What’s In Store? The Future of Large-Box Retail as the New Town Center

March 28, 2019

As it becomes less important for consumers to be present at a physical location to shop, retailers will look to multi-purpose real estate development, similar to Walmart’s recent move to turn land adjacent to their stores into “town center” concepts.

E-commerce has been one of the major factor in driving this change, as retailers have had to reconsider the product categories they sell in store and why shoppers go to stores in the first place. The entire retail industry, both store and non-store, needs to meet more specific needs of their customers. The lines that have traditionally defined retail have become blurred, as people seek out more than just products. Retail has become a concept where the new definition of traffic is “connecting” – how well the retailer’s total proposition connects to shopper needs. On top of that, shoppers just don’t have enough free time to spend an hour or more on one dedicated shopping trip.

As such, retailers have started look to combine a number of different services and products into one area, creating the “town center” concept, where shoppers can do everything in one central location. For example, the Hudson Yards complex in New York City just opened. Anchored by Neiman Marcus, the complex features art installations, restaurants, large-footprint stores, luxury outlets and nail salons.

Much of the inspiration for this comes from tech companies like Facebook and Google, who have developed physical campuses where people live, work, play shop, relax, worship and learn in designed for purpose “curated communities.”

In these concepts, stores will have to radically transform. The space dedicated to products and the space needed to shop them, will come down. Many stores will create partnerships with others, similar to what Walgreens and Kroger have done on groceries, where it may not be “your own” products for sale. There will also be a greater emphasis on redistribution, where the store will play a role in the retailer’s omnichannel/digital solution. Shoppers will be able to pick-up items ordered from a distribution center or picked and packed from the store while they take in other services offered by the “town center,” like entertainment experiences or dining options.

Beyond that, experiences will play a part of a retailer’s main hub. This has already been introduced among certain retailers like Nordstrom Local or Canada Goose and its “cold room”. The focus away from “replenishment” and more towards “experience” can help destress shoppers and allow them to be more comfortable in an environment, thus increasing the possibility of them making a purchase.

Healthcare and entertainment
So, what will make up these “town centers”?

For retailers like Walmart, healthcare perhaps makes the most sense given the relative isolation of many of its rural locations and the difficulties its shoppers have accessing the healthcare system. The combination of retail and healthcare could be simple, like putting clinics in stores a la CVS, or complex, where malls are converted into “medical malls” with a wide variety of outpatient clinics.

The addition of entertainment and dining are also logical additions to this town center concept. Movie theaters or virtual arcades featuring VR and AR integrations will be possible as technology improves. “Groceraunts” will become a much more common word, as food retailers will use the restaurant to reinforce their credibility and expertise as food retailers. Supermarkets like Hy-Vee and Wegman’s have already introduced in-store restaurants at a number of locations and grocers have started offering cooking classes to play a vital role in forming a community. Retailers would be smart to play into the personalization concept that has been adopted by tech companies like Google and Facebook in order to be successful in this space.

Lastly, retailers could consider their relationship to financial services. Capital One has recently opened banks that look like coffee shops, so there’s nothing stopping retailers from opening coffee shops that looks like banks. While much of banking takes place digitally, this will entice customers to do more of their banking in-person as they make it part of their time at the town center.

In all likelihood, at least two to three of the 15 largest “retail” businesses in the future will be businesses that are better known for their skill at multi-purpose real estate development. In order to succeed, these retailers will need to properly balance the needs of people, products and profits. They must decide how to gather people and connect them, how to deliver products and help people choose them, and how to distill these connections and products into a profitable economic model.

Bryan Gildenberg is chief knowledge officer for Kantar Consulting.