Attention Shoppers: The Retail Industry is Shifting, Not Dying

Hold on to your shopping carts.  The retail industry is undergoing a radical change, and it’s not just impacting retail – there will be major changes in housing and construction patterns as well. 

Yes, we are seeing closures of stores such as Radio Shack and a variety of fashion and clothing stores, and the resulting retail deserts often have a negative impact on the local housing market.  But consider this: A Forbes article notes that, in 2017, more stores have opened than closed. A little more than 4,000 nationwide. It may not sound like much. But it bucks the closing trend we’ve seen for a while now, even after The Great Recession of 2008.  

Statistically speaking, there were 2.7 stores opening in 2017 for every store closing, according to the National Retail Federation.  

What we’re seeing is a rise in the opening of convenience and discount retailers, often referred generically as “dollar stores.” What we’re also seeing is smaller-box stores, particularly the dollar stores, stocking some of their sales shelves with food. These smaller-format retailers are giving the big-box stores – which have often marketed themselves as one-stop shopping locations – a run for their money. 

Because the stores being closed are in locations and set-ups that won’t accommodate the format of the types of retail businesses that have been thriving lately, retailers are finding new locations … away from major shopping locations. 

All of this shifting has got big-box retailers trying to think out of the box, so to speak. We’ve seen the likes of Target and Walmart stores attempt to branch out into urban communities. In essence, those stores have downsized so they can be downtown. TargetExpress is a good example of this.  

We can’t blame retailers for all of these changes. After all, they’re only trying to accommodate the latest set of priorities for consumers. Convenience and accessibility are the latest must haves for shoppers. In that area, brick-and-mortar retailers must go head-to-head with online retailers – even though many brick-and-mortar stores have also carved out an online retail presence.   

And instead of blaming the Internet and technology for the upheaval in the brick-and-mortar businesses, many retailers are getting smarter about using smart technology to reach customers as soon as they enter the stores. For example: After encouraging their customers to download the store’s app, retailers can send enticing, targeted messages and in-store offers to the customers.  

Even with all of that, smaller-format stores have the edge when it comes to customer preference these days. 

These retailers will follow not only consumer behavior but consumers themselves. Most consumers want the convenience of being less than a mile from his or her favorite store. Shops, be it discounters or specialty shops and boutiques, will open wherever the consumer population is largest. And that’s not always going to be in a big city. The new geographic target for retailers might be a second-tier city. It could definitely give a boost to a struggling community’s local economy, like a vitamin B12 shot in the arm of a sluggish person. 

In some cases, retailers may be enticed to pick a location not traditionally considered to be a commercial hotspot. If these are the retailers that cater to consumers’ latest preferences, the businesses will attract homebuilders who see an opportunity to make money.  

“This sort of shift in the retail industry, in terms of location, definitely has the potential to spur a boom in construction of new houses outside of core city areas,” said Tim Bakke of The Plan Collection, a fine house plans firm based in New York.  

One innovative type of retail which may be fueling that construction boom is the “pop-up,” typically a short-term, small format retail store. Pop-ups are often independent boutique shops, but increasingly, larger retailers are getting in on the act as well – and cities eager to redevelop areas that have long been deserted by major retailers are anxious to encourage pop-ups as a way to spur entrepreneurship and fill empty space. “Chicago has some initiatives around entrepreneurship,” said Stephen Brooks, a global consultant who specializes in helping retail pop-up entrepreneurs achieve success. “More of that should be going on.” While Brooks notes that not all retail landlords are on board with leasing smaller spaces to temporary shops, “I’d encourage landlords to take that approach seasonally. And rather than saying, ‘If you stay on, I’ll need to start charging more money,’ instead keep the costs as keen as they can so that business can survive. Something similar is already happening in the U.K., and that’s great for the town, great for employment, great for coffee shops and restaurants, and great for the community in general. But you have to start somewhere – and make those premises affordable.” 

This trend is evident when looking at what has resulted in some areas, such as a few locations in Illinois outside of Chicago. Those locations, and others like them, are what MarketWatch calls “surbans.”  

 Simply put, surbans are suburban communities containing a mixture of housing types (townhomes, apartments, single-family homes, etc.) along with amenities more often associated with urban settings. In terms of retailers, amenities may be smaller-format grocery stores, speciality shops, and discounters. 

“Surban living is becoming a new way of life for many, where the blend of urban and suburban living provides the best of both worlds,” Danielle Leach, a senior consultant at John Burns Real Estate Consulting in Chicago, told MarketWatch. 

As such, surbans can be a source of significant business opportunities and profitability for those in the new-home construction industry, according to Bakke. 

“Just as the retail industry is following consumer behavior and their latest preferences, the housing industry may do well by following the retailers who are setting up shop in second-tier cities and ‘surbans,’” Bakke added. 

From there, a domino effect starts. More demand for new housing – from consumers who want to be near amenities such as small-format retail stores in suburban settings with urban conveniences – means more constructions jobs. Creating more wage earners is likely to translate into more money being spent … and more money getting pumped into local economies as well as the national economy.