Permanent Shift from Goods to Services for Retailers 'On the Table'

A more permanent shift from goods to services is “on the table,” according to a new report from Moody’s Analytics.

Private services spending growth has outpaced goods spending in every quarter since COVID restrictions began to ease in spring 2021 as “the long period of forced isolation gave consumers a new appreciation for social interactions. Consequently, spending in restaurants and pubs, indoor rock climbing, aquariums, live music performances, etc. may remain elevated well into the future,” Moody’s said.

This and e-commerce’s decades-long growth has sent a clear message to current retail center owners, operators, and developers: a consistent level of activity within a given shopping center will likely need a greater proportion of these “social” tenants to attract enough foot traffic to support all tenants, it reported.

Private-Service Tenants Rebound

Matt Hammond, Partner, Coreland Companies, tells GlobeSt.com, that “the reality is that suburban retail, may it be grocery-anchored shopping centers or lifestyle centers, has always been driven by the success of its restaurant and private service tenants.

“While COVID restrictions hampered these business-types more than any other, we have seen a definitive rebound during the past 18 months. Shopping center landlords have definitely taken notice of the key role that these tenant types play.

“When a repositioning opportunity arises, everyone involved is focused on the key elements that support their growth. Together with our clients, we put our focus on attracting the first two or three high-quality restaurant tenants that will establish or expand the customer base.

“Inviting patios, accessibility, and visibility are top priorities. The focus then turns to enhancing curb-appeal to create an environment more attractive to service providers. These tenants, such as medi-spas and specialty fitness centers, want a shopping center that is inviting, and fresh. A retail environment that provides a safe place for their customers to visit at any time of day.”

Real-Time Engagement for Retailers and Customers

Laura Schwartz, regional vice president of leasing for Simon Property Group, tells GlobeSt.com that within Simon’s Burlington Mall and Northshore Mall, it has completed the major redevelopments of two former box stores, incorporating nontraditional tenants such as fitness brands, office spaces, and food and beverage amenities.

“On top of that, many retailers are not only utilizing their stores to sell goods, but also as a touchpoint to engage real-time with customers,” Schwartz said.

“E-commerce brands are more active in our market than ever and are actually opening new stores, whereas before, they completely relied on the online process and online advertising—the price of which has gone up substantially. Direct to consumer brands, are increasingly looking to stores as a more cost-effective channel for growth.”

Small Businesses Led the Way

According to senior associate Joan Ruyle at San Francisco-based retail real estate specialist Maven Commercial, larger-format stores going through these major changes shows how small businesses often lead the way and define new trends and innovation.

“During the pandemic, we saw highly creative efforts from local, independent shops and restaurants doing whatever it took to survive and thrive with omnichannel expansion, outdoor parklets and experiences, and more robust services,” Ruyle tells GlobeSt.com.

“We’re continuing to see it grow in small-and -medium retail shops who are now doing really well in neighborhood and shopping-street spaces, while it’s also taking off for larger-formats and national brands.”