Despite the widespread perception that brick-and-mortar retail is on the decline, the numbers say otherwise. According to PricewaterhouseCoopers' (PwC) recent emerging trends survey, the long term growth rate for traditional retail sales has remained at a steady 4 – 4.5%. Although the industry is changing, the retail landscape is still strong. Here’s how it is changing, why it’s changing, and what to watch in 2018.
Generational Need for “Gadgeteria” Will Change the Retail Landscape in 2018
Although most retailers are targeting millennials with new technology to infuse their strategies in 2018, their predecessors in the GenX crowd and those coming behind them in generation Z and Y are equally impressed with tech-centric retail. Still, there are a few important differences that PwC’s survey points out.
For one thing, Gen Z is much less leery of laser-targeted outreach online and via mobile than previous generations. This generation expects retailers to utilize social media, mobile, and the internet to target them with ads catered to their particular interests.
A concept coined “gadgeteria” by PwC, Gen Z wants and expects retailers to know their preferences and are willing to share them with companies, with one caveat – these businesses must be safe from hackers looking to steal their identities.
Targeted promotions that use geofencing to alert consumers in the vicinity of brick-and-mortar stores of deals based on their mobile browsing history are welcome innovations for a generation born into the age of e-commerce. Cashless payment options, experiential shopping, and m-commerce are all welcome innovations for this age group whereas Gen X and Y find granular targeting a bit unnerving.
Retail Challenges Go Beyond Competition from E-Commerce
Last year brought a lot of bad press around big box store closures and the dwindling appeal of traditional brick-and-mortar retail in city malls. Most of the troubles experienced by these companies have been blamed on the expansiveness of e-commerce. However, PwC highlights trends that go beyond e-commerce that are responsible for some of the challenges facing traditional retail, including:
· Younger consumers prefer shopping online to shopping in person at department stores
· The natural evolution of retail similar to the move away from catalogue ordering in the 50s
· New innovations affecting the way clothing is manufactured and distributed
· Overall changes in the demographic makeup of today’s consumers
· And the effects of technology on society as a whole
In essence, for decades beginning in the 1950s, the proliferation of giant box stores, department stores, retail chains, shopping centers, and malls oversaturated the market. Now that the majority of retail transactions occur online, these massive structures are out of place in the current retail landscape.
The State of Brick-and-Mortar Retail Remains Strong
Even with all of the headwinds and changes occurring that have had a negative impact on traditional retail, industry experts say that the retail landscape remains strong. Investors are still interested in these assets, lenders are still willing to finance investments in traditional brick-and-mortar, and investors are able to acquire these properties at incredibly low prices right now.
The fact that many of these outdated assets were built within urban centers is proving to be a plus now that younger consumers as well as older adults are moving back to the city. Coupled with the fact that online giant Amazon has turned its sights to brick-and-mortar, it’s clear that opportunities abound in 2018 for revitalizing retail in city malls and shopping centers across the country.