Early in the pandemic, landlords watched as physical store locations closed and foot traffic dropped. Retailers that were struggling prior to 2020 closed their doors, and landlords were left with vacancies ranging from small formats to big boxes. As these brands struggled in the physical space, the pandemic accelerated e-commerce, growing 45% from 2020 to 2022. Now, e-commerce is approximately 20% of all retail sales (excluding gas and auto).
As the world finds its "new normal", consumers desire to participate in new experiences and re-engage with their favorite brands. That's a double dose of good news for retail landlords. One, because traditional retail is back. The other, according to Cushman & Wakefield, is that the growth of e-commerce has allowed digitally native brands (DNBs) to expand their strategies into a physical retail presence—and they want to fill those vacancies.
DNBs have found there are important benefits to developing a cohesive virtual and physical ecosystem that allows consumers to interact with their brand on their website, in store, on social media and through marketplaces. "The ability to create one-of-a-kind experiences is key to attracting shoppers," says Alanna Loeffler, Cushman & Wakefield's managing director of retail business strategy. "Online alone can't provide a full sensory brand experience."
Additional reasons DNBs are attracted to physical locations includes the rising cost of customer acquisition, the opportunity to expand customer spend by increasing conversion on a per-visit basis and the ability to leverage online data to reach new consumers.
DNB Warby Parker is a perfect example of a strong brand ecosystem. After opening its first physical store in 2013, three years after starting online, it has expanded to more than 160 locations with plans to open 40 more in 2022—all while maintaining a strong consumer experience both online and in-store.
But with the shift from online to in-store comes a complex journey of discovery and risk. "Identifying the right markets, understanding the consumer journey and implementing the latest in-store technologies are just a few of the decisions these brands are faced with as they enter the physical world," says Barrie Scardina, Cushman & Wakefield's head of retail in the Americas.
Landlords, recognizing this, have been savvy as they work to attract DNB tenants in order to create transformative experiences for shoppers. Real estate investors like Macerich and Brookfield have developed pop-up shop programs that allow DNBs to quickly open stores in prime locations and put their brand front and center, while services like Appear Here allow landlords to advertise these exciting pop-up availabilities.
Alternatively, partnerships with retailers like Costco, Nordstrom, Walmart and Target offer entry into a strong brick and mortar store network, while the host retailers can gain new customers who might not otherwise shop there.
The move from the internet to the real world presents great opportunities for retail owners to find strong and innovative tenants for their properties. From "apocalyptic" to a new transformative landscape – brick and mortar has been re-ignited by digitally native brands.
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