Armed with knowledge, brick and mortar stores can survive

Brick and mortar store fronts are becoming a thing of the past. You've heard the chatter; you've seen major retailers like Macy's, Dress Barn, Pier One Imports and Walgreens shutter stores. But is brick and mortar really dying, or just evolving into something new?

Cheyenne Robinson, an account executive with Buxton, a leader in customer analytics which provides in-depth analysis of customer data to identify, attract and retain the most profitable customers to thousands of retail customers, doesn't seem to think so. Robinson showed an entirely different story from what is commonly believed during the 2019 Southwest Regional Economic Forecast.

"California's retail real estate market is strong but changing consumer shopping behavior and the fact that we are in the late stages of the current economic cycle have resulted in declining project volumes," Robinson said.

So, what exactly does that mean for the hundreds of retail stores throughout southwest Riverside County?

According to Robinson, while it's not a new story that major operators continue to shutter many stores, those stores are not closing due to a lack of business, but rather missteps and failure to reinvent themselves.

Mixed-use centers lead to success

"As for new development and trends prompted by consumer trends, there continues to be a rise in the number of mixed-use developments, online and in-store shopping and growth in health care," she said.

Those mixed-use developments – think Shops at Dos Lagos or Menifee's Countryside Marketplace – are growing and changing the way that those looking for a more engaging, experience-based retail environment shop.

"They also foster a sense of connection and community that many consumers seek," Robinson said.

The new formula for development success, she said, is 70% food, entertainment and lifestyle experiences with 30% of that mixed-use development being dedicated to retail.

"Despite the high utilization of social media platforms, people still inherently crave face-to-face interactions. These mixed-use developments meet consumers' desire for the pre-World War II 'town square' model," Robinson said, adding that mixed-use development also offers benefits such as increasing tax revenue and health benefits associated with people walking rather than driving.

Real estate drives success

According to Robinson and research done by Buxton, one of the biggest factors that drives the success, or failure, of a retail storefront is the real estate market. The good news, in southwest Riverside County the vacancy rate is lower when compared to the entire region, which makes the real estate market highly competitive.

The bad news, she said, is that retail real estate prices continue to rise but that the U.S. economy is in late stages of current growth cycle.

"Real estate transaction volume has started to decline," Robinson said, adding that the cycle would end with what economists call a "soft landing."

"Because of the slow nature of the recovery and the caution investors have exercised," she said. "Essentially, this is predicting a shift of the slow-growth rate to potentially flat growth."

So, what can developers do to entice new business and move toward the mixed-use model that has proven to be successful in many markets?

"City leaders should create an inventory of available retail space and update it regularly, be proactive and help retailers find alternative properties, if their first choice falls through," Robinson advised.

According to Robinson, another consideration is the wide gap in pricing between A-malls and B-C product.

"Essentially, Class A sites are going to be those properties that are the highest quality in the market, generally newer, high-income earning tenants and the lowest vacancy rates," she said. "Whereas, those Class B sites are generally a little older, but still good quality. Class C will be less desirable and often need extensive renovation."

Robinson said that Class B sites can offer competitive advantages such as lower competition and perhaps new planned development.

"Consumer behavior is forcing retailers and restaurants to rethink their business models, which influences real estate needs," she said.

Tourism affects community markets

Robinson said that another major consideration to any marketing strategy should be tourism.

She recommended using household information to develop profiles, identify feeder markets, identify households to include in targeted marketing campaigns and to answer other business questions.

Robinson shared how in a recent mobile data sample from South Coast Winery in 2018 20% of 917 different core-based statistical areas visited the winery with the top visitor markets being Los Angeles, San Bernardino and San Diego.

Of those who visited the winery, she said, there was a mix of affluent families and empty nesters that are experienced travelers, art connoisseurs and visitors that enjoy gourmet dining. Those visitors were offline and digital media receptive as well as what she called a "progressive potpourri" households, who enjoy doing a variety of things such as visit theme parks.

"You could geo-fence Disneyland and serve ads through social media to speak to those households," she said.

The bottom line

Knowing the target market and how to reach them, along with being real estate savvy and open to new ideas, such as advances in marketing, can help any brick and mortar business be a successful one.