80:20/20:80 — Thoughts for Retail Development Survival in the ‘Age of Amazon’

by Katie Sloan

By: David Zelman, vice president in the retail mixed-use studio of FRCH Design Worldwide.

Recently, I had the opportunity to attend the Entertainment Experience Evolution conference in Los Angeles. This is a relatively new event, focusing on retail and mixed-use destinations with entertainment components as an amenity for retail developments. What was truly interesting is that this conference was not just about adding something fun for guests; it was a profound discussion about the future of retail centers — repositioning existing facilities that are struggling, and finding the “it” factor for new projects.

Many industry leaders, including my colleagues from FRCH, presented innovative ideas and perspectives at the event. As retail experts, designers and architects, we spend a great deal of effort taking the pulse of retail in the U.S. and across the globe, evaluating the needs of our guests, macro trends and the overall state of the industry.

The general consensus for the future combats old formulas from the past. We know that a development anchored by a grocery or department store simply doesn’t translate positively with consumers in the age of e-commerce. The focus of discussion was on new ways of drawing guests, and on the need for every development to be local, unique and adapted to its immediate environment.

While this certainly is true for any quality development, we have found that there are still guidelines that can help developers find the right fit for their investment.

First is 80:20 and 20:80. Randy White’s keynote address, ‘The Digitalization of Place — Disruption & Counter Strategies,’ built a narrative for the continued relevance of retail-location-based environments in our evolving digital ecosystem. His strategy distilled our ongoing conversations with clients so simply: 80 percent of American consumer purchases are commodities like groceries and basic apparel, and 20 percent are aspirational, like a 2” thick steak or designer accessories. Many consumers are already purchasing at least some of the 80 percent online, delivered the next day. The 20 percent still represents something the consumer wants to see, touch, smell or taste before they make their purchase. This is our best opportunity for bricks and mortar retail moving forward.

Our challenge is to make retail developments that cater to that 20 percent discretionary market an engaging experience, accessible to 80 percent of our population. When that 80 percent finds their way to a property, the developer’s job is to make sure that they stick around long enough to make significant purchases. If you have a successful retail center that is based around a grocery or department store, it will likely remain the way it is. And if the numbers show that this model will work for a new development — go for it! But if there is a concern that competition — online or down the street — threatens return on investment, then there are alternatives to the traditional product mix.

Before we list what these alternatives are, a few basics must be understood. There are features that many developers still see as amenities that are now prerequisites. They are not to be confused with features that drive traffic — rather, these get consumers to the door. These include: food offerings; convenient parking; a clean and safe environment (really clean and safe); Wi-Fi; kid compartments (daycare/play/focused retail); and well-trained and friendly associates

Again, these are bottom line requirements for the 20 percent aspirational project. Once these have been implemented, then it’s time to consider that special something that makes the development a local or regional attraction. This is where the guidelines come in.

While every place has a unique, localized group of solutions, most likely that “special thing” will fall into one of the categories listed below. The good news is that we have found that adding a component from one, or perhaps two, of these categories can transform commodity destinations to places of choice. Here are some interventions that we have found to be successful:

1.      High Street/Town Square:

Two prerequisites for this approach are that the local neighborhood needs a new center, and that your tenants are a fit for this type of format. In order for a regional retail destination to work, the program has to be more ambitious than replacing 50 parking spaces with grass and benches. A true central destination needs to be integrated into the local community, easily accessed by foot or transit, and scaled and designed to create character that encourages people to gather and share experiences with each other. Often the most successful variations of this type also contain attractions from one of the categories below.

2.     Entertainment Events:

These are venues that include cinema (a new product for your guest every week), live theater/music, sports (playing or watching on the big screen), and programmed event space. The goal here is to draw guests for the event, and encourage them to stay long enough to shop or have a meal and explore the surrounding offerings and experiences.

3.     Meet/Greet and Interact:

There is a lot of noise out there about creating social environments to attract millennials, but the reality is that places that encourage interaction appeal to all demographics. Some new concepts out there, such as adventure play systems and darts or ping pong with online scoring, do tend to work best for a young adult demographic. If a development is interested in attracting a wider demographic, “the classics” are viable as well — pub crawls, art walks, and wine tastings draw crowds when done properly.

4.     Show and Tell:

This is really a sub-genre of Meet and Greet, but one that is not seen much in a retail environment. Through activating experiences that are aligned with the brand ethos and appeal to consumer interests, programmed events with some creative flair do a great job of attracting guests and encouraging a longer stay. As part of a regular event schedule, Show and Tell events can help bring back guests on a recurring basis. Examples of Show and Tell include car shows, a dog park (who doesn’t love to talk about their dog?), family art workshops, antiques appraisals, and holiday events meaningful to the demographic served by the property.

5.     Whiz-Bang Attraction:

Generally a large investment, but well worth the effort in the right market, these include blockbusters like roller coasters, interactive fountains, and large water parks. An option to consider for a more traditional retail development are dark rides — these carnival classics (think haunted house or indoor family coaster) can often fit into an empty anchor or big box space and fill a void quickly with creativity and the right operational support.

While it is true that every project is unique, and every region has its challenges, if a developer truly wants to be in the 20 percent, focusing solely on great brands anywhere below absolute top of market won’t cut it in today’s market. It’s still critical to know your guests, anticipate their needs, give them great food and service and make a place where they want to spend the day. This, plus the added attraction of experiences that can’t happen in their living room or online, is the key to success in our current retail environment.

Dave Zelman is a vice president in the retail mixed-use studio of FRCH Design Worldwide. His 20+ year career has focused in the leisure, entertainment and hospitality markets. He brings this guest focused perspective to every retail development project.

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