News and Insights
The future of retail real estateBy Rebeca Guzman Vidal, Chelsfield’s Group Head of Retail Strategy
The global retail industry is radically changing due to the Covid-19 crisis, and many of the structural changes already happening within the industry – supply chain disruption, technological disruption – have accelerated. 2020 has become the new 2030.
That said, the death of physical retail has been overstated. Yes, consolidation continues but it’s important not to lose sight of the growing and evolving role of the store and, more specifically, the flagship in a post-Covid world. Flagship stores are aspirational, allow brands to engage with new customers and, as a result, grow market share in a far more cost-effective way than online retail ever can. Flagship stores are crucial for established and digital brands which are raising funds now to grow their market share. A recent example of this is Allbirds, which secured $100m to expand its product range and grow its store portfolio globally.
Portfolio rationalisation and stores closures are a reality, but so is the demand from brands which are trading well, and have a positive outlook for the coming years. These brands are still active and looking for stores, albeit cautiously. What is now needed to succeed is a genuine omnichannel strategy, putting online and offline side-by-side. This means store-opening budgets now compete with investment needed to boost digital capabilities. Brands that truly understand this are proving this model works: an omnichannel strategy that balances flagships, community stores and online also recognised as the winning formula. A brilliant example is Nike; through lockdown it opened its Paris House of Innovation flagship as well as several Nike Live community stores, all while boosting its online presence. The result? Quarter three revenues jumped to $10.5bn, thanks in part to a 12% jump in retail sales and higher conversion rates.
The bottom line is simple: consolidation is likely to peak in 2020, and will feasibly start to subside in 2021. With this will come opportunity as digital brands and those that are under-represented in key markets shift their interest to new store openings. Time will tell whether the death of physical retail will become a myth…or not. At Chelsfield, we think it is the latter.