By Michael Ellis, Co-Founder, Managing Principal, 5+Design
With the onset of internet shopping, and the subsequent pressure on physical stores to compete, the retail industry has seen a large number of long term trends emerge from out of this dichotomy. This is easily seen in the rise of emphasis placed on value and luxury as the two dominant sectors in retail.
But one trend more hotly contested and trail blazing is the power of brands (and collections of brands), and the pressure these brands are putting on retail developers to ensure that their interests are being represented. It’s long since known that developers have held the majority of the decision-making power, allotting the last say in what takes place within their retail spaces largely to themselves.
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This power structure is seemingly getting turned on its ear as the power that individual retailers are yielding grows in strength. Herein lies the precipice of the future of retail. This future will be about convergence – bringing together the powerful new forces unleashed by the internet with more local, more competitive, and highly customer-focused physical retail environments.
From the design point, the future will look like a mash-up of national retailers and unique local stores, harkening back to the duality of value and luxury. Retail’s future will interlace together the very fundamentals of good design where the driving point is on delivering greater convenience and a more fulfilling shopping experience.
Fundamental change, exacerbated by the internet, is affecting the retail industry and that is neither a surprise nor an understatement. This is exemplified by the amount of online shopping that has grown in the last several years and is projected to become even stronger in the years to come – particularly in Asian countries. This trend has created a certain amount of concern amongst shopping center developers due to the fear that traditional retail is under attack. Internet experts like Marc Andreessen help to build this concern with their predictions about the death of traditional retail, even though e-Commerce is still far behind traditional retail in terms of sales.
“Retail guys are going to go out of business and e-Commerce will become the place everyone buys,” Andreessen said. “You are not going to have a choice. We’re still pre-death of retail, and we’re already seeing a huge wave of growth. Retail chains are a fundamentally implausible economic structure if there’s a viable alternative. There is fundamentally a better model… I’d bet on the pure plays in e-Commerce. Software eats retail.”
The rise of the internet has undoubtedly created a one side versus the other mentality. But it has also provided real benefits to the retail industry. It’s allowed brands to connect with customers in ways that were previously unavailable to them, creating a much greater proliferation of specialty retailers than ever before – retailers with a unique point of view but not necessarily a need for a tremendous amount of floor space.
This is an aspect that will only grow as time continues and a sentiment that is eloquently expressed in a recent comment by Saks CEO of Steve Sadove.
“Online will not be the death of the bricks-and-mortar luxury store," Sadove said. “It is the blending of the two that is the hope of the future.”
Meanwhile, advances in technology and logistics have allowed fast fashion retailers like Zara, Uniqlo, H&M and Forever 21 to grow quickly and take over larger and larger retail environments in existing centers where other big box retailers are faltering.
These retailers themselves have taken the lead in addressing the challenges and opportunities provided by the internet, integrating the online and physical worlds to provide a number of integrated platforms designed to reach their customers.
Still, some retail developers have responded to e-Commerce by focusing on how to differentiate the physical environment of the mall to compete, often resulting in flashy facades.
But at the core, experience becomes all the more important. The ability to enjoy all aspects of a day out – good food, a pleasant environment, and a selection of retail offers that are both comforting and surprising. A trip to the mall must now be more than a necessity – it has to be fun, and somehow different than what is available online.
It’s also important that these environments compete with what consumers can see on the internet. The old adage that ‘it may not be the best but it’s good enough for here’ doesn’t really work anymore. At the click of a button, consumers now have the power of the universe and can simply see what is available everywhere else, causing them to want the same for themselves.
As the interest grows in urban regeneration, a clearer understanding of the power of retail to draw visitors and potential residents to communities is emerging among city planners and leaders. Whereas in the past, a simple indoor mall might be all that a city needed. Now, there is a greater need for good street retail and lively urban environments to help regenerate and revitalize urban areas.
The most sophisticated planners realize that a mix of offerings is usually best – lively street retail, a mix of national and local brands and food offerings, and often an indoor retail mall as well. A true range of offerings usually provides the greatest returns.
The benefits of mixed-use developments are also more clearly understood now – how a mix of residences, offices, hotels and retail all complement each other and feed off each other, providing energy at all hours of the day and guarding against the type of completely empty urban cores that were so prevalent in the past.
The principals in our firm have been involved in the design of retail and mixed-use environments for over twenty years. Whereas in the past, the idea of mixing other uses with retail was a somewhat radical notion, today it is more often the norm.
The level of sophistication in the mixing of these uses has risen substantially. Ten years ago, Retail Entertainment centers were seen as the answer, but nowadays fully integrated environments where retail is part of everyday life are more desirable.
As an extension of this connection to everyday life, issues which are key drivers to consumers are also finding their way into retail environments. Sustainability is one example – retailers are often leading the way in addressing issues of sustainability while simultaneously increasing the desirability of their brand in their consumers’ eyes. Starbucks is a prime example of this, with their focus on sustainable harvesting of coffee resources and the use of recyclable materials, both for their coffee containers and for the design of their stores.
5+design is very optimistic about the future of retail, and pleased to be practicing in an industry and era where so much innovation is occurring. The opportunity to help shape the public realm in communities around the world, and to work with developers and retailers who are focused on bringing the best practices to a local level, has never been greater than today.
Michael Ellis is one of 5+design’s two managing principals. His primary areas of responsibility are client relations and marketplace strategy. Michael often is the studio’s first contact with a client, meeting to discuss preliminary interest in a project. Thereafter, he serves as the studio’s general liaison in his ongoing role in project management. He also plans and implements overall business strategy, cultivating new relationships with developers, retailers and design firms across the United States and throughout the world.
Ellis is an architect licensed in California and was a designer at Daniel Mann Johnson & Mendenhall and a senior Vice President at The Jerde Partnership before co-founding 5+design.
