The Great Retail Retrofit
In late October of this year, the office-sharing startup WeWork announced that it was buying Lord & Taylor’s flagship store in New York City. Coming as this did in the wake of the bankruptcies of such long-established retailers as The Limited and Toys “R” Us, it was widely viewed as the latest harbinger of the “retail apocalypse.”
It isn’t just chain stores in economically distressed suburbs that are going belly up, but high-end luxury goods purveyors along the retail corridors of America’s leading cities, such as New York’s Madison Avenue, Rodeo Drive in Beverly Hills, and Chicago’s Miracle Mile. All told, roughly 100,000 retail jobs were lost between October 2016 and April 2017. In the next five years, one out of every four malls is projected to close, according to an analysis by Credit Suisse. The square footage of America’s already dead malls covers more land than the city of Boston.
But painful as this retail retrenchment may be, it creates real opportunities that cities and suburbs can take advantage of.
First things first: Brick-and-mortar retail is not going away. Even as it sheds workers, the sector is still growing at a rate of 3 percent per year. The research and advisory services firm the IHL Group estimates that retail sales are up by more than $100 billion this year, and 4,000 more chain stores will have opened than closed in the U.S.
Much of what we are seeing is in fact a long-overdue correction. The United States devotes four times more of its real-estate square footage to retail, per capita, than Japan and France; six times more than England; nine times more than Italy; and 11 times more than Germany.
The way we shop is also undergoing a fundamental reset. As more and more people shop online, the stores that are drawing in customers are those that emphasize experiences. Customers want to sit on that new sofa, feel the weight of a stainless-steel skillet in their hands, and try out new gadgets.
In fact, the line between e-commerce and physical retail is not as hard and fast as most people think. The most successful virtual stores are currently increasing their physical presences. Amazon is opening up bookstores, and with its acquisition of Whole Foods, it has gained a footprint in hundreds of affluent cities and suburbs. As the physical embodiment of Apple’s brand proposition, Apple Stores showcase cutting-edge designs, provide service and advice, build community, and are a big part of what differentiates Apple from its competition.