COVID’s Effect on Retail Trends
We have heard for years now that online retail would displace many traditional brick and mortar retail locations, and that few physical retail locations would ultimately survive the “Amazon effect.” Retailers and shopping center owners responded by focusing more on in-person experiences that could not be replicated online. Bars, restaurants, fitness centers, yoga studios, and other “in-person” experiences became the focus of many shopping centers.
Unfortunately, these in-person experiences have been among those hit the hardest by social distancing requirements. Gold’s Gym has already filed for bankruptcy and many smaller bars and restaurants are struggling to survive. As such, the pandemic restrictions may have accelerated the “Amazon effect” by forcing many of us to shop online whether we like it or not. In fact, online grocery shopping saw an increase of 110% for the month of April 2020 by one report. While this trend may not hold as distancing restrictions are lifted, some of these online shopping habits will no doubt stick for many consumers.
Despite the surge in on-line retail, there is undoubtedly pent-up demand for brick and mortar retail. Many shoppers still want to touch, smell, or see a product in person before their potential purchase. There is also less new construction occurring in the retail sector, which will constrain supply going forward. Therefore, brick and mortar retail may be very well positioned for a surge once distancing requires can be lifted fully. As I write this article, many states are beginning to allow businesses to reopen to some extent. The question now is whether reopening without a vaccine or fully available testing will result in a second wave of the virus that may set us back even further.
Whatever the case may be, brick and mortar retailers will once again need to re-think their strategies and how to compete with online-only operations or expand their own on-line businesses to be less reliant on physical locations. Those who survive the current challenges should be well positioned to thrive.
For more information or questions related to this article, please contact David Lindner, Partner and Chair of the Firm’s Real Estate & Construction Practice.