We Are Not Living in a Retail-First World

It might seem counter-intuitive, but the focus of retail centers should not be retail—according to Kevin Kelley, founding partner and principal at Shook Kelley. Kelley does not mean to say that retail or retail brands aren’t important, but rather that shopping is now secondary to experience or gathering. The most successful shopping centers have what he calls a bonfire—an area where people can gather and interact. Retail is then something that congregators will fall into as part of the experience.

“It isn’t the physical shape of retail that is changing, but it is the message and the values around it that has changed,” Kelley tells GlobeSt.com. “Consumers just don’t like the idea of retail theme parks. People have gotten tried of seeing similar stores, and we are intrigued by where people are going and where they are frequenting. We are looking at places like La Brea, where there is a lot of movement happening, or the Arts District. Retail is not driving those locations. People are going to those because places have a soul and a story, and they generally have a place where people can gather. Retail then becomes a byproduct of those places.”

A bonfire could be anything from a fountain (think the Americana at Brand) to a park or promenade. It needs to have what Kelley calls “participation mystique.” It is anything that will attract potential consumers to leave their homes, not to shop but to be with other people. This is because the consumer approach to shopping has changed. “It isn’t as simple as creating an experience. We are seeing consumers have a buying mindset: one is a buying mindset, which doesn’t care about shopping,” says Kelley. “That is not going away, and that is just a job to get done. The second is a recreational mindset. Some contend that consumers don’t want to shop, but we see just the opposite. We think that people are craving to shop and go to great shopping places. It isn’t about function or price or variety, and it is a whole different kind of experience.”

Aside from physically building a public space, Kelley says that framing and branding the space correctly is equally as important. He uses the example of the Third Street Promenade it Santa Monica, which was once a retail destination and now has three retail vacancies. He says that the promenade has the potential to be a cool downtown environment, but it isn’t being framed as an urban hub—it is framed as an outdoor mall. “We think that it is about place-branding more than anything. We spend a tremendous amount of time looking at the value proposition,” says Kelley about his approach to branding. “We look at solutions, meaning and experience. When we can get those three things to align, we have developed a one-of-a-kind product. I am starting to get more calls from institutional investors that are concerned about their investment and they want to create a bigger driver.”

There is no shortage of retail product, but much of it is struggling. Kelley says that retail owners need to understand the shift in consumer behavior and build a property around that experience—and that includes having a rifle-like approach to tenant curation—as well as infusing a unique experience. “Now, there is not enough demand for retail and too much supply and there is a lot of backlog,” he adds. “There is a lot of inventory that is going to be hard to fill, and those retail properties are going to struggle. You need to be moving up and creating a public feature to bring people in or you need to step down and move into the value space. If you are in the middle, you are not going to survive.”