Retail design in a transformational market

After years of strip centers, now smaller-format buildings bracketed by secondary uses gathered around highly amenitized outdoor space are gaining in popularity. Courtesy Farnsworth Group Inc.

Bruce McLennan, AIA
Principal and national strategy manager for commercial development, Farnsworth Group Inc., Greenwood Village

Traditionally, retail design predominantly was an execution of market-driven formulas. Location is critical, access is slightly more critical, visibility is key, parking needs to be at the front door and everyone makes destination trips based on which merchants they can access conveniently so they can execute a purchase. These formulas tended to simplify design to a functional exercise and, for years, designs reflected these principles.

Truthfully, it didn’t take much creativity to plan a site that made parking convenient and a sign visible. While formulas still inform successful design solutions, the process of understanding what the formulas have become is like translating a language you speak casually. Market forces are changing daily, requiring a new view of retail design.

Retailers are reinventing their traditional models of existence, a trend attributed to online shopping and internet browsing. The dinosaurs of the industry are dying, and the darlings are reinventing themselves. Omnichannel shopping where customers research the product they want at home, touch it in a brick-and-mortar environment, then buy it from their phone online is turning traditional retailing models upside down. Merchants are diversifying their online presence, consolidating their brick-and-mortar presence and reinventing their distribution channels to reflect the new expectations.

Contrary to emerging thought, pure online shopping is actually a challenged business model evidenced by the lack of successful pure e-commerce retailers. When Amazon purchased Whole Foods, the company demonstrated its commitment to a brick-and-mortar presence in groceries that fuel its e-commerce model. Untuckit found that it needed a brick-and-mortar showroom to enhance its e-commerce presence. Like Athleta, Warby Parker and other similar brands that began as pure online retailers, many are adding value to their business model through physical brick-and-mortar locations. E-commerce now informs our brick-and-mortar retail experience. Traditional retail layouts often are oversized for these new physical locations.

The majority of the top 10 retailers in the U.S. are brick-and-mortar concepts. These include Walmart, Kroger, Costco, Home Depot, CVS, Walgreens, Target, Lowe’s and Albertson’s. Add Amazon to the list and you see the reliance on a brick-and-mortar presence that will not fade away.

While younger consumers spend their free time online, they generally prefer to shop in an experiential rather than a digital environment, according to research by CBRE and Accenture. As baby boomers age, they are being replaced by millennials, which contributes to the need for different experiential environments.

So, what do these trends mean to retail design? The basic formulas of location, access and high-quality concepts still rule in any market. However, we see many aspects of consumer behavior that are constantly changing, and most of these changes point to a more interactive model of the environments we design. The experiential aspects of entertainment uses, restaurants and pedestrian amenities coupled with the need for flexible “plug-and-play” building formats require a skillful mix of form and function for a retail environment to succeed.

The technical challenge becomes placing and creating interesting buildings that offer these interfaces while still creating flexibility with the design. For years, we placed multiple junior-sized anchors in a row, often referred to as a strip center. Now we find that smaller-format buildings bracketed by secondary uses gathered around highly amenitized outdoor space allows our clients flexibility for courting multiple retail concepts and the synergy they offer to a tenant mix.

Consumers come for the experiences the environment offers and jump into that mystical omnichannel shopping cycle as a component of the experience. The “look what I’m doing” aspect of the experience, and usually a social media post that proves your clout, fuels the need for personal interaction in cool places.

As omnichannel shopping habits become the cultural norm, online and in-store purchases will become integrated as a part of that purchasing process. Physical interaction in an experiential environment will fuel the need for quality retail design, and as designers we must continually adapt to the changing landscape in the retail market.

Featured in the November issue of Retail Properties Quarterly. 

Edited by the Colorado Real Estate Journal staff.