Housing Market Predictions

It is Time for Retailers to Re-Evaluate Their Real-Estate Footprint

Today’s retailers need to have a better understanding of their real estate footprint.

Let’s face it, the way we buy things has changed dramatically.

Instead of going to the local mall to buy a new dress for work or a new action figure doll for our kids, most of us don’t have time to spend dawdling at the mall.

Instead, shoppers are and have been getting what they need online (especially during the global pandemic) at such sites as Amazon.com, the largest North American online retailer, bypassing trips to brick and mortar stores.

And the numbers don’t lie: Amazon continues to see increased traffic to its site; in January, total visits were up 20% compared with January 2020 and up 37% compared with February 2020, according to Digital Commerce 360’s analysis of traffic data from Web measurement firm SimilarWeb.

e-commerce websites like Amazon.com and Walmart.com make it easy for consumers to order what they need directly without leaving home. Even grocery stores have made it a no-brainer for consumers to buy milk, fruit, and toilet paper online and have it delivered.

For instance, consumers spent $861.12 billion online with U.S. retailers in 2020, up 44.0% from $598.02 billion in 2019, according to the Digital Commerce 360 analysis. Online spending represented 21.3% of total retail sales in 2020, compared with 15.8% in 2019, the report said.

For many the convenience is worth it: find what you need/want, click your mouse, pay, and be done.

It’s instant gratification for those moms and dads who don’t have the wherewith-all to shop elsewhere.

But how does this affect regular retailers who have shops and storefronts? Or, leased space at the local mall or on Main Street? A lot.

Get with It

If retailers want to stay in the game they’ll need to get with the times and re-evaluate their real estate footprint. If they don’t they may find themselves filing bankruptcy as many retail icons have done amid the pandemic.

Yes, remaining retialiers will need to re-think their store’s real estate footprint from A to Z.

One way to re-evaluate their real estate footprint is to think about saving money but also not skimping on the needs of their customers.

For example, maybe it’s time to maximize their retail space or simply downsize. A retailer who once needed an 1,800 square foot store in a large, enclosed mall in a suburb, who has seen sales dwindle and rent rise may not need the big space anymore.

After 18 months of being shut down, almost all retailers have seen a change in their numbers and future outlook because of the pandemic.

They very well might need to cut space if they haven’t done so and come up with new marketing strategies.

Not a Defeat

Retailers who might need to go smaller or change direction should not think of this as a defeat. Even big-box stores like Best Buy and Staples have downsized in certain markets. They’ve cut their space because of waning on-site sales but by doing so they’ve saved on rent, overhead, and more in some locations.

Another way retailers can reassess the way they do business (and some already are) is to redesign their stores; make the shopping experience more exclusive for their customers. This could also lower overhead costs and increase overall sales all while providing customers with a different experience.

Things to Consider

When re-evaluating their real estate footprint, retailers should also think about the neighborhood they enter, know the market potential in the area, the population, and if the location could present more opportunities in the long run.

A retailer should be aware of other competition and determine if there’s too much oversaturation in the market niche or if the location can accommodate another retailer in that space.

It’s a tough market out there as many cities and neighborhoods around the country have witnessed rental costs rise while newer developments have slowed. Both instances have forced retailers to strategize new real estate needs including their square footage and how to increase sales.

In the end, it’s not a one-size-fits-all blueprint, and today’s retailers need to have a better understanding of their real estate footprint. If they don’t being re-evaluating the way they do business moving forward, they may not be around as we prepare for the “next normal.

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