Last Word: House of Cards
The National Retail Federation held their annual event in Manhattan and this year’s preeminent theme was “prepare to conquer omnichannel.” It was a lavish event with credible executives discussing the future of mobile, virtual reality, augmented reality, voice commerce, and the continued shift from physical to online sales. To many, it was a refreshing cheerleading session for the faltering retail sector. The industry’s struggles deserve as much media scrutiny as the loss of rust belt manufacturing jobs. Unfortunately, the critical mass of retail job loss is too far off to galvanize the media in ways that coal and manufacturing have.
See: Dan Primack’s relevant tweet
One thing that I noticed throughout the week’s NRF commentary is that the rhetoric seemed more lofty than what has been heard in years past. Specifically, speakers and panelists worked really hard to convince retailers that now is not the time to bail on brick and mortar investment. Luminaries like Rebecca Minkoff cheered retail’s place in the lives of upscale shoppers.
A recent Lean Luxe quotes on the what is replacing big box retail:
They’ve been replaced by more focused and niche gathering places, most of which are monobrand standalone spaces in the form of hybrid shops. We’ve seen this in a big way with Rapha, who uses their Cycling Club locations throughout the world as gathering places for their members of the cycling community. We’re seeing this with Monocle too, perhaps not a traditional retailer in that sense, but still serving its tight community with several Monocle Cafes sprinkled in international cities. Saturdays, the NY-based surfing brand, also uses their locations––complete with small coffee shops––in this fashion. Even Toms does this with their Outpost concept stores.
In every instance here, each brand uses their physical spaces as hyper-specific communal gathering places for their members. So while the big box brands and the mall structure are on their way out, upmarket operators like the above are taking advantage of the situation––and perhaps even accelerating the death of the mall, as shoppers come to prefer these smaller, more intimate models more.
And there is truth in that message. Brick and mortar retail is not failing at all levels. For the upper middle class and beyond, it is actually getting better. Josh Quinn is the owner of a multimillion dollar boutique in the heart of urban Columbus, Ohio. Quinn is more than a store owner, he is a seasoned retail veteran and analyst. According to him, boutique retail is actually performing better than expected and that long-game players who care about customer experience are winning.
But the real economic shift will be felt in exurban, lower-to-middle class areas. These areas are more dependent on shopping malls and the associated commercial real estate developments to fill their open swaths of land. This is where these communities go to shop, eat, and work. This is also where a sizable amount of tax revenue is generated. Without anchor stores or foot traffic for smaller businesses, exurban commercial real estate is nothing more than a house of cards. Next generation retail will not be there.
I won’t speculate beyond the facts but the calculus is simple enough. The foundation of all suburban shopping mall is the anchor retailer and literally 100’s of anchor locations are closing each month as eCommerce begins to establish itself as the primary means of retail shopping for middle to upperclass America. The digital shifts are consequential to physical structures. Frankly, younger brands do not need that space to succeed. And older brands are now mimicking their younger counterparts.
There are obvious negatives here but the companies that are best positioned to benefit from the resetting of American retail are ones that are considered digital, native, vertical brands. These companies, the software, 3PL infrastructure, and agencies that support them are primed for growth as the evolution of retail continues.
See more of the issue here.