New numbers from Forrester Research estimate that 72% of retail sales will be made in physical store locations in 2023, a statistic most wouldn’t have dreamed of coming out of the pandemic.
While retailers like Bed Bath & Beyond Inc. barely escaped bankruptcy because of what some believe is a lack of awareness of online and discount store competition, there has been a resurgence of people wanting to experience shopping instead of clicking.
In some areas, vacant retail stores are now filled with experiential pop-ups, allowing customers to touch, feel and experience the brand. For example, the long-vacated Barneys department store on Madison Avenue in New York was recently replaced with an experiential Louis Vuitton Malletier traveling exhibit called “200 Trunks, 200 Visionaries,” which ended New Year’s Eve and drew a considerable customer base during its existence.
Rena Kliot, broker and founder of Pulse International Realty in New York and Florida, says the future looks bright for brick-and-mortar retailers offering an experience.
“Building an atmosphere and a personalized customer experience makes you feel special. It’s what Apple and Sephora have been doing for years and is especially sought after by under-30 consumers,” she said. “Stores combining advanced tech and an in-store experience are winning over these customers.”
Kliot believes brick and mortar isn’t dead; it’s “evolving.” For example, she mentioned Dick’s Sporting Goods Inc., which began shifting its consumer experience a few years ago. Dick’s refers to its new customer offering as omnichannel, with additions including Public Lands, a retail concept that features experiential elements like wall climbing, and a tech company that builds products for youth sports teams and communities. Dick’s Going, Going Gone! stores consolidate clearance inventory and allow for e-commerce sales.
Kliot, who has sold $1 billion of properties in her nearly 20-year real estate career, agrees with many investors that grocery stores are still the most sought-after retail anchor tenants. But she also believes stores offering creative discount inventory like HomeGoods, which emerged from T.J. Maxx and Marshalls, is also a great customer experience.
“It’s like a scavenger hunt and something that draws us in because we get excited about what we might find,” Kliot said. “In the most simplistic way, it’s something we gravitate to as consumers.”
Bed Bath & Beyond, which has avoided bankruptcy by completing a complex stock offering to inject the company with new funding, is closing 400 of its more than 750 stores. In a recent CNN article, discount chains like HomeGoods emerged as one of the stores that undercut the giant home furnishings chain.
But for commercial real estate investors looking to replace retail spaces being vacated by former anchors like Bed Bath & Beyond, Kliot says pop-up stores remain an income remedy.
“The lease terms on pop-ups aren’t as short as they used to be. Much of them are open-ended and dependent on success,” she said. “It’s better to have something there than have an empty space. Pop-up stores bring attention and life to the center. It’s a good transition option.”
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