Yes. Physical stores are still tops with majority of consumers
By PATRICK MCKEEHAN
Given the trend to online shopping, is retail brick and mortar development still a good investment for communities?
The answer is an unequivocal “YES” just based upon the staggering numbers for retail brick and mortar sales and shoppers.
According to the International Council of Shopping Centers, retail sales in the United States last year topped $4.8 trillion with brick and mortar shopping centers accounting for more than half or $2.64 trillion. The 7.6 billion square feet of shopping center space generated 42.6 percent of total retail sales in 2016.
ICSC estimates 91 percent of all shoppers will use a physical store to purchase gifts during the upcoming holiday season. While use of e-commerce has skyrocketed to more than 80 percent of total customers, U.S. Department of Commerce reported online shopping only accounts for 11.7 percent of total sales in 2016. This equates to retail purchases of a few hundred billion dollars online compared to multiple trillions recorded by brick and mortar operations.
Beyond these overwhelming numbers, there are three very important and distinct reasons why brick and mortar developments are a good investment.
The first is built on the fact that retail brick and mortar is the fuel that powers practically every community in our country. Sales generated by retailers with the community, from the large-scale supermarket and mega mall to the smallest small mom and pop shop and corner auto repair, produce the vital revenues to fund municipal services. Sales tax provides almost half of total revenues and twice the amount of any other source in many communities. Without sufficient local retail sales, there is inadequate police or fire protection; under-capacity water and sewer systems; limited garbage removal; and poorly maintained streets and public spaces. Many of these essential services are completely funded or heavily subsidized by sales tax revenues. It is unfathomable to think that community leaders would not want to protect and support this critical income source.
The second reason goes to the heart of every household in the community. It is based upon tremendous employment opportunity that comes through local retailers, especially for those with limited education, work experience, job skills and/or means to transportation. According to the U.S. Department of Labor, Retail Trade is the third largest (10.5 percent) and fastest-growing employment sector in the country generating more than 15 million jobs. (State and Local Government is the largest sector, followed by Professional and Business Services.) Employment with a local retailer, for most high school and college students, is their first opportunity to learn critical work skills, time discipline, and money management. Millions of working adults also rely upon a retail trade paycheck to put food on the table. There are hundreds of independent business owners and entrepreneurs in every community that make their daily living by selling an endless variety of products and consumables to their customers. A community’s protection and support for local retail development has a direct and lasting effect upon an individual’s or family’s financial stability and their ability to contribute to social and community.
The third reason is as old as the concepts of commerce and trade. Throughout human history, the commercial marketplace has been the cultural and social center of what defines a community. It is not only the place to trade goods and make one’s fortune; it is a universally accepted gathering space and common ground for the exchange of information, ideas, and opportunities. Human beings are deep-rooted with the desire for human interaction and connection. For anyone who has traveled, whether it’s across county lines or whole continents, there is a constant fascination with experiencing the central marketplace, whether it is the streets of Paris or a farmers’ market in a small rural town.
While it is clear that retail brick and mortar is essential, it needs to adapt to the new reality of online shopping. The growing influential of millennials and their use of mobile devices for all aspects of their lives have retailers scrambling. Baby Boomers, the most wealthy and active buying segment of the population, are beginning to retire at an accelerating rate. The on-line behemoth Amazon, like Walmart before it, is changing the retail trade landscape. In the near future, most shoppers will be able to purchase products or groceries on a mobile device before noon and find it on the doorstep by early evening with select items delivered by autonomous vehicles or drones. It goes without saying, retail brick and mortar quickly needs to adapt and evolve or be relegated to the growing list of failed operators (e.g. Circuit City, Border’s, KB Toys, and Gander Mountain).
There are ways to survive this on-line onslaught and it begins with the importance of the shopping experience. Surveys of shoppers, ranging from Generation Z to Greatest Generation retirees, show a significant desire to “see, feel and touch” products before buying. The ability to “take home immediately” and return easily are additional considerations for shopping brick and mortar. Local retailers must find a means to reconnect with customers, utilizing multi-platforms that engage buyers and differentiate between the virtual world and real life.
At the same time, community leaders must change their thinking on how to protect and support brick and mortar development. Local decision makers need to be more deliberate and place a stronger emphasis toward return on public investment versus a “build it and they will come” approach. Communities should use zoning regulations and retail clustering strategies to strengthen existing retailers. Local economic developers should dive deep into their retail sales numbers and develop a “Moneyball” approach to understanding a community’s retail strengths, weaknesses and needs.
As centuries of history have shown, the retail marketplace will adapt and survive. Good investment decisions on retail brick and mortar development will allow it to thrive.
Patrick McKeehan is the director of economic development for the city of O’Fallon, Mo., with a combined 32 years of work experience at state, regional and local levels. Patrick and his wife, Mary, live and “shop local” in the Edwardsville/Glen Carbon area.