The Trends That Will Dominate ICSC

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While store closures and bankruptcies get the most press, they do not show the full picture of the retail sector as it exists today. What is often overlooked and underreported are the new innovative retail uses we see emerging.

SEE ALSO: Apparel Getting Squeezed in the Middle

That is why I anticipate that there will be a lot to talk about at this week’s International Council of Shopping Centers (ICSC) in New York to see beyond the headlines.

Here are some of my predictions for the most buzzworthy topics at ICSC.

 

Alternative retail.

While retail is experiencing a “have” and “have-not” discrepancy between brands that remain stagnant and those that have adapted and modernized their approaches, the industry is also welcoming new, alternative tenants (those famed “disruptors.”) In 2019 the industry will see quick-service, flexible spaces open up across from unusual industry sectors. One example: Americans are seeking health care services—dental, veterinary, even total-care facilities—similar to how we experience retail. Patients demand convenience and efficiency, which is driving health care providers to set up shop in alternative spaces in retail-dense populations.

 

The nexus of technology and retail.

Technology is making shopping easier from the comforts of your home—but it’s also making a visit to a brick-and-mortar store better, too. From image and facial recognition to robotics and chatbots, technology will continue to evolve, offering more and more opportunities to retailers. Brands with enough information and technology will give retailers the opportunity to deliver personalized and customized experiences tailored to each individual—both online and in-store.

Apparel retailers are leveraging technology to help improve fit and color and beauty brands are suggesting products for by skin type prior to any purchase.

From cashier-less stores to stores that only use the click-and-collect model we are seeing the perfect marriage of physical meeting digital, resulting in a positive brand retail interaction/experience.

 

Trading places, i.e., online brands go offline.

Just a few years ago, physical retail and e-commerce were considered two very distinct concepts, but now it is proven that no app can replace a customer’s innate desire to interact.

Multi-channel retailers with a physical presence are organically driving traffic to their sites, with lower customer acquisition costs. BaubleBar and Rent the Runway both report higher average order values in their physical store locations than online compared with their single-channel competitors. These are all proof positive that bricks matter.

Online businesses that have successfully jumped offline include: Everlane, Allbirds, Kith, Untuckit, Adoreme, Farfetch, Brideside and Koio. They are redefining retail in some of New York’s most interesting submarkets.

When push comes-to shove, even the direct-to-consumer brands of yesteryear are taking the channel-agnostic approach, testing the theory that online drives offline, offline drives online, and all access points matter. I don’t think we have even scratched the surface on this trend.

 

The future of retailtainment.

The last decade has seen experiential retail become the new industry standard, with experiential/entertainment retail setting new standards for engaging consumers. Leading global entertainment companies are just the tip of the iceberg.

It is my belief that in five years, every brand that has significant intellectual property will enter the experiential retail market. Major film studios, entertainment networks and toy companies will dot the retail landscape in the years to come. These immersive, interactive spaces will be available locally, not just for vacationers at Disney World or tourists in Times Square. Indoor, mini-Disneyland’s are looking to saturate the market all over the U.S.

 

Healthy clusters.

Health and wellness is still one of the fastest growing sectors, especially among millennials. Research has proven that this segment of the market shows no signs of slowing down, which is great news for landlords with spaces to fill.

Gyms, boutique fitness concepts, healthy food eateries and ath-leisure retailers continue to increase in popularity—and that includes the ultra-niche fitness concepts like “unplugged” meditation studios, cryotherapy spas and stretching studios.

The health and wellness industry has been a bright spot in retail, and these retailers will continue to draw shoppers to street retail corridors, malls and live-work-play developments.

 

Yes, we will discuss the market correction.

Landlords are continuing to offer flexible lease terms, creative concessions and less rent in an effort to fill space. Strategic retailers are taking advantage of this market correction and are signing long-term leases to solidify their positions in the market. The viability of successfully entering the U.S. retail scene is stronger than ever.

Landlords are doing many things to get deals done. Most are lowering rents; others are making concessions with more tenant improvement allowances, free rent and favorable escalation terms. Not too long ago, retailers were postponing brick-and-mortar moves due to where rents were. Now, landlords are creating opportunities for retailers to take advantage of the robust market in most urban settings. This year has seen an increase in leasing activity and it shows no sign of slowing down. In 2019, we expect to see more brands capitalize on the market correction and more retailers secure spaces in the U.S.

There is little doubt that it is an exciting time to be in retail real estate, and it’s clear that we have already witnessed one of the biggest retail transformations of our time. I am excited about the evolution and to see retail’s next act continue as 2019 unfolds.

Ariel Schuster is a vice chairman at retail brokerage firm RKF, a part of Newmark Knight Frank