Physical retail space is more important than ever as retailers stand to benefit from tailwinds generated by economies transitioning to more accommodating monetary positions, according to Cushman & Wakefield’s Mainstreets Across the World 2024 report.
Showcasing innovation and brand presentation are key reasons that physical retail space will be important going forward. These two factors combine to build brand experience through a physical embodiment of the brand that customers connect with, which translates into brand loyalty, said Cushman & Wakefield.
Because of this, luxury brands are searching for suitable space in strategic locations, and more retailers are seeking to emulate them. For example, IKEA, which typically occupies suburban retail warehouse space, has committed to a new development on New York’s Fifth Avenue.
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This is creating some competitive tension, as more retailers are looking to expand and open flagship stores, but the number of those locations has changed very little over the past decade. Vacancy rates remain tight, which is fueling strong rental growth and prompting retailers to strategically identify optimum locations that will contribute to sufficient revenue to remain profitable, said the firm.
One strategy that is emerging is a targeted approach to store openings.
“This often means starting with a flagship location and then re-creating an interpretation of that flagship store in strategically significant cities, rather than taking a country-wide approach,” the report said.
Data and analytics have become important in determining optimum locations and strategically significant cities. Key market dynamics, consumer demographics and foot traffic patterns are crucial data points.
In addition, identifying the locations of brand fans is just one element of the process, said the report. Curating an experience that brings these shoppers into the store is even more important. Social media plays a role, as the power of influencers can reach millions of potential customers and build anticipation of collections, events and experiences.
Data and technology can teach retailers how different generations engage with the brand as well as how customers engage with other brands, which can lead to brand partnering. Hyper personalization – in which each customer is treated as an individual – is the next frontier of experiential retail. This could include anything from fine-tuning relevant product recommendations to using artificial intelligence to identify ideal sizes, styles and colors, said the report.
“Building such tailored services makes the consumer feel special and more likely to purchase,” according to the report.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
