Retailers Are Full Of Ideas On How To Beat E-Commerce

Though the outlook is brighter in Center City than the suburbs, brick-and-mortar retail isn’t dying—it’s simply getting leaner and more flexible. At Bisnow’s Philadelphia Retail Revolution event at The Ritz-Carlton, the focus was on the creative ways to keep retail relevant.

The event was kicked off by a keynote address by Casandra Dominguez, Center City District’s business retention manager, delivering some impressive statistics about the retail climate in the city’s core.

The main shopping area of Center City has expanded from Walnut Street to include Chestnut Street as rents have skyrocketed to the point where the 1600 block of Chestnut is now the most heavily trafficked pedestrian block in the city. Three years ago, it was the 1700 block of Walnut.

“As soon as retailers started locating on Chestnut,” Casandra said, “it really drove shoppers and pedestrian traffic to that block. To me, that shows that if you’re a destination retailer, because Center City is so walkable and accessible, you can locate anywhere downtown and shoppers will follow.”

The largest percentage of retail customers in downtown Philadelphia comes not from residents or employees, but overnight visitors to the city. As much as Philly is lauded for its historic buildings, the two things such visitors do more than any other activity are shop and go to restaurants—an encouraging sign for retail development in the city.

Although e-commerce has made an outsize impact on the culture of shopping, it still only accounts for 10% of all retail, according to Post Brothers’ Randy Hope (below, right). That number figures to double in the next 15 years, and many retailers are understandably concerned.

“You’ve seen national retailers lock up a bit,” said Cedar Realty Trust’s Ehud Kupperman (above, center), “just until they fully understand what’s happening to the market. They’re very reactionary when it comes to those things.”

There are exceptions, as there are with any economic condition. Target, for example, has been aggressive in expanding to urban markets with much smaller stores that target the needs of the surrounding demographics with precision. According to Metro Commercial’s Michael Gorman (above, right), the first two stores of this kind in Philadelphia have exceeded expectations.

“In fact,” Michael said, “one of the two has performed way beyond expectations.”

Although not everyone will be able to match Target’s demographic research (or have the balance sheet to be so aggressive), every retailer has to ask similar questions of itself: How do you more closely fit with customer demands? How do you make your store worth walking into?

We’ve discussed Under Armour’s new flagship store in this space before, wherein they aim to create a more holistic experience to sell themselves as a lifestyle brand, rather than a shop in which you’d walk in, buy one piece of athletic wear and walk out. Now, Nike has taken the idea one step further, having opened a 55k SF store in NYC's SoHo neighborhood with a running track and a basketball court.

Bonobos, perhaps the highest-profile online retailer to move into brick-and-mortar stores, creates a boutique experience by greeting customers with a beer and a personal shopper.

“When you have a targeted rollout like Bonobos [or the urban Targets],” Michael said, “you already know your customers, where they are and what they’re buying, so you’re able to have a highly curated and targeted shopping experience.”

“Local curation is a challenging thing for a lot of national retailers,” Ehud added, “and Target is exceptional in how they’ve pioneered urban retail.”

Urban Outfitters has taken it one step further by incorporating Pizzeria Vetri locations in their stores, a measure that Michael says has proved economically successful so far.

“Alcohol always helps with sales,” Michael joked.

The expansions of Bonobos, Warby Parker and Under Armour, along with the continued success of Walmart in the online space underscores a crucial point—for continued success, it’s essential to integrate your physical business with an online presence that fits your brand.

Saxby’s Coffee, for example, has followed Starbucks’ lead by rolling out a loyalty program via a smartphone app, which has been highly popular at their location on Drexel’s campus.

As Saxby’s founder Nick Bayer (above, left) says, although “it’s hard to buy a cup of coffee on the internet,” the impetus to use technology to encourage repeat customers is there.

“We like the face-to-face interactions,” Nick said, “but we do want to provide guests the opportunity to leverage technology to make the experience more cohesive to what they want.”

In the suburbs, it’s more of a challenge to stay with the times, since retail centers are littered with the bones of stores that have either changed business models or gone under completely. To rebuild value in those shopping centers, developers have taken to integrating non-retail uses as a way to bring customers in.

Residential might seem like the most obvious route, but Federal Realty Investment Trust’s Chris Fleming (above, center) has had success with uses like pediatric medicine locations and swim instruction centers. Any time you can bring families, rather than individuals, to your shopping center, you’re more likely to see trips extend spontaneously, whether from a child’s window shopping or simply a place to get a bite to eat.

“Anything that has a lesson component to it,” Chris says, “that keeps people on the property for a period of time; it enhances the [shopping] experience.”

“Experience” is now the key word for all retail. Retailers who know how to create one will continue to stay ahead of the curve, which is always appealing to the coveted Millennial demographic.

“You can do little things,” Ehud said. “But, they can actually go a long way and be such a step above what’s in retail currently, especially with your traditional strip centers.”