The Future of Retail

The opening of Macy’s & Co. on 6th avenue in New York City in 1878 helped drive a revolution in American consumption[1]. Through out the late 19th and early 20th century Americans began to flock to department stores such as Macy’s, Selfridges, and Marshall Fields not only to shop but to experience everything the stores had to offer including ornate facilities, restaurants, and entertainment.

In the mid 20th century as suburban populations spiked shopping malls began to be build in suburbia to mimic the convenience of urban commerce. Like urban department stores these were much more than just commercial stores and served as “shopping towns” offering attractions to consumers including ice skating rinks and movie theaters.[2]

Not unexpectedly, the dominance of the shopping mall began to crack and fail following the rise of Amazon and online shopping. As Amazon and other eCommerce players began to offer a far more convenient shopping experience consumers began forgoing in person shopping at department stores, malls, and local stores. Furthermore, with the rise of digitally native vertical brands such as Casper and Warby Parker consumers had less and less reason to do any of their shopping in person.

The impacts of the shift to online shopping is already being felt and have been coupled with a continued rise in rents. According to a recent survey by Douglas Elliman Real Estate 20% of all retail space in Manhattan is currently vacant compared with about 7% in 2016.[3] In addition, despite a relatively strong economy mall vacancies are currently at a seven year high of 9.1% levels not seen since the great recession.[4]

The conventional wisdom dictates that the rise of digitally native vertical brands will continue to fuel the growth of online shopping leading to the inevitable death of retail. Despite a seemingly dire landscape for retailers there are several innovative players beginning to enter the scene providing hope for brands hoping to have a brick and mortar presence. Following a similar playbook as coworking space WeWork these startups have begun to create a new shopping environment that allows online brands to rent short term leases and use shared retail facilities to offer consumers in person shopping experiences. Many online brands that got their start selling direct to consumer have begun to view brick and mortar as a valuable marketing and retail channel as seen in recent moves by Warby Parker and AllBirds to open physical stores. Smaller upstart brands, however, are unable to afford long term leases and are finding services offered by co retail spaces to be highly valuable. For monthly fees, brands that normally would be confined to Instagram and Shopify, can now rent retail spaces as small as a shelf and as large as a full store for short term durations.

Although online shopping will most likely continue to erode brick and mortar’s retails profits, the rise of shared retail spaces has a chance to help turn the trend around. However, simply offering retailers cheaper options to sell their goods in shared spaces is not enough to bring consumers back into stores. The most successful start ups will be companies that offer consumers experiential shopping, like how the early department stores offered visitors more than just a shopping experience. The company that succeeds in truly becoming the WeWork of commerce will have an innovative approach that not only offers brands a cheap brick and mortar alternative but also provides consumers with an incentive to leave their homes and shop in person.

[1] http://www.departmentstorehistory.net/

[2] https://daily.jstor.org/the-rise-and-fall-of-the-shopping-mall/

[3] https://www.nytimes.com/interactive/2018/09/06/nyregion/nyc-storefront-vacancy.html

[4] https://www.forbes.com/sites/pamdanziger/2018/10/14/the-fall-of-the-mall-and-three-ways-to-make-them-rise-again/#4dc063352a26