Shifty Shoppers: How Retail is Responding
You would have to have your head in the sand not to notice that the world is shopping differently. Walmarts are getting smaller; Sears closed its flagship store in Chicago last year; J.C. Penney is struggling to find a reason to exist. As analyst Jason Moser put it on a recent NPR broadcast, “Does the world really need a Sears at this point? I don’t think it really does, actually, and I think the numbers bear that out.”
And you need look no further than that glowing device in your purse or pocket to understand why. More and more shopping experiences and purchasing power are within reach of your smartphone or tablet, causing retailers to rethink their investment strategy. As more consumer goods are perceived to be commodities—everything from shampoo to office supplies—retailers shift their real estate focus. Distribution centers get larger, and storefronts get smaller. Walmart plans to have 500 Neighborhood Markets and 12 Walmart Express stores, which are one-tenth the size of Walmart Supercenters, by next year. Yet Walmart’s distribution center requirements have grown exponentially to keep up with online sales.
Shoppers aren’t shifting all of their consumerism to computing devices, however; they still like to get out and shop. But they are far more selective about the products they are shopping for: personal-choice items where seeing, feeling, and asking about the product is vital to the purchase decision. Furthermore, the distance shoppers are willing to go, and the trouble they are willing to endure for the experience (finding parking, meandering seeming miles of aisles to find a single product) have dramatically reduced. Retailers like Walmart have figured that out and are changing with the times; other retailers, venerated brands for over a century, have missed it and will not outlive this century.
What does this mean for users of commercial real estate? It means that retailers are finding more success in smaller spaces as close as possible to the consumer. Traditional neighborhood developments, such as Patrick Square in Clemson, South Carolina, offer the ideal solution. By blurring the lines between commercial and residential, they allow businesses to be literally next door to the people they serve. “Retail is becoming much more integrated with housing, especially in cities,” says Maureen McAvey, a fellow at the Urban Land Institute. “In decades past, people considered it déclassé to live above a store. But social tastes change. And retail development simply follows that lead.”
Patrick Square is currently planning nearly 250,000 square feet of commercial space in its Town Center alone, but it’s not all in one place. It’s spread over twelve parcels interspersed with landscaping and tree-lined sidewalks, making the entire site accessible by pedestrians. And unlike “lifestyle centers,” which lure suburban shoppers with upscale retail, Patrick Square is actually a living, breathing community, with all the necessities and amenities of daily life—education, the arts, medicine, and more—all within walking distance. This is a boon to businesses who want a “captive audience,” or better put, an audience that is willingly captive. Patrick Square, likely the best example of a traditional neighborhood development in the state, is worth taking a look at from a commercial real estate perspective. Developers who are in tune with the times would do well to replicate its success.