During the first quarter of 2017, we saw nine retailers file for bankruptcy in addition to announced sweeping closures from big industry players like JCPenney, Macy’s, and Sears. Kohl’s is also considering reducing store size in some select locations. Due to changing consumer trends, the rapid growth of e-commerce and overdevelopment in the shifting retail landscape, retailers have had to adapt with plans that include decreasing store sizes and redesigning department layouts to enhance customer experiences.
For example, Target is using new store designs to create improved in-store experiences for all types of shoppers. The new design will feature two separate entrances for both grab-and-go shoppers with quick access to grocery, spirits, and reserved parking spaces for online order pickup, as well as those who want to browse at a relaxed pace. Additionally, Target is investing a huge amount of capital to remodel and refresh stores in order to enhance the customer in-store experience using advances in technology while incorporating experiential elements like product demonstrations for shoppers.
Despite the current retail climate, not all merchants are struggling. The off-price sector is reporting unexpected growth, one reason being that consumers enjoy the “treasure hunt” gratification for an array of home, apparel, and discounted goods. This provides tenants such as T.J. Maxx, Marshalls, HomeGoods, Ross, Burlington Coat Factory, Tuesday Morning, and Nordstrom Rack the potential to backfill vacant spaces or anchor new developments.
Looking forward, it will be interesting to see how big box and other struggling retailers will adjust to changing economics, technology, and trends as the millennial generation becomes the industry’s primary consumer segment.
Mark Reeder is executive vice president and market leader at SRS Real Estate Partners.