Death of storefronts greatly exaggerated: report
Sears has shuttered the last of its stores in Canada. In the U.S., Toys ‘R’ Us is planning to close onefifth of its stores amid bankruptcy proceedings, and Safeway just announced it will be closing 10 locations in B.C. — just the latest signs of the impending doom of physical retail in North America.
But not so fast, suggests a new report by Colliers International.
“Despite the common headlines predicting ‘the end’ for bricks and mortar, there simply isn’t the evidence to suggest that this is the case,” reads the intro to the firm’s recent Spark Report called, Where To Next? Top 5 Retail Trends Shaping Success for 2018.
“The reasons for consumers to choose to shop online has changed, and there remains a clear opportunity for those retailers prepared to respond in kind,” it reads.
The report predicts that shopping centres and precincts, brands and retailers that accept and adapt to changes in the marketplace, embrace technology and seek to understand their customers will flourish.
“Retailers aren’t necessarily dead, it’s that they need to be moving forward with what’s happening in the market,” said Brad Westerop, market intelligence co-ordinator with Colliers in Vancouver.
“There are definitely still places to make money. The problem is that all we hear are horror stories of older retailers going out of business and how hard it is to make money at retail, but I think the real thing is that they ’re not really paying attention to their market well enough.”
Online retail, while growing, still only accounts for a small fraction of Canadian shopping sales.
In November 2017, retail ecommerce sales totalled $1.8 billion, accounting for 3.5 per cent of total retail sales, according to Stats Can’s latest monthly retail figures. On a year-over-year basis, online retail sales increased 25.5 per cent, while total retail sales rose 7.4 per cent, Stats Can said.
Among the trends taking place in retail is a shift back to brick-andmortar retail from ecommerce, Westerop said.
“It’s becoming incredibly expensive to drive (online) revenues,” he said. “Facebook ads have tripled or quadrupled in cost over the last two years because now everyone can do it. It’s the same with Google ads. People have learned how to do it and do it well, and now it’s just costing so much to drive acquisition.”
Brands such as Indochino, Frank + Oak and Bonobos have made the transition from online only to opening physical stores, and for them, it has worked, he said.
“Maybe you acquire a new customer in the store and he knows he’s a large collared shirt … and then now he’s buying (those shirts) on your ecommerce site after that,” he said.
As workers become more isolated by their technology, sometimes we just want to get out of the house, said Craig Patterson, a retail consultant and editor-in-chief of Retail Insider.
“It’s quite strategic for retailers to have a physical space even if it’s just temporary because you’re going to get face-to-face interaction and feedback that sometimes you don’t get online with customers,” he told Postmedia.
For instance, men’s fashion retailer Harry Rosen is experiencing strong online sales but after it initially engages with most customers in the store, Patterson said. “They’ve found that men likely won’t order their first suits online, but after their first visit, they can keep ordering from the online store,” he said.
“Up-selling is a big potential for physical retail and building a faceto-face relationship,” he said.
Another promising trend for physical retail is the emergence of experiential shopping, Westerop said.
“If you’re creating an experience or a reason to be shopping there, then that retail isn’t dead,” he said, highlighting festival-like events such as the Khatsahlano Street Party on West 4th.
The July street and music festival draws thousands of people to the area and creates organic marketing and heavy foot traffic for retailers through the heart of Kitsilano.
“That kind of experience is going to be driving brick and mortar,” he said, offering another example. “If you walk through Gastown, everything is animated, people are going in and out all day . ... There is a reason for that it.”
Experiential shopping is really not a new concept, Patterson said.
“West Edmonton Mall got it right the first time in the late ’70s,” he said.
“They created that experience. In some respects, now shopping centres are going to be dropping the word ‘mall’ from their name. They already are actually quite a lot. They’re not just malls anymore, they ’re becoming entertainment centres that have stores.”
Landlords also need to do their part to keep physical retail alive by accommodating flexible leases and adapting their spaces to suit upstart retailers, Patterson said.
“It was just 18 months ago that retailers and landlords were looking at pop-up (shops) as being a little bit odd,” Patterson said. “Fast forward to now, every mall and every retailer seems to be doing some sort of pop-up or is in the process of doing it.”
In Vancouver, many retail fronts slated for redevelopment are now being used to house temporary pop-ups shops and restaurants, Westerop said.
That provides tenants with a chance to test their businesses. “It also gives landlords the motivation to monetize underperforming spaces,” he said.
“Shoppers Drug Mart isn’t going to sign a two-year lease,” Westerop said. “You could get four or five cool brands that want to test something out and get them in there for cheap and make a little extra cash while you’re prepping to demolish it, and maybe those brands end up in your new development at a better market rate.”
Patterson said the bottom line is that shopping is changing and retailers need to adapt. “We’ve seen a hastening of bankruptcies and we’ve seen retail changing with technology,” he said. “There is a lot of uncertainties right now.”