Store Design

Sustainability: What Does it Take?
Sustainability: What Does it Take? 1440 428 ASG

Sustainability is mission-critical for retailers. Consumers demand it. Shareholders want it. The earth needs it. So why is it so hard to walk the walk?

There’s a common misperception among retailers that investing in sustainable building will be too costly to achieve any kind of ROI. Yet efforts to reduce carbon footprint, while perhaps more costly upfront, can be beneficial for retailers in the long run. While it takes effort to source products that are sustainable, using eco-friendly designs and recycled materials in retail locations are just two examples of ways brands are getting closer to sustainability goals.

As we’ve explained before, improving sustainability requires a willingness to do business differently. We’ll explore sustainable building in retail and what the future holds for this approach.

The Importance of Sustainable Building Practices in Retail

According to Microsoft, sustainability is a growing priority in retail and consumer packaged goods. Industry leaders, employees, investors, partners, and consumers who buy the goods care about sustainability.

  • 93% of CPG leaders spend more time on sustainability issues today than five years ago
  • 73% of Millennials prioritize sustainability over pricing
  • 55% of recent CPG market growth came from sustainability-marketed products

By implementing sustainable practices, retailers not only gain a competitive advantage with eco-conscious consumers but also reduce their carbon footprint.

Virtue Signaling vs. Environmental Commitment

Retailers who talk sustainability without verifiable actions raise doubts about their commitment. Virtue signaling – talking the talk without walking the walk – can instantly destroy a brand’s credibility. And even though there is a gap between what consumers say they expect and what they purchase, the intent for better sustainability is a growing trend among consumers and stakeholders. And with more legislation requiring specific commitments to sustainable practices, getting ahead of the curve can be cost-effective.

Sustainability Begins Before Building

As retailers refine their sustainability efforts, the first consideration is location. More than ever, sustainability includes answering the question, “How far do I expect my customers to travel to shop in my store?” The answer is often not as far as they used to. Smaller stores embedded in neighborhoods are a more sustainable alternative to larger stores that use more energy and require a longer trip to access.

What Steps Are Retailers Taking to Be More Sustainable?

There are a number of ways retailers can incorporate sustainability into buildings and materials—some might be easier and more cost-effective than you think.

Energy-Efficient Lighting
Energy-efficient lighting is one of the key components of sustainable building. It’s more than just LED lights, although that is an important component. LED lighting uses much less energy than traditional lighting and can last decades longer. However, other considerations can help with more sustainable lighting as well. Choosing to construct buildings in ways that take advantage of natural lighting can help save even more.

Efficient HVAC
Energy-efficient HVAC systems help significantly reduce energy consumption. While lower utility bills are the most obvious benefit of an efficient HVAC system, other benefits include better air quality and reduced health risks for employees and consumers.

Eco-Friendly Materials
IMM-Cologne explores the use of sustainable materials in retail design in great depth. They suggest solutions from the circular economy:

  • Terazzo floor slabs, bricks, and recycled concrete produced from construction waste.
  • Recycled PVC or vinyl floor coverings.
  • Recycled clothing made into curtains, shelving, counters, and more.
  • Alternative construction materials such as hemp, rapidly regrowing bamboo, or recycled plastic.

IMM-Cologne makes the argument for the importance of pursuing sustainability:
“Rising energy costs, shortages of raw materials, the new awareness in society and the increasingly visible consequences of climate change call for a new way of thinking. This should ultimately benefit everybody: companies, people and, above all, the environment.”

Eco-Friendly Retail Design
Sustainable building can also include using eco-friendly designs like green roofs and walls. Green buildings reduce heating costs by adding insulation while also reducing the urban heat island effect. According to the University Corporation for Scientific Research on urban heat islands,

“Heat islands form as vegetation that is replaced by asphalt and concrete for roads, buildings, and other structures necessary to accommodate growing populations. These surfaces absorb—rather than reflect—the sun’s heat, causing surface temperatures and overall ambient temperatures to rise.”

When retailers incorporate green roofs and walls into their structures, they help reduce this effect.

The Benefits of Sustainable Retail for Businesses and Consumers
Sustainable retail practices are good for the environment, but they also provide measurable advantages for businesses that implement these practices and the consumers who support them. Sustainable building can save retailers money on energy and water bills while also allowing them to connect with consumers on a deeper level, earning more customer loyalty. Plus, consumers benefit from a healthier shopping experience in buildings with improved ventilation and natural lighting.

“Some people will say sustainability is an additional cost, but once they’re doing it, it becomes second nature and integrated into how they do business,” said Sabine Schlorke, global manager for manufacturing at the International Finance Corporation, a member of the World Bank Group, in an interview with PWC. “If you see it as part of your business, it’s not a cost; it’s an opportunity.”

A Consumer Shift

“I hope when the industry slows down (in a good way), we will be able to focus more on using the sustainable products of the future—fixtures, building materials, flooring, and even playing around with 3D printing to make small tables and stuff,” he says. “It’s the future. I hope we can use it to think bigger.”
– Andrew Miller, ASG procurement and materials manager.

Consumers are becoming more environmentally conscious, choosing products with sustainable packaging and shopping brands whose values match their own with regard to sustainable efforts. Retailers have been rushing to get ahead of pandemic-related supply chain struggles, but making efforts to implement sustainable building practices where feasible demonstrates that they are listening to their customers. The effort and transparency go a long way in building a strong brand reputation and earning customer loyalty.

The Modern Mall
The Modern Mall 1440 428 ASG

An Exciting New Chapter for the Modern Mall

The traditional mall, once a staple of American retail, has been undergoing a significant transformation in recent years. As consumer retail trends shift and evolve, retailers need to adapt to stay relevant in the changing landscape. While many analysts claim the mall will become a thing of the past, these retail centers can survive by embracing innovation, reinvention, and evolution.

From Shopping Centers to Experience Centers

Gone are the days when malls were simply places to buy clothing or electronics. Modern malls are becoming “experience centers” where consumers can immerse themselves in a wide array of activities beyond traditional retail. Mall operators and retailers alike are reimagining these spaces as dynamic destinations that offer a unique blend of shopping, dining, entertainment, and community experiences.

What’s driven this evolution? Well, Millennials and Gen Z report valuing experiences over possessions. Community gathering places are critical to these major demographics, who want places to connect, socialize, and make memories. As a result, modern malls are incorporating more experiential elements, such as entertainment venues, fitness centers co-working spaces, and community gathering areas, to provide a multi-dimensional experience that goes beyond shopping.

Consumers crave an interactive touch-and-feel shopping experience again. Many retailers have undergone major renovations, focusing on creating an upscale, hashtag-able, entertaining experience. While not every mall can have the full NYC Hudson Yards vibe, all retailers can create spaces for consumers to shop and play. A unique and memorable experience will drive traffic and, in turn, sales.

An Omnichannel Experience

While the pandemic had most consumers on a click-to-buy pattern, now that the world has reopened, consumers are ready to get out and shop again. But consumers are still in the buy-now mindset, expecting in-person retail to be just as quick and easy as e-commerce.

How are malls reacting to these new shopper expectations? Some malls are repurposing vacant retail spaces into fulfillment centers or last-mile delivery hubs, enabling retailers to meet the growing demand for online shopping and same-day deliveries. Other retailers are leveraging malls as showrooms or experience centers where customers can try out products before making online purchases. This allows them to showcase their brand and create an interactive shopping experience, while still capitalizing on the convenience and efficiency of online sales.

The integration of online and offline retail creates a seamless omnichannel experience for consumers, blurring the lines between physical and digital retail.

modern mall

Other Consumer Preferences Transforming Malls

Let’s take a closer look closely at some of the key consumer retail trends that are influencing the transformation of malls and explore the evolution we can expect to see.

  1. Experience-Driven Shopping: Unique and immersive experiences that go beyond traditional retail are driving younger generations to the mall. Modern malls are incorporating experiential elements, such as entertainment venues, interactive installations, and community events to create memorable and engaging experiences.
  2. Technology Integration: Consumers use tech in their everyday lives, and they expect retailers to use it to enhance their shopping experience. Expect to see more features like augmented reality (AR) and virtual reality (VR) experiences, digital signage, personalized/targeted marketing and specialized apps.
  3. Community-Centrism: Malls have an opportunity to position themselves as more than shopping destinations, but hubs for community engagement. Malls can make their mark on a community by hosting local events, supporting local businesses, and creating spaces for social gatherings, like rooftop gardens and event spaces. This trend is driven by the growing desire for authentic and localized experiences as consumers seek connections and a sense of belonging in their communities.
  4. Convenience: Consumers demand time-savings solutions and shopping experiences that cater to their busy lifestyles. And with the rise of e-commerce, they have come to expect it. Malls are adapting by incorporating services like curbside pickup, same-day delivery and streamlined returns.
  5. Sustainability: Consumers expect retailers to incorporate sustainable practices, such as recycling, green spaces and energy-efficient lighting (at the very least). This trend is driven by the growing importance of sustainability and social responsibility in consumer purchasing decisions.

A Dynamic Destination

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.

Redefining Flagship Retail
Redefining Flagship Retail 1440 428 ASG

Flagship retail stores have historically been the beacon of a brand—an iconic entity with grandiose energy. But as we continue to rethink retail in today’s ever-changing and quickly evolving environment, it presents the opportunity to reevaluate the flagship experience and our approach to store design.

If you think about the essence of a flagship store, it has meant something larger-than-life, experiential, immersive, or even exclusive. Often, we relate this to store sizes like Krispy Kreme in Times Square, Hermès in Paris, Nike in New York, or the glass cube at Apple Fifth Avenue. When you strip away the square footage, it really implies a “special experience,” either with an exclusive, localized product (The Big Apple Doughnut), personalized service, or unique offerings associated with geography. So, if we can let go of this perception of flagship relating primarily to size and connect it more to the unique experience – then we get to the heart of what flagship retail means.


From High Streets to Side Streets

Retail succeeds when it responds to consumer needs, and today’s consumers want to stay closer to home when they shop. They want to be catered to and want anything but homogeny. Gone are the days of being inside any mall in America and finding the same set of stores. Consumers want something that reflects the energy of their neighborhood.

“Consumers want and crave variety, diversity, and choice. 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, ASG

The importance of diverging from homogenized retail is one of the key factors in retail design success today. Consumers have gained a new appreciation of home since the start of the pandemic. Similarly, when retailers begin to understand their own unique importance in the local community, they then become part of the social fabric of the community.


Embracing the Flagship Experience at Scale

Now is the time to refocus the meaning of flagship retail to symbolize a unique and localized experience for the consumer. In other words, we believe that the flagship experience shouldn’t be limited to just the launch of a design as it appears in Times Square, but it can also be a thoughtful, customized, and unique design in every neighborhood.

Your brick-and-mortar locations are not just transactional. They are valuable opportunities to connect with your customers and showcase your brand, values, and commitment. Every store design is an opportunity to provide local customers with an integrated, immersive, and unique experience with your brand.

Eager for more insights about the retail experience? Check out how some retailers are Minding the Retail Gap between pandemic and high performance.

Minding the Retail Gap
Minding the Retail Gap 1440 428 ASG

We have been talking about redefining retail for a long time, but some retailers are falling behind. In fact, the retail gap between outperformers and the rest of retail is becoming wider, according to McKinsey, and “those that wish to keep up need to speed up.” The report offers great insight into the state of the post-pandemic retail industry, including the fact that pure grocery retailers were not ready and were outpaced by Walmart, Costco, and others. What did these top 25 retailers do that we need to understand and emulate?


Cater to Consumer Needs

Some retail categories struggled, especially those selling business apparel and cosmetics, as more people worked from home and barely bothered to get dressed, let alone put on a suit. Regardless of type, retailers that achieved the most success were those that had some infrastructure already in place before the pandemic hit and were capable of shifting to meet changes in consumer demand. 

Home improvement, as a category, was dominant. But some retailers seemed prescient in their pre-pandemic strategies and had infrastructure in place that let them quickly shift to meet changing consumer needs as the pandemic wreaked havoc. Walmart, for example, had already launched their curbside pickup service and had a sophisticated ecommerce platform in place. Costco had already established both ecommerce services and two-day deliver for food in many areas. McKinsey identified 25 forward-thinking companies that accounted for 90% of retail gains. What set these retailers apart? They were able to quickly shift more of their services online without having to build the infrastructure in order to do so. 


Deliver Value

The consumer perspective was forever shifted due to the pandemic, and the retailers that thrived were those that could offer consumers value. Value, of course, means different things to different consumers, but the three shifts I’ve observed are: cost, sustainability, and social. Consumers were laid off and losing income. Consequently, they wanted to know they were getting the biggest bang for each buck. At the same time, consumers began to evaluate purpose and meaning on a more existential level, and there was a seismic shift toward sustainability. And of course, in the midst of the pandemic, we had social justice issues playing out before our eyes that caused a measurable consumer shift in choosing retailers whose values aligned with their own. 


Leverage Technology to Meet Consumers Where They Are

One of the most interesting statistics to come from the McKinsey report had to do with grocery retailers. As an industry, grocery lost one percent of their revenues, which is obscene given the fact that grocers were one of the essential industries that never had to close. During the pandemic, many people began cooking at home more and even embraced cooking as a way to pass the time. So how did grocers not explode during the pandemic?

According to McKinsey:

The shift from in-store shopping to grocery delivery – combined with consumers’ increased price-consciousness, substantially higher store-operating costs due to COVID-19 protocols, and investments to support online fulfillment – created significant pressure on margins. Uncertain longer-term growth prospects, due to meal-delivery companies eating into grocers’ revenues and platform players using food as a source of consumer engagement rather than profit, have also likely played a role in the sector’s mediocre performance.

In other words, because grocers were slow to recognize the need to invest in technology before the pandemic, they were caught facing costly infrastructure investments during the pandemic – all while other retailers were able to use food as an experience.


How to Close the Gap

Whether you’re a grocer or any other retailer who does not want to be left behind in the new retail, closing the gap will require a number of changes in strategy, not the least of which is flexibility.


Be clear in your definition of what and who you are.

Are your operational, organizational, and communication strategies aligned with your mission? Do you know what your brand stands for? Do your consumers? 


Technology

The retail environment is not done changing. And if you’re not keenly aware of the power technology plays to keep you in the game, it’s time for a very rapid education – and a significant financial investment. Everywhere your brand lives – social media, ecommerce, brick and mortar – needs to be treated as one, integrated unit. Believe me, your consumers don’t see these as separate entities.


Consumer-Centric Focus

Walmart and Amazon will not stop investing in technology and infrastructure and they will continue their attempts to peel away consumers by focusing on convenience and price. But consumers are starving for personal touches; so, find where you can make consumers feel good and be there. We know consumers will pay more for experience. Deliver it.


Re-evaluate Everything

From location strategy to brand partnerships, from the retail space you need to the neighborhoods in which you locate your stores, now is the time to re-evaluate everything. If you are struggling, get tough with your business. Where do you cut? Where do you invest? What kind of mission do you have? How are you engaging with consumers and cultivating consumer loyalty? What can you change to better meet your consumers where they need you to be?

As McKinsey suggests, “Those that act boldly to stage a strong exit from this economic crisis can maintain their edge for a decade or more.”

What are you doing to be bold?

The Golden Opportunity for Retail
The Golden Opportunity for Retail 1440 428 ASG

Over the last 10-12 years, DTC brands became a force to be reckoned with, as more customers turned to the convenience and cost-effectiveness of try-before-you-buy and automated subscription models. Traditional retailers and brands that were already shifting their retail strategies to compete with digitally native DTCs ramped it up during the pandemic. And consumers, seeking comfort in a time of uncertainty, sought out familiarity with the brands they already knew and loved. 


Consumer Trust in Traditional Retailers and Brands Increased During the Past Year

According to a Scalefast report, consumers ranked digitally native DTC brands as the most reliable category of retailers prior to 2020; 15 months later, traditional retailers and brands have taken a lesson from the DTC playbook, and 41% of consumers now consider traditional retailers most reliable. In fact, digitally native DTC brands are losing favor with consumers because of their inability to deliver on the consumer expectation of fast deliveries and a seamless experience.


Where Digitally Native DTC Went Wrong

Digitally native DTC brands were singularly focused on acquiring customers. As disruptors to the market, the focus was on peeling customers away from traditional retail and brands. They spent all their VC funding on ads to attract new consumers. And it worked. But along the way, the digitally native DTC market became saturated. To be heard and seen in a way that would attract a new customer required more and more money pouring into digital advertising, which drove up the cost of ads and visibility.

This was summed up nicely in an article about the fall of the DTC on Marker at the beginning of the pandemic: 

The investors bankrolling these companies are discovering one thing in common — that most of their money is going to expensive and ever-rising customer acquisition costs (CAC) via Google, Facebook, and Instagram. As one DTC investor has put it starkly before: ‘CAC is the new rent.’ And even after these startups get on the treadmill of paying digital rent, they are then finding themselves also paying actual rent. After all, the most effective billboard is an outdoor L.A. luxury mall or an expensive SoHo storefront, which can cost some $60,000 a month.


Growing a Customer Base from Scratch Is Costly and Difficult

Digitally native DTCs drove up the cost of customer acquisition without investing in any way to retain the customers they acquired, or to meet the needs they promised their customers and their VCs. DTCs were great at landing customers onto their websites to make a single purchase, but retention rates were so low that the cost of CAC became astronomical – and only grew higher due to the increasing costs of digital advertising. More and more money was required to get the same number of eyes on an ad – to the point where CAC was costing more than the LTV of each customer. In fact, that seemed to be the entire focus of some DTCs: Buy up enough media ads to divert people to the website for a quick sale with no plan for how to keep them. And for some DTCs, retention wasn’t even a solution. How often do consumers replace their mattresses or their luggage, for example?


Traditional Retailers and Brands Have Lower Customer Acquisition Costs

As the pandemic drove consumers back into the arms of recognized and cherished brands, and just as traditional retailers and brands were kicking omnichannel and integrated retail into high gear, the opportunity became clear. Adding DTC doesn’t require the same type of investment from an existing brand or retailer as it does from a digitally native DTC. And consumers don’t care where you started. A third of American consumers see no difference between digitally native DTCs and traditional retailers. All they want is to get what they want, where they want it, when they want it.


Digitally Native DTCs Are Not Sustainable without Brick-and-Mortar Locations

Digitally native DTCs are struggling, more so since the pandemic. The ones that are surviving are partnering with traditional retailers (becoming brand manufacturers or wholesalers) or are opening locations (becoming traditional retailers). This substantiates what I’ve always said: pureplay is not sustainable. Digitally native DTCs are opening retail shops and pop-ups or are getting placed on the shelves of traditional retailers. Omnichannel, or more accurately, integrated retail, is the only cost-effective business model for the long run in most cases. Retail Dive outlined the major movements in these two directions, all driven by the difficulty in acquiring new customers in an affordable way: 

Target brought in brands ranging from Casper to beauty brand Versed. Nordstrom formed partnerships with Glossier, Away, Bonobos and Kim Kardashian West’s Skims shapewear brand, among others. And Crate and Barrel launched an exclusive, limited-run collection with Parachute to sell online and in 65 of its retail stores.

Other brands opted for pop-ups or permanent locations of their own. In 2018, Casper announced plans to open 200 stores across North America, while Adore Me around the same time said it had plans to open 200 to 300 locations over the next five years. Commercial real estate firm JLL previously anticipated digitally native brands could open some 850 stores by 2023.


Why Traditional Retailers and Brands Should Consider DTC

Consumers expect to be able to find the products they want and need anywhere they happen to be shopping, whether that’s online, on their phones, in an app, or in your store. Moving into DTC only makes sense for traditional retailers, especially given the past year in which most retailers survived by already taking those first steps. A comment from Peter Smith on Retail Wire reminds us (the emphasis is mine):

What can sometimes get lost in the DTC conversation is the need for an integrated and seamless experience for the customer. They shop where and when they want – and that clearly works both online to bricks and bricks to online. So the only thing better than a great online experience is a consistent online and bricks experience. What should never get lost, however, is the significant advantage for brands executing DTC to control the brand experience for the end-consumer. It is no accident that more brands are reclaiming that right (critical to survival) in the face of indifferent end-user experiences with many bricks partners.


Benefits Beyond Brand Control

For traditional retailers and brands, there are major advantages of going direct to consumers, beyond just controlling the brands from start to finish. These benefits include:


Consumer Data

We all agree that staying in business requires delivering an exceptional customer experience every time. While having integrated retail solutions makes that more likely, knowing your customer better does, too – and DTC lets you learn things about your customers that you wouldn’t learn otherwise.


CAC and Other Cost Reductions

Controlling the entire supply chain process can allow you to achieve economic factors not otherwise available and gives you more control over the kind of service your customers get.


Personalization

Success in retail today requires a degree of personalization you can’t offer without incorporating DTC.


Customer Satisfaction

It’s a numbers game you can’t afford not to play. Eighty-four percent of consumers say they won’t go back to a brand after a bad delivery experience. Forty-two percent of Americans would purchase directly from a branded manufacturer over a third-party seller if they promised free and fast shipping.


It’s About the Customer

To achieve sustainable customer acquisition costs, traditional retailers and brands will have to adapt and restructure. DTC will help traditional retailers and brands deliver value to the customer at every touchpoint along the customer’s journey. 

Reinventing Retail: The Post Pandemic Strategy
Reinventing Retail: The Post Pandemic Strategy 1440 428 ASG

Has there ever been a more challenging time for retail? Without the business disruption insurance that we lobbied for, we’re seeing more and more retailers forced into bankruptcy. And even as states are in the midst of phased reopenings, the ongoing civil unrest, however justifiable, has made it impossible for some retailers to open as planned. There are more unknowns than knowns – and there’s a lot to unpack. What has become clear, however, is that whatever role you play in retail, the one word you need to remember is flexibility. 


Flexibility is our Mantra for 2020-2021

Retailers, landlords, lenders, and consumers – and all the organizations involved in keeping them up and running – must all embrace flexibility. But what does that really mean?


Retailer Flexibility

Retailers who survive need to throw their old models out the window. Consumers have changed. The economy has changed. We are not going to be able to predict everything that is going to happen (did you ever once think in January that this is where we’d be in June?). 


Location

For a retailer, this means flexibility in your location strategy: pop-ups, regionalization, localization, adapted design, modular design, movable walls to adjust to consumer and operational needs. 


Leases and Lending

This also means flexible negotiations with landlords and lenders, because traditional, long-term, fixed deals are not and cannot be the future. While terms have been adapting over the last two years, even more change is going to be required for new retail players. Flexibility tied to performance and structure will be a mandate from those retailers expanding and moving forward.  


Customer Service and Customer Experience

Flexibility in service to the customer, whether this means curbside delivery OR curbside return – yes, you read it here: curbside return – will be necessary.  Providing delivery options is only one of the simple changes that retailers have to make. The long pole in the tent is a complete overhaul of old processes and procedures as well as systems and devices that both associates and customers use.  Retailers have to pivot their strategies in order to address these new customer expectations.  Rachel Williamson provides the best guidance here:

  • Retailers must start with WHY. It has to be clear to your customers. Many businesses are focused on the WHAT and HOW. WHY is more important and draws customers to your brand.
  • Create WOW experiences. While safety is top of mind (and should be for the time being), it cannot replace genuine customer engagement. Sanitizing, masks, and long lines to enter the store must be met with engaging associates who are making the customer feel glad they chose to shop in-store.  The experience has to be tantalizing and connect the customer to the brand.  The only way this happens is through really thorough training of the store teams.  Shortcuts to training means shortcuts in delivery.  The customers will feel it and may not come back to shop.
  • Communicate to your customers regularly, reminding them about the safety protocols, but more importantly, about the different ways they can connect with your brand.  Now more than ever, the online and offline experiences have to be seamless.
  • Create a compelling reason for customers to come shopping and then continue to create reasons to return. Covid-19 created a supply chain disruption bigger than we have ever seen.  Stores have few fixtures on the selling floor and even fewer products.  Get creative on how to make the stores look and feel full.


Operations

Flexibility also means streamlining your company’s operations. Before COVID, removing ‘friction points’ was the focus. Now, the new processes designed to keep customers safe have created a new set of friction points for both store teams and customers. Every process that can be automated should be.  Examples include labor scheduling, merchandise flow, and performance management, as well as sensor product in the DC or at the manufacturer. Take it off the list of things the stores have to do. The focus in-store must be on delivering customer experiences and exceeding their expectations if brick-and-mortar is to survive.  

To be as nimble as possible, retailers should outsource everything that’s not part of the core business so that they can adjust more readily to changes. The future of retail belongs to the brands and companies willing to adapt to this constant state of flexibility – and there is a lot of market share up for grabs.


Landlord Flexibility

One of the core lessons learned during the pandemic is that force majeure did not save anyone but the landlords. Landlords – and the lenders behind them that often tie their hands – who refuse to renegotiate or provide any kind of flexibility will end up with empty buildings. The landlords who remain under-standing and flexible will be the landlords who win going forward. Retailers must be able to adjust lease terms to their needs. This can no longer be a negotiation to meet landlord demands. Retailers just can’t afford to do it anymore. Gone are the days of a 10-year, fixed-rate lease. Right now, retailers need leases that offer variable rents with more options; flexible terms are the new norm.   

The biggest outgoing is often rent. A number of landlords and tenants have already agreed short-term arrangements, such as rent concessions and deferments to cover the lockdown period. But what happens after lockdown? In a retail landscape where some trading is possible, but not enough to sustain rents at their pre-Covid levels, landlords and tenants will need to collaborate in order for both to survive. 


Store Construction and Design Flexibility

Retailers are going to need to be able to adjust locally and build in more regionalization and differentiation; so, there can be no more one-lease-to-fit-them-all or one size stores. National footprints won’t be normalized. Adding flexibility inside the spaces themselves will require flexibility with the landlord for things like movable walls to adjust backroom sizes and selling floor sizes as the stores or consumers demand, with multiple-size footprints and more showrooming for consumers.  

“This is a retail renaissance not a retail apocalypse,” said Whitney Livingston, COO, Centennial Real Estate. “For anyone to succeed, all parties need to move out of their comfort zones, and compromise and partner. Companies that are willing to innovate and think outside of the box will help the industry reset and thrive post-pandemic.”


Lender Flexibility

We’re spending all day every day in conversations with landlords. Landlords’ hands are sometimes tied as well. But without more flexibility from commercial lenders, we’re headed for a collapse that will make the housing crash of 2008 look like small beans. We’re already in a worse situation than we were then. It’s going to be ugly. 


Final Thoughts on Post-Pandemic Retail Strategies

Consumers may spend less. But even if they spend more, their spending is likely to be different. It will take time to collect data and develop trends, and until then, you’ll need to be able to quickly pivot.

The way forward in 2020 and 2021 is going to require innovation, technology, and data.

Data will be crucial. To get some real perspective on how little retailers know and how crucial data will be for future decisions, read this deep dive, from Retail Dive, on the uncertainty retailers face. From managing cash flow to determining a reopening strategy to making the tough decisions about locations in the coming 6-18 months, you will need analytics more than ever. 

“Retailers need to understand that their response to dynamic customer behavior starts and ends with data. We already have an endless supply of data but using it intelligently to make decisions on where and how to invest, and what the customer needs and values, is where we’ve seen traditional retailers struggle.” – Andy Halliwell, Senior director, retail, Publicis Sapient

The future is unknown. But we can begin to build new models now.

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