By some estimates, shoppers were spending $1 million per minute at the peak of Black Friday. By the close of business, $5 billion was estimated to have been spent online. Estimates are that Cyber Monday will be even bigger with digital sales of $6.5 billion; signs that the retail experience in the future will be totally different than it is today. Tailored customer experiences and seamless integration of online and brick-and-mortar will be pillars of the retail experience. The following are some insights into how retailers are preparing for the future.
Customer experience is more important than ever before. The customer has more choices and more variety than ever before, what we have grown to expect online, we are taking into the store. That puts a tremendous amount of pressure on retailers to meet those expectations. Retailers have to cater to that. One of the main points of higher expectations is in surprise and new and different. There is an element of surprise of new demands because we have gotten used to the Internet where everything changes every minute, and we don’t want to walk into the same old boring store. In order to drive people in to a retail space, you need to offer something different.
This especially applies to large retailers, which have a copy-paste model where everything is the same and you rotate merchandise every few months. Pop-ups give retailers an opportunity to offer something new and different and to experiment with new store formats and new product lines. For the big stores, it is a chance to experiment with new products and test new markets before committing to a long-term lease. Pop-ups can also be really popular for smaller up-start brands that can’t commit to a long-term lease. A pop-up gives them entry points into a market and to customers.
The landlord has to play a much more active role in both generating traffic and in working with the retailers. There is recognition that retailers and landlords need to partner more as opposed to have a more traditional tenant-landlord relationship. They are partnering on data initiatives. A simple example is that a landlord is looking to install technologies or creating mobile apps that can assemble retailers or connect consumers to different stores, and digitally create a partnership that together drives sales at the properties. We see landlords investing more in retailers. Landlords need to be more active in trying to generate traffic and reach out to consumers digitally. One of the ways that you see that is in the social media marketing efforts.
No one knows the perfect solution. The best way to figure it out is through experimentation. Omni-channel is very expensive. Retailers have this new higher cost and an uncertain future, and the solution at the moment is experimenting. Pop-ups have become a way to collect data on the consumer. This can help inform a retailer’s long-term strategy, and the most savvy and smartest retailers are leveraging pop-ups to collect data.
It is hard to say exactly what is going to happen with certain technologies and where you should invest. That is the challenge that the entire industry is facing. Fundamentally, any time you have a period of change and transition like we are going through now with omni-channel, there are always winners and losers. We will see retailers fail to keep up and we will see retailers that fill in the gap and adapt really well.
Retail Lease Terms
A lot more flexibility and early termination clauses are being built into leases today. That really answers the question of what happens in five years if retail is completely different. The landlord, in many cases, will almost always compromise with a tenant rather than lose it.
Source: Forbes, GlobeStreet.com, CBRE Future of Retail, CNN Money