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Stores Aren’t Dead, Convenience is King, and Big Questions from a George Mason Retail Panel

The pandemic has not killed bricks and mortar stores despite
the move of consumers to clicks and online buying. Only changes that provide
greater convenience to consumers at reasonable cost to retailers will persist. Most
disruptions have already been coming and the pace and convergence have simply been
accelerated. But very big questions remain.

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These were some of the insights from a
panel of retail experts during the “Rebuilding Local Retail: Operations, Design
and Technology” round table webinar hosted by the soon to be launched Retail
Innovation Center and the Center for Real Estate Entrepreneurship of the George
Mason School of Business last June 24.

The panel consisted of Paul Weinschenk, Vice President for
Retail with the development firm Peterson Companies; Roberto Belmar, a retail
technology expert with Infovista; Mike Smith, a retail strategy and design
expert with Streetsense; and Mark Hasting, a senior retail executive previously
with MyEyeDr, Target and Starbucks. Gautham Vadakkepatt, director of the Retail
Innovation Center, served as the panel moderator.

Physical Stores Are Not Dead (But Transforming)

Weinschenk confirmed that firms like Peterson Companies,
which manages over 6 million square feet of retail space in the metro D.C.
area, have been contending with how to reopen stores and bring consumers back.
“We’re trying to give shoppers a sense of comfort and happiness to be there,”
he said.

But even with stores reopening, the speakers acknowledged
that the pain in the retail sector was worse than widely thought.  “The media has provided a sense of optimism
about the large increase in retail sales in May over April. But if you exclude
sales of automobiles and fuel, many stores had small sales growth or declined,
“said Hasting.

Smith added that some of the decline had been long coming.
“The pandemic accelerated trends that were already happening. Retail was
overbuilt due to pressure for retailers to expand and open new stores funded by
more corporate debt. Local zoning also encouraged more street level retail.
This has now led to weaker performing retailers and store locations.”

In the face of weak foot traffic and low sales
at most physical stores, the discussion focused on the surge in online
purchases by consumers. “Online is not going to be the death of stores,” declared
Belmar. “If there was ever a time where this would have happened, now is that
time. It did not and retail is not going to be 100% online. Other forms developed
like curbside, pickup, and by appointment.”

“Online
remains good for researching a purchase and a quick buy once you know what you
want. It is not great at discovery and a true shopping experience,” continued
Belmar. “In a store or a mall, shopping and discovering what you want are great,
but the buying and payment experience is not. The goal is to make shopping and
buying a good experience for the consumer at reasonable cost.”

“Brick and mortar stores aren’t going anywhere,” agreed
Smith. “It took many years for Amazon to turn a profit, so online is still a
tough go. The omni-channel approach (physical and online combined) still makes
sense, though physical footprints will shrink.”

“Some retail will decline like apparel,” said
Smith. “True experiential retail such as food and beverage has exploded in
recent years, over-expanded and is now right sizing. Fast casual restaurants such
as Chick-Fil-A are less experiential and doing better with delivery and
pick-up. Ghost kitchens are growing – restaurants with no front dining and offering
just delivery and pick-up.”

Smith
also brought up the issue of increased retail vacancies. “The longer this
situation goes on, the longer these temporary disruptions linger. What do you
do with the excess retail space from closures? There will be less prospects for
new tenants. Municipalities and developers have to be more realistic about the
real demand that exists for retail spaces. Other uses to create place will be
needed other than shopping or eating at restaurants.”

Technology: The Good to Haves Became Must Haves

The panel agreed that technology is addressing some of the
challenges facing retailers. “Necessity is the mother of invention,” quoted
Hasting. “Some technology went from nice to have to must have such as touchless
payment, which retailers used to postpone but are now going in that direction.”

Belmar agreed with this. “Trends in retail technology are
not new but are now accelerated and converging. 
Some technology which was considered expensive before are now getting a
second look such as augmented reality for virtual try-ons as an alternative for
fitting rooms. Will customers want to use fitting rooms, and will employees
want to handle tried-on merchandise? Some retailers are also looking at touch
screens which are made touch free, for example, by swipe gestures.”

Online and Delivery: Convenience is King

Belmar also brought up the grocery home delivery. “Once
consumers experience something that they now prefer, they look for it in the
future. One thing that has been mentioned is contactless payment and another is
grocery delivery. Grocery delivery is now convenient for the consumer who has learned
how to tolerate others picking their groceries. But this comes at a high cost
to the grocer so a balance will be sought.”

Although physical retail is here to stay, Weinschenk raised
several implications of increased delivery and online sales for developers and
users of retail space. “Are we going to see more retail sales go permanently
on-line and will this lead to more retail space converted to last mile
fulfillment?” he asked. “This affects the space choices of tenants. Would they
still want more expensive retail space versus other types of spaces? Or will
physical stores become a loss-leader? Will we see the same range of selections
in physical stores? If curbside and drive-through pick-up stick, there are also
implications for the design of retail centers and zoning rules of
jurisdictions.”

The panelists addressed which changes will
stick after the pandemic. “Consumers have short-term memories and will go back
to what they know,” said Hasting. “But things that simplify life over what used
to be will stick. If something makes life more complicated, the consumer will
go back to what used to be. Consumer muscle memory is hard to change.”

“It
used to be that the customer or the product or the messaging was king,” added
Belmar. “Now, convenience is king.  The
pandemic has changed the definition of convenience but still reinforces that
convenience is king.”

Big Questions at the Top of the Second Inning

In a time of continued volatility and uncertainty, the panel
reflected on where the retail industry stands. “We’re still at the top of the
second inning, maybe the bottom of the first,” said Weinschenk. “More questions
are still to be answered. What the retail world will look like is still to be
revealed. Will consumer behavior will go back as before? Which new behaviors
will stick around for a while?”

“How do we reduce the anxiety of consumers and employees?” asked
Hasting. “Retailers also have to deal with the bifurcation in our society – for
example over mask use.”

“Consumers’
ability to spend money will depend on their sense on whether the pandemic is
still lurking out there,” continued Weinschenk. “There’s also the political
climate – how do we engage with each other?”

Vadakkepatt,
as moderator, concluded that retail is indeed transforming, many big questions certainly
remain, and perhaps the panel could reconvene in six months to provide an
update on continuing disruption and rebuilding of retail and retail places.

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