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Retail Apocalypse or Evolution?  Finding Retail 2.0

Retail Apocalypse or Evolution? Finding Retail 2.0

In a recent article at Business Insider (BI) the idea of a looming meltdown in the retail economy was discussed.  It talked about the possibility that this meltdown could be/ would be akin to the residential meltdown that happened in 2008.  Similar to how mortgage backed securities turned out to be one of the main culprits that held toxic assets in bundles for the residential mortgage industry, there now appears similar cracks in the commercial market regarding commercial mortgage backed securities, loaded with commercial toxic assets.  The theory is that these CMBS’s are a time-bomb that will wreak havoc on the retail marketplace nationwide when the bubble bursts.

 

I am not so sure about this.

 

First things first, as an urban planner I think BI is alarmist in this and many other issues. That retail is declining is a known.  I’ve noticed it for a few years.  In fact, when the residential market popped in 2008, retail did take a major hit as the recession took a huge bite out of American purchasing power.  The result of that was business closing shop and/or consolidating into proven local markets.  So yes, retail has been retreating (if not declining) for a few years now.  But I don’t think it’s a forever trend like this article is suggesting.  The main reason that I think this way is that not everything can be acquired online.  It’s also very presumptuous and hubristic to suggest that bricks and mortar shops have reached their historic demise.  It’s not possible for something to become obsolete and entirely lost because online sales are eating into retail sales.

 

We’ve seen this before.  Remember when everyone said that bookstores were a doomed enterprise with the rise of Amazon and a myriad of websites offering book sales but also digital copies of the same stories cheaply?  Bookstores are still around.  They evolved to the threat of online sales.  Some bookstores did disappear, but not all.

 

The same story is true for video-stores.  Everyone said that streaming services would kill video-rental stores like Blockbuster.  Many stores like Blockbuster did die but in the time that streaming services like Netflix and Hulu rose to prominence, physical video rental enterprises also thrived.  Consider Redbox an evolutionary example.

 

So this idea that retail is on the ropes is unnecessarily alarmist.  For all we know, in 10 years we could be talking about the opposite: the decline of online sales!  (That would be kind of exciting to think about, actually).

 

Now you might think that I am a bit “mad” in suggesting the demise of online sales when there is a clear trend of retail activity collapsing across the country (there is data!).  The financial markets are jittery after all.  But the cross market trend most notable to watch in the resurrection of bricks and mortar is the headlong growth of the travel industry.  Yes, the travel industry. That will have an impact on the way bricks and clicks business will be conducted in the future, particularly with the newer generations coming of age. What were witnessing now is simply the death of the 1970s and 1980s model of retail sales.  The CMBS’s with all their toxic assets represent the auto-oriented strip malls and mega malls with huge parking fields surrounding them.  There is a lot of debt involved in these buildings, but people are not seeking these old tired designs anymore.  They want to experience something more in their retail activities and to enhance their overall marketplace experience.  Quite simply, the money is redirecting.

 

In fact, I think the retail evolution is already happening as reinvestment in pedestrian malls and pedestrian street environments.  Indeed, those early experiments in pedestrian oriented shopping from the late 70’s and early 80’s have already seen reinvestment and renewed interest.  Consider the pedestrian mall Oakbrook Center in Oak Brook, Illinois as an example.

 

Retail has been evolving for some time now.  The retail industry itself has been predicting for years that the way brick and mortar retail sales survive and beat online sales is through selling more than just products but experience, experience that cannot be obtained via websites.  In other words, not just brand experience but placemaking experience is the future.  In other words, retail must reinvent and rebuild to compete.  Consider as an example or poster child of this effort Disney Springs (formerly known as Downtown Disney).  Disney Springs is a pedestrian mall (yes, with lots of hidden parking) but is packed with experiences that are impossible to obtain via websites.  It’s not just the Disney magic at work, it’s actually the age-old Disney recipe for building great public assembly spaces that encourage economic activities.  People will spend money in places that they think are special to remember their experiences and enjoy their travels etc.  This is where the retail industry will be reborn.   This is Retail 2.0.

 

Disney Springs, Retail 2.0 the way of the future. (Photo Credit: Nectarios Pittos)

 

 

So let the CMBS crumble and let the sky fall, but don’t panic.  We came out of 2008 and if it is meant to happen that a retail meltdown occurs, we will get out of that too and I think we’ll be better for it.  But in all honesty, I don’t think it will happen like the residential bubble.  The markets will generally consolidate into proven markets, just like they did in the recession, and they will then regroup and the old tired strip-malls of yesteryear will slowly be replaced by lucrative (if nigh on venture capital) investments in local towns and cities.

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