may lead customers to question the overall safety and security of the shopping environment.

Loss of Trust in Staff

If retail theft is a recurring issue, customers may start to lose trust in the store’s ability to provide a secure shopping experience. This lack of confidence can extend to store staff, leading customers to question the effectiveness of employees in preventing theft.

Diversion of Resources

Retailers may divert resources away from customer service initiatives to invest in theft prevention measures. This reallocation can impact the quality of service and attention that customers receive while shopping.

How Retail Theft Will Influence Retail Location Strategy

Retailers strategically choose locations for their stores based on various factors. Will retailers choose to avoid high-theft areas, or are they implementing innovative strategies to mitigate the risk associated with certain locations?

Already, we are seeing retailers close inner city stores where crime is higher and retail theft is more common. It is likely that new retail openings will factor crime statistics into their location strategy decisions. According to Investor’s Daily Business, the following retailers have already taken action:

  • Whole Foods closed its flagship store in downtown San Francisco in April after opening in March 2022.
  • Walmart closed four Chicago stores in April, citing annual losses in the “tens of millions of dollars” (but did not explicitly mention theft).
  • REI announced plans in April to close one of its best-performing stores in downtown Portland, citing shoplifting and higher crime. The outdoor retailer spent more than $800,000 on extra security in 2022.

Where Do We Go from Here?

Local and federal agencies are also coming to the assistance of retailers by providing new laws, better enforcement, and other support. The U.S. Congress introduced a bipartisan bill, Combating Organized Retail Crime Act of 2023, that expands federal enforcement of criminal offenses related to organized retail crime.

The bill is one of several collaborations needed to curb retail theft and address the threat of organized retail crime. Retailers will not only need to balance the prevention measures they take to avoid alienating shoppers but also work closely with authorities and each other to turn the tide.

Ultimately, the fight against organized retail crime requires a multifaceted approach that encompasses legislative support, collaboration among retailers and law enforcement agencies, and strategic deployment of security measures. By working together and remaining vigilant, retailers can better protect their assets and uphold the integrity of the retail industry.

Experiential Retail: A Balancing Act for Profitability and Appeal

Experiential Retail: A Balancing Act for Profitability and Appeal 1440 428 ASG

Experiential Retail

Transactional shopping is easy to do online, from the comfort of home, with free shipping and free returns. But consumers want a reason to leave their home, drive to your location, find a parking spot, and step inside your store—and it’s up to retailers to give it to them. And as the landlord, you want that foot traffic as much as the retailer does.

With attractions ranging from pop-up retailers with limited holiday engagements and entertainment spaces like theaters and concert venues to active leisure activities like axe throwing and escape rooms, today’s mall bears very little resemblance to these retail meccas of yesteryear.

Experiential retail shifts the focus from transactions to immersive experiences, aiming to offer customers unique, memorable interactions beyond what online shopping provides. It acknowledges that shoppers crave engaging, value-added experiences alongside their purchases.

Adapting to Experiential

How can landlords balance attracting foot traffic while safeguarding investments amid experiential retailers’ needs for space and tighter budgets? The short answer, of course, is to say yes. Offer flexible space, invite the experiential retailers in. Give consumers a reason to keep coming back.

Of course, it’s more complex than that and there are many factors that must be considered, but the mall of today represents a huge opportunity for retail growth and renewed consumer interest.

Doug Tilson, who leads ASG’s Tenant Representation, explains:
“The real struggle for landlords is walking this fine line between bringing in the experiential retailers that consumers want, while still meeting the financial goals for their shopping centers. A lot of these locations are publicly traded REITs with profit goals and shareholder expectations they must meet.”

Making the Most of Your Mall Space

How can landlords position themselves to benefit from experiential retail? How do they attract a beneficial combination of retail offerings that keep the traffic coming? Consider these factors:

Strike a Balance
How do landlords marry the need to show profits with less lucrative experiential retail tenants?
Tilson explains, “There is significant competition for space, especially in the top-tier shopping centers. So, there is a tradeoff between doing something the customer desires with the constraints of possibly lower returns,” he says. “If an experiential retailer pays less, does the landlord do it for the customer, or do they prioritize the more profitable traditional retailer? My advice: Look at your shopping center as an asset and stay relevant with your consumers. Ignore short-term quarterly earnings and focus on the long-term strategy.”

Curate Your Tenant Mix
Carefully curating the mix of tenants within a shopping center or complex is crucial. Selecting retailers that align with the experiential trend and offer unique, engaging, or interactive elements contributes to the overall appeal of the retail space, but they should not be the only priority.
“We saw this happen in many shopping centers when sit-down restaurants became popular,” says Tilson. “In a number of instances, landlords went overboard and ended up with an imbalance. They must be careful not to overdo any one type of retail. And consumers still want to shop; shopping centers still need traditional retailers. Don’t throw baby out with bath water. You still have to have products for consumers to buy, whether or not they have an experiential component to them.”

Embrace New Retailers, but Perform Due Diligence
Just because you may be considering bringing in more experiential retailers doesn’t mean you still shouldn’t perform due diligence. It’s important to maintain fiscal responsibility with new tenants, even if you’re providing more flexibility to the terms of the lease regarding space and scalability. Be sure to address the issue of liability, particularly as it concerns some of the more adventurous experiences.

Use the Fundamentals of Retail Real Estate Strategy
For landlords, consumer expectations may change, but the basic tenets of retail real estate investment have not. (For more, pick up Secrets of Retail Real Estate: How Successful Retailers Win by ASG founder Steve Morris). Location matters. Accessibility matters. The only thing that has really changed are the types of retailers. You’re more likely to have success with a grocery store as an anchor than a department store these days. And you may need to consider more flexible lease and space terms to attract the right kind of retailers to your space.

Embrace Agility
If the pandemic taught retailers anything, it’s that everything can change in an instant. Be agile and willing to change your strategy to suit shifting demand. Where department stores once ruled, it’s more likely your spaces will be filled with DTCs opening physical locations, medical retail, seasonal pop-ups, and experiential retailers. But this shift is an exciting one, because the changing dynamics of your location can be a draw for consumers who are looking forward to what’s next.

Design Stores for Flexibility
Flexibility is a crucial factor in designing retail spaces that attract experiential retailers. Consider allowing retailers to create dynamic and ever-changing environments by offering modular layouts, movable fixtures, and adaptable spaces that can accommodate distinct types of experiences.

Integrate Technology
Incorporating technology into retail spaces is necessary with experiential retail. From augmented reality (AR) and virtual reality (VR) elements to interactive displays and seamless online-offline integration, retail landlords should supply the infrastructure necessary to support these technologies.

Prioritize Sustainability
Embracing sustainability practices can resonate with consumers who are increasingly conscious of environmental issues. Retail landlords can encourage and support eco-friendly practices among their tenants, creating a positive and responsible image for the entire retail space.

Analyze the Data
Leveraging data analytics can help retail landlords understand consumer behavior and preferences. This information can be used to tailor experiences, optimize tenant mixes, and continually adapt the retail environment to meet changing consumer expectations.

Perfectly Positioned
Landlords can embrace experiential retail while taking a balanced and prudent approach by implementing these strategies. This holistic approach allows retail landlords to position their spaces as destinations rather than mere transaction points, creating a more compelling and competitive retail environment that will attract consumers for the long-term, while minimizing the risk of financial insolvency.

Modern Landlords and the Department Store Dilemma

Modern Landlords and the Department Store Dilemma 1440 428 ASG

As traditional department stores grapple with significant losses in a challenging retail landscape, modern landlords should adopt flexible leasing models to remain competitive. To navigate changing consumer preferences, department stores must innovate by investing in technology, enhancing online shopping experiences, and forming strategic partnerships. Success stories from adaptable retailers like Von Maur, Bloomingdale’s, and the unexpected return of Toys “R” Us offer insights into strategies for reinvention.

Department stores have been on a tough journey lately, and a big part of that story revolves around changing consumer behavior and the dynamics of retail real estate. Stores have seen a dip in foot traffic, leading to a struggle to pay the rents demanded by retail landlords.
According to Modern Retail, in just one quarter in 2023, Macy’s recorded $22 million in net losses, Kohl’s profits plunged 60% to $58 million, and Nordstrom’s net sales dropped 8.3%.

But it didn’t always used to be this way.

“Not only did department stores sell everything people needed to clothe themselves and furnish their homes, but they took advantage of the fact that, for the first time, consumers had disposable income. Department stores provided demos, offered lectures, and hosted entertainment events. Shopping was – get the irony here – an experience.”
– Carrie Barclay, President and CEO, ASG

Department Stores Struggle to Keep Up

This history of the department store is a reflection of our culture. But according to Frontier Economics, “the pace of the changes in the last year, including rising costs, channel shift and fast-evolving customer habits, has pushed many department stores to the brink. Even the biggest and best-known brands have faced difficulties. House of Fraser is under new ownership; Debenhams is fighting hard to stay alive; and John Lewis has reduced staff bonuses for the first time in over 60 years.”

Economic shifts and rising operational costs have made it tough for these former retail giants to sustain their traditional models. As a result, we’ve seen closures and restructurings as department stores grapple with these challenges. Meanwhile, shoppers are after more personalized experiences and specialized products, which many department stores find tricky to provide with their one-size-fits-all approach.

This shift in consumer behavior has hit the bottom line for these stores, putting pressure on their ability to keep up with the usual high rents in prime locations.

So, what is a modern landlord to do? Our top advice—be flexible.

Flexibility in leasing department store spaces allows landlords to remain responsive to market demands, attract a wider range of tenants, optimize space utilization, and mitigate risks, ultimately contributing to the overall success and sustainability of department store properties.

What’s Actually Happening to Department Stores?

Many traditional retailers have adapted to the digital age, exploring online sales channels, and implementing innovative strategies to stay competitive. The ones that didn’t are going the way of Kmart, like the following examples.

Bed, Bath, and Beyond
Bed, Bath, and Beyond went from being the retailer on top of the world in the post-economic downturn of 2008 to filing bankruptcy, suing suppliers, and being eaten up by Overstock in 2023. What happened?

The failure is “the result of an increasingly unwieldy corporate structure and its failure to fully reckon with the ascendance of online shopping,” according to the New York Times. In the article, Neil Saunders describes their situation as a death spiral, mostly caused by mishandling of debt.

Bed Bath & Beyond’s stores have closed, but Overstock acquired their intellectual property and took the BBB name in order to “acquire new customers and cement itself as a go-to home goods retailer,” according to CNBC.

Tuesday Morning
Tuesday Morning has closed its remaining 487 stores in 40 states after being approved for bankruptcy. Like Bed, Bath, and Beyond, the company was overextended, and when Wells Fargo increased their cash reserve requirement from $10 million to $30 million, it effectively eliminated any liquidity they had, as explained in a Retail Dive brief.

What Department Stores Can Do to Reinvent

The demise of the department store should be a wake-up call to all retailers to adjust course with the following strategies.

Adapt and Innovate
To survive and thrive, department stores must adapt to evolving consumer preferences. Investing in technology, enhancing the online shopping experience, and incorporating sustainable practices are crucial for staying competitive in today’s market.

The aging Boomer population and the multigenerational increased focus on health has opened doors to medtail, making “retail space a strategic necessity” that has created a dynamic landscape that continues to evolve as both the health care and retail industries face unique challenges.”

Collaborations and Partnerships
Strategic collaborations with popular and emerging brands can breathe new life into department stores. By creating exclusive partnerships or hosting pop-up shops, these stores can attract a diverse range of consumers and generate excitement around their offerings. Grocery stores and beyond are focusing more on consumer values, from sustainable, locally sourced products to products that are committed to protecting the environment.

Focus on Experience
Successful retailers are increasingly focusing on creating memorable in-store experiences. From interactive displays to immersive technologies, department stores must go beyond simple transactions and offer an environment that engages and delights customers.

As we previously reported, “The modern mall is undergoing a remarkable transformation to meet the changing needs and high expectations of today’s consumers. We are excited to be at the forefront, watching how retailers and mall owners embrace innovation, creativity, and technology to reinvent the mall experience. From immersive and experiential offerings to convenient and sustainable practices, the modern mall is poised to become a dynamic and engaging destination that goes beyond traditional retail.”

Contemporary Department Stores Getting it Right

While some department stores have sounded the death nell and others are facing imminent demise, several department stores are demonstrating a level of flexibility and agility that may help them survive in the modern era.

Von Maur
Headquartered in Davenport, Iowa, Von Maur is the parent company of Dry Goods, a women’s contemporary fashion store targeted toward modern young consumers. Von Maur is expanding Dry Goods rapidly, with 11 new store openings in 2023. Von Maur Dry Goods has been in business since 1872 but have managed to reinvent themselves time and again to keep up with consumer demand. Today’s focus is “fashion-forward style meets old-fashioned customer service.”

Bloomingdale’s
It might be surprising to see Bloomingdale’s on the list of hopeful success stories, but they have made some big moves to remain relevant, including appointing a new CEO. Unlike their parent company Macy’s that continues to struggle with relevancy and operational efficiency, Bloomingdale’s shows promise, says GlobalData Retail managing director Neil Saunders, who believes the new CEO’s international connections and experience will benefit the retailer.

In an interview with Modern Retail, Saunders said, “There are good brands in there. There’s a good selection. But really, there needs to be more differentiation. There needs to be more exclusive lines, more young, up-and-coming designers. There needs to be more newness.”

Toys “R” Us in Macy’s
Much to the devastation of generations of kids, Toys “R” Us closed their stores in 2018 and filed for bankruptcy. No one expected the brand to reemerge, but they now have 452 shop-in-shops in Macy’s around the country and have plans to open 24 flagship stores. Their new retail location strategy – air, land, and sea – will see stores opening in airports, on cruise ships, and in strategic locations throughout the U.S.

The Future Belongs to Innovators
“If the high street and the city centre are to survive, these important landmarks must find new ways to become destinations. Otherwise, the city may succumb to the 21st century’s version of retail modernity: the cavernous, windowless, invisible, under-regulated, under-taxed Amazon warehouse.” – Apollo

The state of department stores reflects a broader transformation occurring in retail. While closures of big box, specialty, and legacy stores may signal challenges, they also present opportunities for adaptation and innovation. As the industry continues to evolve, the key to success lies in the ability to embrace change and meet the dynamic needs of today’s discerning consumers.

Ethical Fashion: Revolutionizing Material Creation

Ethical Fashion: Revolutionizing Material Creation 1400 428 ASG

Sugar cane, seashells, and mushrooms—sounds more like a list you’d find on a recipe card than on a clothing label, right? But innovative brands are manufacturing clothing using such renewable materials, aiming to take a bite out of fashion’s substantial environmental impact and move toward a more ethical fashion reality.

Innovation in textile production and biofabrication techniques are facilitating the creation of textiles with desired properties like biodegradability, durability, and performance characteristics while using closed-loop systems that recycle water and minimize chemical usage in the manufacturing process.

But fast fashion is still favored by many—the market is valued at $123 billion compared to the $8.16 billion ethical fashion market. As we have watched sales of sustainable clothing steadily rise over the past decade, the fashion industry has quietly been making strides in material creation to minimize environmental impact.

Innovative Materials for Sustainable Fashion

The apparel industry is widely considered one of the worst-polluting, responsible for huge volumes of greenhouse gas emissions. In 2021, the apparel industry emitted approximately 897 million metric tons of carbon dioxide equivalents into the atmosphere. This is estimated to increase to almost 1.3 billion metric tons by 2030 if no drastic action is taken.

The pressure for drastic action is compelling companies to shift their focus towards more responsible practices, emphasizing renewable materials, and exploring innovative technologies to drive sustainability in the fashion industry.

“Sustainability in retail is here to stay, but such a commitment must be more than just words on a page. A genuine commitment to the environment needs to be reflected in every part of your supply chain and the decisions you make regarding how and from where you are sourcing ingredients, who you’re hiring to make your clothing, and how you’re treating people and the environment along the way. Consumers want to see not just a goal to be carbon neutral by 2035 but the steps you’re taking to ensure you can achieve that.”
– ASG

Bioengineered Materials and Brands Blazing the Way

Allbirds is a leader when it comes using renewable materials like wool (wicks away moisture while being soft and comfortable), sugarcane (used to make comfortable and supportive insoles), Eucalyptus tree fibers (a lightweight, breathable fiber made with responsibly sourced Eucalyptus), and castor bean oil.

TômTex is a bio-based, high-performance material created from seashell or mushroom waste. They focus on organic dying practices and recyclability; their products are 100% biodegradable. They made their first appearance in NY Fashion Week in 2022, where they showed off a two-design collab with Peter Do.

Smartwool is a company committed to transparency and sustainability. They produce socks, base layers, and other products made of Merino wool. Merino wool is soft, manages moisture, regulates temperature, and resists odors. They use reclaimed wool to create their socks, preventing those scraps from going to a landfill.

Pinatex is a pineapple-leaf based material that has been used as a sustainable alternative to traditional leather by ethical footwear brands like Po-Zu and Nae Vegan Shoes. Hugo Boss and H&M have also incorporated Pinatex into some of their collections.

Stella McCartney, the renowned fashion designer known for her commitment to cruelty-free fashion, collaborated with Bolt Threads, creator of Mylo, a mushroom-based leather alternative, to create The Frayme Mylo bag. It was the first-ever commercially viable product made from mushroom-based leather. Stella McCartney plans to integrate Mylo into their main collections of bags going forward.

Orange Fiber, a sustainable material made from citrus byproducts, was the highlight of a recent collection by the Italian luxury fashion house Salvatore Ferragamo. The collection featured dresses and scarves made from the citrus-based fabric. H&M uses Orange Fiber in its Conscious Collection as well.

Keel Labs, formerly AlgiKnit, is a biomaterials company focused on creating sustainable yarns from kelp, and are the developers of Kelsun fiber. The company works directly with fashion brands to develop biodegradable and renewable seaweed-based textiles. In 2022, the materials innovator received a $13 million infusion of investment from VCs, including H&M CO:LAB, the investment arm of H&M Group.

Spiber’s Brewed Protein materials are fibers, films, and other types of materials that are manufactured through fermentation of plant-based ingredients. Everything from filament yarn to fleece can be made with this innovative process. Sportswear brand GOLDWIN and The North Face Japan have used the trademarked fiber, which has been likened to spider silk in feel and durability, in limited edition collections.

Greener Fashion, Greater Loyalty

The fashion industry’s shift toward sustainable material creation is a crucial step in minimizing its environmental impact—and it may be a necessary step to maintain a strong and loyal consumer base.

“Time is running out for retailers who are lagging behind customers. The circle is definitely closing around the circular economy.” said Sanford Stein, in The Robin Report

Companies that adopt eco-friendly practices, avoid harmful processes, and embrace renewable materials can help drive the sustainability consumers say they seek. As we all become more conscious of the impact of our choices, the global shift towards sustainable fashion will accelerate. By revolutionizing material creation, fashion is taking a giant leap towards a greener and more sustainable future for all.
As brands embrace eco-conscious methods, shun harmful practices, and embrace renewable resources, they actively fulfill the sustainability consumers crave. As our awareness of our personal impact on the environment grows, the push for sustainable fashion will continue to gain momentum worldwide. By revolutionizing material creation, fashion can propel us toward a greener, more sustainable future.

Every business is trying to be more “sustainable.” Why is it so darn hard to do it? Read more:
Sustainability: What Does it Take? (consultasg.com)

Reducing Construction Costs: What Does It Take?

Reducing Construction Costs: What Does It Take? 1440 428 ASG

In commercial retail construction, costs can quickly become a headache, posing challenges for businesses seeking to bring their visions to life. To navigate this challenging landscape, it’s critical to maintain a clear project scope, engage an experienced store planning and construction team, foster open communication, and stay well-informed about industry trends, economic shifts, and local regulations.

Rapid changes in store planning and construction over recent years have slowed projects down once they leave the design phase. We sat down with Elizabeth Seitz, Jenn Crawford, and Trevor Boyle from the ASG Store Planning and Construction team to explore how they prevent projects from hemorrhaging when confronted by rising construction costs, labor issues, and sourcing/logistics concerns.

“It’s gritty, it hurts, it bleeds. That’s our job: to figure out how to keep us from bleeding so much.”
– Trevor Boyle, ASG

What are the first things to do when trying to reduce construction costs?

Elizabeth: It’s all about planning. You want to be involved early in the process with the details of the deal. What are you building? Where are you building it? Are we shipping internationally, cross-country, or locally? Are we using trucks, ships, planes, or trains? Logistics in various countries and regions can drive up costs. We procure and plan early enough to know all those details so you can bring them to light with the client. Then, together, we set priorities for the rest of the project.

Jenn: I start looking at what we can reuse within the space. Can we reuse the bathroom or keep the electricity in the same spot? What can we reuse that will help us reduce work down the road? Some clients want you to reuse everything; some clients want the space updated to their vision.

Trevor: When it comes to building, you have three primary points: scope, schedule, and budget. You have three ways you can approach all three together or one at a time: good, fast, or cheap. You can choose two out of the three, and the other WILL affect your outcome. What is your priority? If you do something good and fast, it won’t be cheap—which in turn affects your budget, scope, then schedule. You must establish very early on the quality of standard expected by your client and go from there.

So how do you balance client expectations with reality? How can you educate, guide, and make their dreams a reality?

Trevor: It’s my job to guide them into their lane. And sometimes that means informing them that what they need is different than what they want—what’s necessity versus wish list.

Elizabeth: It’s all about communication. “I want X, but save me money,” is what we hear a lot. Every client has needs and wants, so you must dig down into the why.

Jenn: For example, do your bathrooms really need to be super fancy? Especially if they’re tucked away in the BOH?

Trevor: Besides the fact that you think it’d be nice, it sometimes doesn’t translate.

In what ways has sourcing evolved over the past few years? What do you look for now when sourcing? What are your priorities and how have they changed recently?

Elizabeth: Sourcing has become so much more important these days. These conversations need to happen VERY early. If you are trying to source something (especially custom), there is a minimum time to get through the process. You need to plan all that before documents go out so that GCs [General Contractors] can bid correctly and get subcontractors for the work. It all goes back to planning because the last thing you want to do is say you’re over budget on week two—by then it’s too late. You must plan upfront with multiple options for value engineering to avoid all of these roadblocks.

Trevor: People get stuck on the idea that they must use a specific material or item. You could give people two items that are two identical items, ask them to say which is worse, and every time they’ll pick a different one. We often deal with the illusion of quality and encourage our clients to consider a difference in materiality. If it’s a prominent feature, then yeah, sometimes it has to be THAT material.

Elizabeth: Luxury brands might prioritize the differences when substituting materials. To Trevor’s point, they get in their mind that they want Carrera marble, so our job is to find other cost-effective methods. To some, taste equals expense. The illusion of expense equating to quality, however, can be enough to make customers feel better about spending more at fancy store.

With there being shortages in skilled labor, are there often long lead times or delays with preferred GCs and how do you navigate them?

Trevor: The last thing you want to do is replace subcontractors on a project. If you do it, you can get backcharged by the secondary sub for the work that was already finished by the first. It’s hard to find people to help because they’re so busy.

We never plan supplementation. We qualify bids by looking at each one. What did they miss, what are they not including, are they trying to buy the job? Will they really perform? Their bids should cover all labor needed without the need for supplementation. Supplementation comes in during the process if they need help.

Elizabeth: The contractors have to understand what we’re asking them to build. Qualification of bids takes more upfront. If we have rollout programs, we start up front, looking at how we plan out the construction schedule so that we can keep GCs that understand the build, moving from project to project, and growing with the account over time. We are trying to build relationships with General Contractors for the long haul. There is a shortage of skilled labor right now, and if we can build those relationships an establish a good work flow, we can keep them busy. There is a lot of competition for the smaller labor force out there right now.

Consumer Trends in the Era of Digital Dependency

Consumer Trends in the Era of Digital Dependency 1440 428 ASG

Starved for genuine connection and burnt out from always being “on,” two-thirds of Americans across generations are yearning for simpler days when we weren’t plugged in 24/7. Roughly 40 percent of Americans wish they weren’t so reachable, a symptom of widespread digital dependency, made possible in large part by modern technology, apps, and platforms. We’re overwhelmed trying to keep up with new technology, and over half of us say tech oversaturates our lives and creates a barrier to authentic connection. Surprisingly, younger generations are more likely to believe that tech drives us apart.

Many Gen Zers believe the platforms that should be bringing us together are negatively impacting our self-image, creating insecurities, and highlighting differences while promoting a new downtime activity, “doom-scrolling.” Because of this, social media has come under great scrutiny, with 81 percent of Americans worrying about its effect on young peoples’ mental health.

The majority of people ages 18-54 said they would return to a time before the internet and smartphones. We’ve all seen the jokes Boomers post on Facebook of everyone in the waiting room being on their phones and not interacting. The sentiment that we spend too much time on our phones is shared among all generations.

So, what are we supposed to do about it?

Starting at the Root, Tech Giants

Whether to counteract the flood of smartphone notifications or just for nostalgia, consumers are investing in the “dumb phone” market, and Gen Z is a surprising and significant part of trend. Phones that filled pockets and purses pre iPhone, phones that flip, slide, and click, are reviving their near-extinct spot in the marketplace. Phones like The Light Phone offer a color-stripped, simplistic UI that provides you with the minimal operations of a phone—text, calls, music, notes, calendar, and maps—and nothing more. Other phones kept their analog buttons and mechanics like the Punkt Phone. They keep us in touch without the constant demand for our attention and investment that removes us from the present moment.

@tiktoktips

Pause your scrolling. Time for a night time snack break!

♬ original sound - TikTok Tips

In an attempt to get in front of an exodus of people from their platforms, social media companies like Instagram and TikTok offer time-based constraints. Through the app or smartphone settings, you can limit your screen time across apps to reduce doom-scrolling through the night. TikTok even implements promoted videos to remind users to take breaks or go to bed.

Some organizations actively rallied for unplugging and organized National Unplugging Day to encourage people to take a break from the onslaught of digital media. According to the Unplug Collaborative, one-third of Americans say they are online almost constantly, and the Collaborative has set out to do something about it. Similar organizations are a bright light among bleak screens in the ongoing battle against digital burnout and disconnection from our friends and neighbors.

Idle Hands are Digital Playthings

Remote work, shrinking budgets, declining social connections, and mental burn out all have people spending more time at home. This newfound at-home time has people exploring more niche, special-interest hobbies. Hobbies and activities that get us unplugged, working with our hands, and creating help curb the impending dread that comes with being plugged in all the time.

DIY has been popular for decades now as a form of self-accomplishment and cost savings. Creating things by hand invokes a sense of nostalgia. DIY kits and experiences are becoming popular gift items—the gift of a shared activity, not just an item. Places like The Smithery in Columbus, Ohio offer hands-on experiences in jewelry making—a craft many have little experience with. People can tune into their interests while crafting something on their terms, either as a solo activity or with people they love—all while getting to step away from the digital distractions and concerns we constantly face.

Also in Columbus, Ohio, The Kee has a variety of game activities such as ping pong, cornhole, chess, sport-inspired games, a gallery space, and more. Curated activity spaces like these encourage us to get off our phones and interact with each other without being tempted to check our screens every 30 seconds. The Armory in St. Louis is like The Kee on steroids—it’s a six-acre adult playground with everything from bowling leagues to tennis tournaments to concerts and more. These types of bars answer the ask for interactive entertainment that goes beyond shopping or simply sitting around drinking. You can go out with a group of friends and play the night away together, feeling rested and fulfilled, rather than burnt out from not truly getting to unplug and enjoy your time together.

Getting outside, while common, is still the most prominent form of disconnection. Knowledge about gardening, foraging, and food prep/storage has never been more abundant—with 62% of Americans stating they want to grow their own food. With so much interest in gardening, why don’t more people get involved? Well, the answer lies in a few hurdles: time, space, and effort. With new brands emerging like VegoGarden, offering modular garden beds, or Gardyn, making hydroponic gardens, the healthy hobby is becoming more accessible. If you don’t have space outside, there are even countertop or indoor gardens like AeroGarden, which lets you grow herbs in your kitchen.

Like gardening, many of these activities have Americans wishing they had the time or resources. Brands and businesses can step in and provide starter kits, education, and easier bundling for consumers to dip their toes in and kick off their next unplugged passion. Investing in bringing your brands and products to life in a tangible way will bring people to invest in your brand when they see that you care about their passions and relationships.

Invest in One Another, Not Digital Vices

Brands that invest in fun, activity/community-centric spaces and pop-ups will see great returns—people crave genuine, entertaining experiences outside of corny text or email trying to get them to buy more.

As Americans become increasingly stressed and overwhelmed by our ever-increasingly connected and plugged-in lives, brands need to create holistic experiences that aren’t purely focused on the hustle of digital culture. As important as digital and mobile interaction is, dialing into fun, human-centered experiences and products will ensure longevity and a loyal following that won’t get burnt out due to a constant onslaught of consumption-focused digital communication.

Brands can serve as a jumping-off point, full of knowledge, tips, tricks, and products to help people unplug and unwind. If we treat our audiences as people, not just a conversion or engagement factor, they will want to invest in and support us back.

Learn more about brands dialing back into analog: Retailers Dial In On Analog – Chute Gerdeman

The Modern Airport is the Destination

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Imagine visiting an airport that not only serves as a transport hub, but also doubles as an adventure park, shopping mall, and sanctuary for relaxation.

In today’s travel landscape, airports are redefining themselves as destinations in their own right, offering travelers and locals alike experiences that go beyond the usual concept of an airport. Whether you’re looking for a taste of local culture, thrilling entertainment or an oasis to escape the stresses of travel, airports are evolving to cater to a diverse range of preferences and needs.

The timing couldn’t be more important. Industry experts say an expected 9.4 billion passengers are expected to travel by air in 2024, an important milestone as the global industry continues to recover post-pandemic. By comparison, the year 2019 saw 9.2 billion airline passengers.

The transformation of airports into dynamic, multifaceted spaces reflects a growing trend that enhances the travel experience, making the journey as memorable as the destination. Here’s how they’re doing it.

Amplifying Local: Airports Embracing Regional Flavors and Culture

At Adelaide Airport in South Australia, you’ll find 100 Miles, a restaurant with a unique philosophy: It exclusively uses ingredients procured from within a 100-mile radius of the establishment. Embracing the flavors of the region, this innovative eatery offers a menu featuring locally-sourced, seasonal ingredients sourced from the city’s Central Market and paired with South Australian wine.

The conceptual restaurant amplifies local flair and offers the nearly 6.5 million passengers traveling through the airport each year a taste of the region’s culture and products.

Yet 100 Miles isn’t just a restaurant; it’s a snapshot of the modern airport, reflecting the growing trend of providing authentic and locally-inspired experiences to travelers.

Across the ocean in Seattle, an expansion currently under way of the C Concourse at the Seattle-Tacoma International Airport is inspired by the Pacific Northwest landscape. The more than 145,500-square-foot expansion, expected to be complete in 2027, adds four additional stories above the airport’s existing concourse.

With enhanced views of the surrounding Olympic Mountains as the backdrop, the project provides travelers with additional dining and retail spaces, as well as amenities like interfaith prayer and meditation rooms and a nursing suite. A marketplace located in the middle of the concourse will be modeled after Seattle’s famous farmers’ markets and will serve as a location for more retail kiosks and musician performances.

As part of the Metropolitan Washington Airports Authority’s multi-year redevelopment plans, Reagan National Airport and Dulles International Airport will see a boost of local flair. D.C.-area coffee shops, gift shops and apparel shops will add locations inside the airports, alongside a new restaurant at Dulles from Fabio Trabocchi, a celebrity chef and owner of the Italian restaurant Sfoglina, which is nestled in the northern D.C. neighborhood of Van Ness.

Revamped Retail: Transforming Airports into Entertainment Destinations

Airports are not only redesigning retail and entertainment spaces to cater to the preferences of today’s travelers, but also becoming entertainment hubs – not simply a necessary stop.

At Perth Airport in Western Australia, guests can escape a haunted house, explore a space station, or battle pirates on the high seas– all while never leaving the first level of Terminal 1 International. It’s all part of the airport’s enhanced VR experience, Gaming Point, which offers VR escape rooms to elevate the travel experience. Gaming Point also allows guests to choose from a library of more than 50,000 games to play on state-of-the-art gaming desktops. Once gamers leave the airport, they can continue to play using their own Steam network account.

Have a long layover? No problem. Check out the flight museum or the used book store at the Milwaukee Mitchell airport, or play interactive games in Buzz Zones at the Hong Kong International Airport. Immerse yourself in art at one of Miami International Airport’s galleries, or make sure you plan a special trip through the Munich Airport during the holidays where you’ll find a Christmas market that features an ice skating rink, carousel and an open market selling handmade crafts.

Airport Innovation: Setting New Standards for Comfort

It’s not all about entertainment. International airports are also elevating passenger comfort and relaxation during layovers.

At the forefront of innovation, Auckland Airport’s Strata Lounge boasts private wellness pods that visitors can book in advance. These pods create a calming ambiance through gentle, customizable lighting, immersive floor-to-ceiling photographic murals of tranquil forest landscapes, and modular sofas that can be converted into single and twin sizes.

At Dubai International Airport, global travel hospitality brand Airport Dimensions has installed its largest “Sleep and Fly” lounge where guests can unwind and even take a power nap in between flights. Afterward, guests can freshen up in luxurious showers stocked with Ayurvedic spa products, enhancing the sense of relaxation and rejuvenation.

The “Sleep and Fly” lounge is a prime example of how airports are setting new standards for airport comfort, reflecting a growing trend in which airports worldwide are redefining the passenger experience. As travelers increasingly seek unique and enjoyable layover experiences, these airports are taking the lead in offering services that elevate the airport experience to new heights.

Airports as Community Hubs: Enticing Locals to the Airport

While most people who walk through the automatic doors of an airport are on their way to somewhere else, more airports are reimagining what it means to be a community hub.

By transforming airports into hubs for socializing, recreation and even a whole day of entertainment, they are no longer simply places for travelers in transit. This shift in perspective is enticing locals to visit the airport for activities – many of which have nothing to do with traveling.

One example of this transformation that sets the standard for airports serving as the new mall is the Changi Airport in Singapore, home to the Jewel mall. Nearly 300 retail and dining outlets offer a variety of airport shopping center experiences at the mall. Near these airport retailers is a 150,000-square-foot Canopy Park that includes gardens, topiary walks, bouncing nets, mazes and giant slides that create a fun airport experience. While these areas are part of the airport complex, they are located in the landside zone and are accessible to anyone – flight ticket or not.

At the Detroit Metro Airport, visitors have access to two terminals with a DTW Destination Pass, and at Orlando International Airport, you can visit terminal C with a visitor pass. While these passes allow family and friends to surprise loved ones arriving at any of the gates near the terminals, it also offers an opportunity for locals to access a PGA tour shop, gather for a drink at a taproom, get a massage and eat at one of dozens of restaurants.

The distinction between travelers and locals blurs in these locations, as airports are increasingly working to invite everyone to explore a world of social interaction within their confines.

Wellness in Travel: Enhancing Passenger Well-Being

1 in 3 business travelers say the journey itself is the most stressful stage of their trip out of town. And in a post-pandemic world, only about a third of those traveling for business are happy to be back on the road, citing stress and exhaustion for their hesitance.

Even those traveling for vacation often experience stress. More than 90% of Americans say traveling can be stressful.

Many airports are seeing an opportunity to address this stress by enhancing the passenger experience. While comfortable lounge chairs, calming teas and neck warmers to relax tension may sound like pampering tools found in a luxurious spa, they are actually part of the Centurion Lounge space at Houston’s George Bush Intercontinental Airport.

Airports like this one are increasingly focused on promoting passenger well-being by introducing a range of amenities and services that cater to holistic health, relaxation and mental peace. This shift in perspective reflects a broader trend in the travel industry, as travelers seek ways to alleviate the stress and anxiety often associated with journeys.

Other key developments in this wellness-centric transformation include:

Bringing nature into the terminal through incorporating natural elements like dog parks and walking paths.
Offering healthier dining options like at Newcastle International Airport in the UK, where you can find a range of vegan, vegetarian and other healthy food options.
Wellness-centric lounges that offer private sanctuaries to de-stress and take a break from the airport crowds.
Digital gyms like at the Incheon Airport in South Korea, where passengers can participate in interactive visual workouts for different ages.
Wellness services, including flu shots, IV infusions, diagnostic testing and even virtual yoga and meditation services offered through XpresSpa at airports in New York, Phoenix, and Salt Lake City.
Noise pollution reductions that eliminate loudspeaker announcements (and additional passenger stress) at Zurich Airport.

From celebrating local culture where passengers can embrace regional flavors to ensuring visitors are entertained or comforted, airports have undergone a remarkable transformation. With more than 9 billion passengers expected to travel by air in 2024, it’s crucial for airports to evolve and carefully craft elevated experiences so that they are not merely a means to an end.

The way and why people travel are changing. Read about The New Bucket List Travel: https://consultasg.com/redefining-bucket-list-travel/

The Retail Store Prototype is Dead

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Once upon a time, when a store launched, there was a flagship on 5th Avenue in New York City that served as the prototype store. From there, a standard cookie-cutter rollout of smaller, but similar, stores proliferated across the country as the brand grew. In fact, it became so cookie-cutter that it led our CEO, Carrie Barclay, to write about the threat of retail homogeny in 2017.

As Carrie wrote then, homogeny is for milk, not for retail. Today, those prescient words are proving themselves again and again.

Time to Toss Out the Recipe Book

There is no cookie-cutter roll out anymore. In fact, without the right data, it’s hard to know where to locate a new retail store, let alone the design that should be implemented.
You might instinctively think New York City is where you need to be, but the data may point to better success in Indianapolis.

Most retailers vying for today’s customers must be able to deliver a hyper-personal, customized experience that is different in every location. The store a brand opens in Buffalo, New York simply cannot be the same store as the one in Raleigh, North Carolina.

Retail Location Strategy and Store Design Are Intertwined

Today’s retail location strategy and store design must be relevant and deliberate. Rollout is a complex dance where every store is now a prototype.

As retailers try to control the cost of building, sourcing materials from the local area is a smart approach, but that means different material boards for each region; styles and materials for stores in the Pacific Northwest will be different from those in the Midwest.

Rather than see this as another wall barring retail growth, brands can embrace the opportunity to use location, materials, and product mix together as a way to provide a unique experience in every store. Not only do local customers appreciate the local feel, but travelers enjoy going into to a store they love in a different location and noticing local or regional differences in the retail environment.

“Don’t go too quickly. Take it slow. You don’t need to go from 0 to 20 stores in a year—especially if you’re just starting out. You don’t have to commit to rolling something out across the entire fleet. Give yourself the chance to evaluate what works and what doesn’t. How does it work for the staff? Customers? What if we can’t duplicate it? Or if you must change it for every single store? Someone needs to be the keeper of the standards and organization, and that’s where we step in,” says Jennifer Crawford, Senior Project Manager at ASG.

Opportunity to Meet Customers Where They Are

Post-pandemic, consumers are shopping closer to home, but they still seek unique and memorable experiences when shopping in person – and they do love to shop in person. These factors are shifting location strategies for retailers, leading to store openings outside of the typical launch areas – and introducing unique store designs for certain neighborhoods and college campuses.

“You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive.”

—Carrie Barclay, President and CEO of ASG

When assessing retail spaces, location data emerges as a distinct form of insight, capable of revealing unexplored opportunities for every potential location. This data explores more than just traffic patterns, structures, and roadways. In addition to all that information, it also reveals extensive demographic data about the consumers living in the area, including median income, home values, and more.

With data-driven insights, brands can test a variety of different prototypes to see what works where. Small-format stores and flagships can benefit from the insights that give a human touch to the brand.

How Are Brands Repositioning?

Retailer solebox is a shoe company in which every location is specifically designed for where it’s located. Their website explains, “The stores all have their own design concept and stand for themselves – what connects them is the carefully curated assortment. The latest sneakers, streetwear from different continents but also some pieces from the high fashion world can be found at solebox.”

Jeni’s is a popular ice cream shop with more than 25+ locations. Travelers love seeking out Jeni’s in the towns they visit because they know they’ll find something different at each location. Jeni’s has developed a winning strategy of choosing a location, like Congress Street in Austin, Texas, and then creating flavors based on the local market. They also appeal to customers’ desire for sustainability and inclusivity by using Direct Trade ingredients, employing a diverse team of people, and working to improve our environmental and social impact.

“People go on first dates at Jeni’s Scoop Shops, people get proposed to, and have their weddings with us…Our customers send our ice cream for Mother’s Day, bereavement gifts, and anniversary gifts. We are a part of people’s lives,” said Chelsea Clements, former director of ecommerce at Jeni’s, to ShopperHQ.

American clothing and accessory retailer Vineyard Vines was founded in 1998 on Martha’s Vineyard by brothers Shep & Ian Murray, who still lead the company. They now operate more than 70 retail locations, including an outlet division, a successful e-commerce business, a domestic distribution center, and expanding corporate headquarters. Shep & Ian’s philosophy that “every day should feel this good” and “if you’re doing what you love, you’ll be successful” is a major part of their brand. In 2020, they reevaluated their location strategy and, working with ASG, discovered that the brand does best along the coastlines.

To compete effectively for today’s experience-driven consumer, retailers must toss out their old playbooks and develop location and design strategies that connect with consumers where they are. The traditional store prototype is dead; now, every store is a prototype that allows the brand to learn more about what customers want and fine-tune their approach.

Read more about ASG’s retail location and insights tool, ASGEdge, which helps retailers examine potential sites using a forward-looking modeling that scrutinizes an extensive list of variables, including proximity to competitors, demographic insights, and consumer behavior.

Medtail is Moving In

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Once one of the largest shopping centers in Tennessee, One Hundred Oaks in Nashville faced a prolonged downward spiral. Like many malls, it enjoyed success as a thriving urban shopping hub with nearly 900,000 square feet of retail space. However, the story of One Hundred Oaks mirrors a broader trend seen across America, where malls struggle and eventually succumb to closure due to changing consumer preferences, community migration, and the rise of e-commerce.

Nearly half of the former mall’s property is dedicated to Vanderbilt University Medical Center’s clinical and administrative support operations with 22 specialty clinics, a pharmacy, imaging center, and laboratory.

The opportunity came at a time when Vanderbilt University Medical Center needed to expand its services to keep up with patient demand. Despite the unconventional nature of the location at the time, the transformation of the One Hundred Oaks site made sense. It was just four miles away from downtown Nashville—creating a medical space at a time when there was a demand for accessible health care.

With an aging Boomer population, increased healthcare demands and shifting consumer preferences, it’s no surprise that repurposing retail space has become a strategic necessity. It has created a dynamic landscape that continues to evolve as both the health care and retail industries face unique challenges.

medtail

Meet Medtail

Referred to as “Medtail,” this transformation within retail stems from healthcare tenants moving away from expansive hospitals and independent structures to more accessible locations to deliver in-person services that cannot be accessed through online platforms.

And these healthcare services aren’t only the vision centers, dental clinics, or urgent care facilities you typically see occupying former malls, strip malls, and other commercial spaces. Health and wellness providers of all kinds—therapists, sleep clinics, dermatology centers, and even university medical systems, as we’ve learned—are playing a pivotal role in revolutionizing the healthcare real estate sector.

Today, major healthcare systems, including the University of Rochester, are embracing this trend. The university constructed a 350,000-square-foot ambulatory orthopedic facility at The Marketplace Mall site in Henrietta, New York. The $227 million project—the largest offsite project the university has ever undertaken—will include an outpatient surgery center and a physical therapy space.

Similarly to the former One Hundred Oaks space, the University of Rochester project is an example of how new life can be breathed into an unoccupied retail space—the outpatient surgical center is a former Sears store—by converting it into a space that meets the country’s growing demand for more healthcare infrastructure.

At a time when a healthcare worker shortage and endemic COVID-19 are making the outlook of the healthcare industry less clear, one trend is evident: There is a dire need for more healthcare infrastructure. And that infrastructure may look different than expected, but it’s transforming the way we access medical care.

The Face of Medtail

Successful Medtail businesses have a keen awareness of the demand for accessible healthcare solutions. These setups strategically position healthcare services in high-traffic areas, making medical attention conveniently available where people already frequent, redefining the accessibility and approachability of healthcare.

A Tether Advisors survey found that nearly 80% of private equity, commercial real estate, and retail healthcare respondents believe Medtail investment will increase. You don’t have to look far to see proof.

  • VillageMD and Walgreens are opening of nearly 600+ full-services doctors’ offices. The clinics, located inside Walgreens pharmacy locations, will staff more than 3,600 primary care providers. The company says at least half the locations will be in medically underserved areas.
  • In Winona, Minnesota, a once vacant Kmart now serves as a primary care clinic for Gundersen Health System. Vacant since 2014, the building now houses several medical specialty offices, including family and internal medicine, pediatrics, women’s health, imaging services, occupational therapy, and an eye clinic.
  • About four hours north in Duluth, Minnesota, developer Kraus-Anderson converted a former Younkers department store into an adult and pediatric therapy facility for Essentia Health. The 45,000-square-foot facility includes gym spaces, treatment rooms, and spaces for rehabilitation psychology and support groups.
  • After an economic downturn during the pandemic, the Good ‘N Plenty restaurant closed in Lancaster County, Pennsylvania. Well Spring Care Inc. purchased the 8.5-acre property in 2022 to convert the structure into a 24/7 medical clinic for the Amish community.

Research shows that nearly 20% of retail space is now leased by medical providers, up from 16% in 2010, and it shows no signs of stopping.

What’s Driving Medtail?

What’s behind this surge in utilizing retail space for medical services? One of the biggest key drivers is convenience.

While convenience may mean proximity to one consumer, it may mean avoiding enormous hospital campuses to another. A vast majority of hospital and health systems say they expect a continued increase in outpatient volumes through this year and beyond. In fact, 95% of health leaders surveyed in the Guidehouse and Healthcare Financial Management Association report say outpatient volumes will increase this year alone, and 40% expect jumps of 10% or more.

While many patients may prefer to bypass navigating through complex facilities to find a physician or healthcare specialist, these statistics also beg the question: Is there even enough room at current healthcare facilities to accommodate rising patient numbers?

Small communities in remote areas also once had little access to medical facilities, with patients forced to drive dozens of miles to see a specialist. With Medtail’s rise, rural patients are now seeing more options available to them.

There has also been a shift in how healthcare has embraced preventative wellness, recognizing the importance of proactive measures and offering services that empower individuals to maintain their health and well-being before issues arise.

Look no further than Dollar General to illustrate this transformation. Not to be left in the dust by Medtail leaders Amazon, CVS, Walmart and Best Buy, the discount retailer created a healthcare advisory panel to assess opportunities in Medtail and healthcare under its DG Wellbeing brand.

Earlier this year, Dollar General began teaming up with DocGo, a mobile health and transportation service provider, to pilot three mobile health clinics. Large vans in three Tennessee store parking lots now offer customers basic, preventive, and urgent care services, as well as lab testing to reach underserved populations in high-traffic areas.

Malls experienced among the highest vacancy rates in the fourth quarter of 2022, with an average rate of 8.7%. General retail locations fared much better at just 2.5%. The number of empty office buildings looked even more bleak, with a record 963 million square feet of office space unoccupied in the United States at the end of the first quarter of 2023.

Commercial leasing agents may feel like they have their work cut out for them. Yet reusing underutilized retail space offers a glimmer of hope and opportunity in these changing times. Opening retail spaces to health and wellness businesses can not only bring new life to empty storefronts while also tapping into the growing demand for accessible medical services.

Incorporating Medtail is just one way malls are transforming to reflect consumer behavior. Learn about an exciting new chapter for the modern mall.

Wellness Real Estate: Building Healthier Retail Spaces

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Amidst the towering urban landscape, a quiet revolution in building design and construction is unfolding–one that goes beyond aesthetics and focuses on the essence of human well-being. While brick and mortar is often thought of as static and unyielding, looking at retail spaces through a human-centered-design lens, we see incredible potential to create healthier, and more liveable, shoppable, and workable spaces. By considering human health in building design, construction, and management of retail spaces, retailers can contribute to a healthier future for us all.

The wellness economy stood at $4.4 trillion in 2020, according to a report from the Global Wellness Institute (GWI), of which $275 billion came from the Wellness Real Estate sector. The sector has a projected annual growth rate of 16.1% through 2025, thanks to increased consumer awareness following the pandemic about the critical role that external environments play in our physical health and well-being.

The GWI defines the Wellness Real Estate Sector as “the construction of residential and commercial/institutional properties that incorporate intentional wellness elements in their design, materials and building, as well as their amenities, services and/or programming.”

There is great potential to create healthier retail spaces wherein employees and customers thrive. So what makes a retail space ripe for wellness-centered improvements? And will the investments pay off?

Certifying Well-Being

Although you’ve probably heard of LEED, or Leadership in Energy and Environmental Design certification, there are newer accreditations in the wellness real estate space–WELL Certification (from the International WELL Building Institute, or IWBI) and Fitwel Certification (created by the U.S. Centers for Disease Control and Prevention and the U.S. General Services Administration).

Although all certifications focus on using healthy, sustainable construction practices and building operations, WELL and Fitwel focus more on the relationship between a building and its occupants’ health and wellness, while LEED focuses more on environmental impact and sustainability.

WELL, which is also available in the home building industry, takes a more comprehensive and stringent approach with rigorous requirements and an emphasis on indoor environmental quality that translates well to an entire shopping center; whereas, single or even a fleet of retail spaces may be better served by the Fitwel certification, which is an American standard known to be more flexible and less costly.

Each certification has its own unique focus and criteria, so choosing the most suitable one will depend on the specific goals and priorities of your retail project.

Critics of the WELL Building Standard and other wellness real estate certifications claim they represent an overhyped, high-cost way for companies to “tick boxes” for recognition, rather than a genuine commitment to creating healthier spaces. Regardless of whether a company or homebuilder meets all the criteria for the standard, proponents say the goal is to move the needle further, democratizing human-centered design.

“Our goal is not just to sell a bunch of certifications,” said IWBI CEO Rachel Hodgdon in an interview with Axios. “Our goal is … can we look back 15 years from now and say the average home is built differently because of the work that we did on this system, regardless of whether they have a WELL score or not.”

Healthy Buildings as Retail Strategy

Today’s values-based, wellness-minded consumers demand retailers to do more than preach their beliefs; they want to see retailers put it into action. And getting healthy-building certified is one way to show tenants and shoppers that you are doing more than just listening.

Take it from Tanger Factory Outlet Centers Inc., one of thousands of real estate companies executing a post-pandemic strategy to promote long-term wellness and safety. The company achieved the IWBI’s WELL Health-Safety Rating for its 36 North American shopping centers and its North Carolina-based corporate headquarters in early 2023.

The designation, “defines health leadership related to cleaning and sanitation, emergency preparedness, air and water quality and other facilities management criteria.” The goal: to ensure consumer and employee comfort and safety and “build confidence that our facilities are a safe place for communities to gather,” said Tanger EVP and COO Leslie Swanson in a statement.

IWBI says it is enrolling an average of nearly 4 million square feet of projects per day in WELL Certification initiatives, with active engagements with more than 20 percent of the Fortune 500, including retail destinations like Tanger outlets, the offices of corporate giants like Goldman Sachs, Accenture and EY, and iconic structures like the Empire State Building and Yankee Stadium.

ROI and Wellness Real Estate

Although we know that healthier buildings significantly improve worker satisfaction, wellness, and productivity, it can be trickier to quantify the financial benefits of certification for landlords—even when the value proposition of healthy buildings seems clear.
In a healthy building, a retailer is better positioned to survive the next pandemic while maximizing wellness for its staff and shoppers alike in the meantime. It’s also a way to differentiate your properties, remain competitive, and prepare for the future.

“Real estate owners are driving demand for healthy buildings as they seek to retain tenants and strengthen leasing activity in a time when the pandemic still casts a long shadow on occupancy,” said Wendy Feldman Block, executive managing director for the global real estate advisory firm Savills to triplepundit.com. Now, she says, many property owners and occupiers with portfolios are budgeting for certification. “Landlords know they have to talk about what they’re doing to protect health and safety. They have to be competitive.”

Wellness Real Estate Realized

A Chic Showroom
The Mohawk Group Showroom in New York City is LEED Gold and WELL Platinum certified and incorporates features like biophilic design elements, incorporating natural daylight throughout the building, stocking healthy food for employees and guests, enhancing acoustic comfort, ensuring better air quality indoors and incorporating a living wall. The “designer-focused high-performing, sustainable commercial flooring company” also offers employees complimentary off-site gym memberships.

A ‘Mega Lifestyle’ Retail Fleet
City’super became the world’s first supermarket to achieve WELL Certification at the Gold level in 2018, with an eye toward both marketing and wellness for shoppers and employees. “Our vision was not only to differentiate the store from the marketplace, but also to promote health and sustainability in the retail industry,” said President of City Super Group, Jiahua Wu. “To win the WELL award is a great achievement; we were dedicated to green living through seven dimensions: air, water, light, nutrition, fitness, comfort, and spirit.”
With healthy buildings a non-negotiable for the mega lifestyle retailer, they prove they mean business by offering a desirable experience for shoppers “who enjoy the finer things in life” at their stores in Hong Kong, Mainland China, and Taiwan.

A Cutting-Edge Mixed-Use Building
With all of the wellness real estate considerations as table stakes, a new retail and office building takes wellness real estate to the next level. A new addition to Atlanta’s Ponce City Market will open in early 2024 with Pottery Barn taking over an 18,000 square-foot space at the new 619 Ponce building. Once built, its developers expect it to be net-zero carbon ready, LEEDv4 Core & Shell certified and Fitwel certified.

The building, with 87,000 square feet of office space and 27,000 square feet of retail space, was designed as a mass timber structure to prioritize the use of human health by minimizing chemicals of concern and supports the local economy by sourcing materials, including timber, from within 100 miles where possible. Mass timber typically comes from Canada, Austria, or Germany, design-focused real estate investment and management firm Jamestown owns and sustainably manages more than 100,000 acres of U.S. timberlands it uses in construction.

According to Real Estate Weekly, the project is “a great example of how true architectural and structural design collaboration, along with engaging local timber suppliers, can lead to a highly creative and efficient mass timber design.”

Empowering Wellness, Inspiring Retail

In pursuit of a healthier tomorrow, WELL and FitWel have emerged as guiding lights for the retail industry, transforming spaces and redefining what it means to live and work in a human-centered space. By embracing the forward-thinking principles behind WELL and Fitwel concepts, retailers have a unique opportunity to create environments that prioritize the health and vitality of both employees and customers.

How can retailers capture—and keep—a shopper’s attention? Enter the micro experience. Read about it here >
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