Retail trends driving change in 2018

Above: Second look at the interior of Scottsdale Fashion Square's luxury wing (Provided rendering by Scottsdale Fashion Square) Retail | 19 Feb, 2018 |

Last year’s rise in bankruptcies and store closures of retailers had some people predicting a “retail apocalypse.” Meanwhile, others in the retail industry pushed back on that rhetoric and saw it more as an evolution of the industry to meet changing consumer demands.

Nine retailers announced bankruptcies during the first quarter of 2017, which matched the 2016 total, and Credit Suisse estimated 8,640 more stores could have closed by the end of the year, which was higher than the historical peak of 6,200 stores during the Great Recession. However, experts say, retailers can avoid being another statistic by identifying emerging trends in retail and making the appropriate adjustments before it’s too late.

To better explain what the industry can expect during 2018 and beyond, local experts were asked to identify a couple ways that retail is evolving.

One local mall that has remained a one-of-a-kind retail destination and a top-performing property for many reasons is Scottsdale Fashion Square, which is currently owned by Macerich along with nine other regional shopping centers in Arizona, including the Biltmore Fashion Park in Phoenix.

For Garrett Newland, vice president of development at Macerich, the latest exciting trend is how digitally native brands are occupying brick-and-mortar spaces to build closer ties with shoppers and create new relationships. “Across the Macerich portfolio, we now have physical stores for born-online brands including Warby Parker, Peloton, Blue Nile, b8ta, Ministry of Supply, UNTUCKit and others,” he explains.

Expecting the trend to continue, Todd Folger, first vice president with CBRE Retail Services, says, “Now, more than ever, consumers crave experiences that allow them to feel, touch, hold and in some cases, try on, products. Brands will continue to move toward providing creative and new experiences for their consumers to earn their loyalty.”

For example, Total Wine now hosts beer and wine tasting classes, which offer customers a different experience than anything they’ve traditionally seen in the past.

Other strategies may include adding new, trendy shops and amenities to enhance customers’ experiences, renovating or reinventing the traditional mall by adding mini-boutiques into larger vacant floor plates.

For example, at Biltmore Fashion Park in Phoenix, Macerich transformed empty space into a retail incubator called “The Union.”

“The goal was to temporarily house smaller, local and independent businesses, and to give them each an opportunity to test the mall environment and find success,” Newland explains.

Tenants that did well, like Short Leash Hot Dogs, Citrine and Royal Coffee, decided to relocate to spaces outside of The Union but still within the shopping center.

On the grocery store front, Scott Ellsworth, vice president at SRS Real Estate Partners, says, “Kroger [known as Fry’s in Arizona] is staying ahead of the competition by its ‘ClickList’ online service, which allows customers to pick up groceries at a designated time from their stores.”

E-commerce doesn’t suit all aspects of retail, explains Joshua Simon, founder and CEO at SimonCRE, but he predicts technology will greatly impact physical retailers. Also citing Fry’s as an example, Simon says, “They are committed to cutting physical store openings while investing more in ClickList, Express Lane and mobile app experiences.”

In addition, Ellsworth explains, “Fry’s has also added more to-go meal kits to compete with online only companies like Blue Apron as well as continuing to enhance its in-store bar and prepared meal offerings to capture business from other neighborhood restaurants.”

Many within the restaurant industry have coined this added competition segment as “grocerants,” and it can already be seen in the Valley at some Fry’s and Whole Foods locations.

Overall, more grocers are adopting onmi-channel strategies, giving customers options to order their groceries online and pick them up in-store, curbside or via delivery.

“Whether you are retail or a restaurant, the consumer demand is driven by having what they want and when they want it –  brought to their door,” says Dave Cheatham, president at Velocity Retail Group. “Retailers will continue to buy internet companies, and vice versa, to be able to accelerate their expertise in omni-channel.”

For example, Amazon bought brick-and-mortar Whole Foods; Wal-Mart bought internet companies Jet.com and Bonobos; and PetsMart bought internet company Chewy.com.

Simon agrees, noting the successful retailers have adapted the right omni-channel approach. “They have better inventory, provide better mobile experiences, emphasize personalization and simplicity, and engage consumers on consumers’ terms,” he adds.

In terms of new project developments, Kerry Linthicum, vice president at CBRE Retail Services, says, “Another trend we will likely see in 2018 is grocers offering a wider variety of store sizes, with smaller footprints designed for convenience and quick trips, and larger store sizes designed to support experience-centered amenities like cooking classes and in-store dining.”

Meanwhile, new restaurant concepts are setting up shop in unconventional spaces.

“The concept ‘If you can vent it, you can rent it,’ is taking the food and beverage industry by storm,” explains Folger. “In Downtown Phoenix, we’ve seen projects like DeSoto Market transform a former automobile dealership into a multi-vendor market. While The Churchill is a new urban market concept that will be housed in repurposed shipping containers.”

Restaurants and bars are still considered a popular way to provide shoppers with experiences and opportunities to spend their dollars outside of traditional apparel shopping.

However, regardless if it’s a national, regional or local restaurant, Ellsworth says, “more closures will be expected next year from oversaturation and too many ‘niche’ concepts that can’t produce what’s needed to stay relevant in the ultra-competitive restaurant industry.”

For Carol Schillne, first vice president at CBRE Retail Services, the lines between live, work and play are becoming increasingly blurred, with consumers wanting restaurants, shopping, services and entertainment at their fingertips. For this reason, she says, “Retail space will continue to be added below office buildings and apartment communities.”

A similar strategy will be evident at Scottsdale Fashion Square where Macerich has already begun a multi-phased, multi-million-dollar project to renovate the mall’s luxury wing followed by the addition of mixed-use elements such as high-end residences, class A office space and a new hotel.

“Certainly, adding complementary live, work and stay elements to a property will provide a built-in, new customer base for the retail components,” Newland explains. “And vice versa, being in such close proximity to a world-class retail destination like Scottsdale Fashion Square provides a powerful draw for the project’s other mixed-use elements.”

It’s true retail is changing and those changing with it will do the best during this evolution of the industry, but the top-performing retail centers will continue to be magnets for people, ideas, great experiences and brands, as well as community gathering spaces.

Although the ways this gets accomplished will also evolve as the retail industry heads into 2018 and beyond.

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