Here’s a fact that might surprise many: Retailers have opened more stores in 2021 than they’ve closed.
And this is a tend that isn’t slowing. Even with the COVID-19 pandemic, national and regional retailers will have opened more new locations this year than they will have closed. Dominating the list of retailers that are expanding? Grocers, convenience stores and fast-casual restaurants.
This is the good news from Lehi, Utah-based Retailsphere, which earlier this year released a report on the expansion plans of national and regional retailers.
According to the report, 52 percent of grocery-based retailers are expanding today, while 52.5 percent of fast-casual restaurants are doing the same. Retailsphere found, too, that 58 percent of value retailers — such as dollar stores — are also expanding this year. Retailsphere estimates that 60 percent of retailers overall have plans to expand this year.
What’s behind the surprisingly strong year for retailers? We spoke to Barton Strawn, director of marketing with Retailsphere andTim Benzinger, vice president of product for the company, to find out.
What are some of the strategies retailers have taken to not only survive but grow during the pandemic?
Barton Strawn: Our research team has spoken with a lot of retailers. One of the biggest moves retailers have made during the pandemic is to make it easier for consumers to buy online to pick up in the store or for curbside pickup.
That was already happening before the pandemic, but the pandemic provided a shot in the arm to this trend. With more people staying home, retailers found that they could rely on their online presence and the convenience of having localized pick-up opportunities. If you look at the clothing sector, big boxes and places like Target, they all revamped their online platforms pretty aggressively.
Restaurants were already doing curbside pickup, too, before the pandemic. But that has become even more important today. Even the smaller retailers are offering curbside pickup. We’ve even seen that when restaurants are looking to open new locations, they are more explicit about saying that they need extra parking that they can dedicate to curbside pickup.
Tim Benzinger: These retailers know that the more convenient they are, the more they’ll stay top-of-mind with consumers. The more convenience they offer, the more often people will shop with them. That’s a trend that will stick around after the pandemic ends.
Do you think curbside pickup and online ordering will remain an important revenue stream for retailers even after the pandemic ends?
Strawn: These options do add a more robust revenue stream for retailers. In-store shopping and in-restaurant dining will begin to recover again and hopefully return close to normal numbers. But I think you will see curbside pickup and increased delivery options stay in place even after that happens.
For me personally, I’ve gotten used to it. It is nice to pull up to Target and they run a bag out to your car. I don’t have to go into the store. It saves a lot of time.
What are some of the more important trends you’re seeing in the expansion plans that retailers do have?
Strawn: A lot of retailers are opening smaller locations. Look at Target. They had already been experimenting with stores with smaller footprints. The pandemic increased the need for that. I don’t know if the pandemic increased retailers’ plans for focusing on smaller-footprint locations, but it did make those stores more important. A lot of national brands are looking to open stores with smaller footprints.
Benzinger: It’s about creating a more curated experience for customers. Target is doing this with its smaller stores in urban areas. They are trying to create a niche for their brand that is exclusive to that neighborhood. We have seen articles about Ikea considering the same thing. It’s more like shop-and-go instead of navigating the maze of a larger store. We are seeing some retailers experimenting with these options. It’s all pointing toward a trend of more curated and considered space for consumers.
Strawn: We’re also seeing some larger brands partnering with smaller brands. Target, for instance, might sublease some of the space in one of its larger stores to someone else, like Starbucks or a CVS pharmacy. That ends up as a good partnership and both brands benefit from it. The stores with larger footprints are looking for partnerships to improve their space and curate it. They are finding ways to get creative with their larger square-footage buildings.
How about downtown areas? Some of the retailers in the downtowns we cover are struggling because of the pandemic and the lack of office workers. Do you see that improving anytime soon?
Benzinger: A lot of that depends on the businesses and offices. The sooner the big companies get their employees back to work, the more relevant retailers in downtowns will be from a convenience standpoint.
Strawn: Our researchers have found that some of the urban areas are starting to bounce back when it comes to retail. There are some interesting opportunities for retailers in urban core areas. Some places have closed and the landlords are looking to fill that space as quickly as they can. If retailers are in a position to expand or open something new, they will find a lot of interesting opportunities in those urban cores that they might not have been able to get into before the pandemic.
I think mid-tier cities might see their urban cores bounce back more quickly. In some of the larger cities, it might take more time. When you look at some of the expansion plans for retailers, those that are looking at opening smaller-footprint spaces are looking at the urban cores of mid-tier cities for some of that expansion. There was a time when these spaces might not have been considered exciting opportunities for these national retailers. Now it has become a new avenue for them to pursue.
How about retailers selling experiences? Before the pandemic, experiential retail was considered a strong bet. Is experiential retail coming back now?
Strawn: At least from our research, it looks like experiential retail has come back. Topgolf is a good example. Topgolf is doing very well right now. As people get vaccinated and cities are pushing for that return to normalcy, we will see more of the experiential retail come back.
Benzinger: People have picked up many hobbies during COVID. Experiential retail is a complement to that. Then there is the rise of social media. People want to share their experiences at interesting retail venues. They want to share with their friends and family members what they are doing, be it rock climbing or some other new hobby. Experiential retail is here to stay.
How about the suburbs? They are seeing a lot of retail expansion, right?
Benzinger: A lot of retailers in urban areas are moving out into more suburban areas, too. They want to reach and expand their brands further. At the same time, consumers might go into urban areas and find places that are still closed because of the pandemic. In more suburban areas, that is usually not the case. Where we are, in the suburban areas all the restaurants are open. In downtown areas, that is sometimes a question mark. Retailers want to position themselves where they know the people are, and that includes the suburbs.
Strawn: We also see that there is a shift in population from large urban centers to the urban areas of mid-tier cities and their surrounding areas. Some of the retailers see that many their consumers have moved to cities like Indianapolis. This inspires them to consider expansion plans in those areas. They want to move to these mid-tier cities and capture an even larger market. For brands that are poised to grow, this is an exciting opportunity to reach into new markets. There has been the unfortunate demise of some retail concepts, but plenty of retailers are also looking to grow.