The advent of the digital era has undoubtedly transformed the way consumers explore and buy products. However, it has also cultivated a yearning for genuine, tangible encounters. Brick-and-mortar establishments excel in providing such experiences, crafting distinctive environments where patrons can directly connect with merchandise, engage with well-informed personnel, and fully immerse themselves in the essence of a brand. The tangible presence engenders trust, nurtures loyalty, and amplifies brand awareness. It serves as a chance for retailers to forge enduring bonds that are inherently irreplaceable in the online realm.
I recently sat down with Brad Zackson, co-founder and Director of Development of NY based full-service real estate firm Dynamic Star, the company behind Fordham Landing, a transformative mixed-use project under development along the Harlem River waterfront in The Bronx, NY.
Gary Drenik: Thank you for joining us today, Brad. It’s a pleasure to have you here to discuss the return of brick-and-mortar retail. To start, can you tell us what’s driving the resurgence of brick-and-mortar retail?
Brad Zackson: Thank you for having me, Gary. This is being driven by a combination of factors. While e-commerce has transformed the retail landscape, there are certain experiences that can only be provided in a physical store. One key drive is consumer demand for a tactile and immersive shopping experience. People still want to touch, feel, and try products before making a purchase decision. Additionally, the social aspect of shopping, along with the convenience of immediate gratification, can’t be replicated online.
Drenik: With that in mind, what are some tactics that retailers should consider when choosing a retail space, and what should they look out for in terms of location?
Zackson: Location is paramount in the success of a brick-and-mortar store. Retailers should consider several factors when selecting a retail space. They’ll need to understand their target demographic and ensure the location caters to that audience.
Additionally, accessibility and visibility are key. The retail space should be easy to reach by car, foot, or public transportation, and it should have prominent signage to attract foot traffic.
Retailers should also assess the competitive landscape. Look at what other businesses are operating in the vicinity. Are there any direct competitors, or are you filling a unique niche? Understanding the competitive dynamics in the area can help retailers make informed decisions.
Drenik: Now, let’s talk about a term that’s not often discussed but can have a significant impact on retail leasing: “percentage lease.” Could you explain what this is and why it’s important for retailers to negotiate this when seeking commercial real estate space?
Zackson: A percentage lease is a type of lease arrangement where the tenant pays a base rent plus a percentage of their gross sales to the landlord. It’s a powerful tool that aligns the interests of both parties. For retailers, it can be especially beneficial during slow periods when sales might be lower than expected because it provides some relief on fixed rent costs.
Percentage leases can also motivate landlords to support the tenant’s success. Landlords have a vested interest in helping tenants increase sales because it directly impacts their income. This can lead to more collaborative and supportive relationships between landlords and tenants.
It’s often overlooked because many retailers focus solely on negotiating the fixed rent amount, but understanding and negotiating a fair percentage lease can be a significant asset for both parties involved.
Drenik: That’s an excellent point. Let’s shift our focus to what consumers look for in retail spaces. Can you share some insights into what aspects consumers consider when choosing to shop at a physical store?
Zackson: Certainly. Consumer preferences can vary, but there are some universal factors that shoppers tend to consider. First, convenience and accessibility are crucial, as consumers want stores that are easy to get to. Parking availability can also be a significant factor.
Second, the in-store experience matters. Shoppers want clean, well-organized stores with helpful and knowledgeable staff. The layout and design of the store should be appealing and encourage exploration.
Third, many consumers seek out stores that offer unique or exclusive products, as well as those with a strong brand identity.
Lastly, safety and security are increasingly important. Consumers want to feel safe when shopping, so factors like well-lit parking lots, visible security measures, and cleanliness contribute to a positive shopping experience.
Drenik: Now, let’s discuss how a retail space can drive sales. How can a physical store create an environment that encourages shoppers to spend more?
Zackson: A well-designed retail space can boost sales. Here are some strategies that can help:
- Visual Merchandising: An attractive and well-organized layout can draw customers in and encourage them to explore the store. Effective visual merchandising highlights products, tells a story, and creates a seamless shopping journey.
- In-Store Experience: Retailers should focus on creating a memorable and enjoyable experience for shoppers. This could include interactive displays, product demonstrations, or even in-store events. Engaging all the senses, from sight to touch and smell, can enhance the overall experience.
- Customer Service: Friendly and knowledgeable staff who can provide assistance and recommendations can make a huge difference. Excellent customer service can lead to repeat business and positive word-of-mouth.
Remember that the goal is not only to drive immediate sales, but also to create a loyal customer base.
Drenik: Those are some fantastic strategies. According to a recent Prosper Insights & Analytics survey, over 80% of respondents still shop for groceries in physical stores, and 47% shop for clothes and apparel in-person. Notably, the percentages for Gen-Z and Gen-X consumers were higher in these categories. Unsurprisingly, in-store shopping for electronics was the lowest at under 20%. How do you see these statistics impacting the future of brick-and-mortar retail?
Zackson: Those statistics align with what we’ve been discussing today. They highlight the enduring appeal of brick-and-mortar retail, especially for products that consumers prefer to see, touch, or try on before buying.
However, the lower percentage for electronics shopping in physical stores is a testament to the ongoing shift in certain sectors towards e-commerce. As technology evolves, we may see more innovation in how electronics are showcased in physical stores to compete with online options.
The future of brick-and-mortar retail remains promising, especially when retailers adapt to consumer preferences and provide unique and engaging shopping experiences.
Drenik: Thank you, Brad, for sharing your valuable insights on the return of brick-and-mortar retail and the strategies retailers should consider when choosing retail spaces. It’s been a pleasure having you with us today.
Zackson: Thank you, Gary. It’s been my pleasure. Brick-and-mortar retail is far from obsolete; it’s simply evolving to meet the changing needs and expectations of consumers. The future of brick-and-mortar retail lies in its ability to adapt to changing consumer preferences, leverage technology, and provide memorable experiences that online shopping cannot replicate. Success will be achieved by understanding the needs of the target audience, offering convenience, and creating a holistic shopping journey that encompasses both physical and digital realms.
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