Shoppers became more cautious, and curbside pick-up went from necessity to commonplace. Online shopping pumped up the volume of e-commerce but headed south when stores began welcoming back shoppers in the second half of 2020. Market swings made the future of mixed-use commercial real estate tough to predict, but trends in retail have emerged.

During the pandemic, outdoor farmers markets nationwide gained traffic while indoor shopping malls took a hit. Shopping outdoor with room for social distancing and plenty of fresh air registered with customers. In 2020, markets showed strong sales as boosted by new participation from the Supplemental Nutrition Assistance Program (SNAP). A survey by the Farmers Market Coalition found that in the summer of 2020, SNAP purchases  increased over 2019 levels at nearly 40% of markets that responded.

Automation levels have spiked as getting goods to consumers faster has changed the shopping experience. Self-checkout systems have surfaced throughout the brick-and-mortar world as customers shied away from cashier interaction. A number of convenience stores including WaWa, Royal Farms, and Spinx have followed suit. Even Kroger and Walmart have rolled out stores with 100% self-checkout — testing the patience of shoppers. To help soften the term “self-checkout,” the retail industry has even adopted the term “frictionless” to describe the experience.

As the move away from human interaction gains traction, Amazon is once again leading the pack with the deployment of its Just Walk Out shopping. They’ve expanded the system beyond Amazon Fresh stores as other retailers look to adapt the technology. Shoppers download the Amazon shopping app and scan in a QR code to enter the store’s gate. Once the tech-enabled grocery cart is filled with goodies, another code gets scanned, funds transfer and the customer heads for the parking lot. Amazon refers to the magic process as “a combination of computer vision, sensor fusion, and deep learning.”

The transformational impact of the pandemic caused consumers, property owners, investors and especially retailers to adjust to a new world order. As things gradually began returning to normal, retailers were already innovating new ways to lure shoppers out of their homes and back into stores.

To bring customers back, retail focused on opening new channels and offering an experience beyond cruising aisles while pushing a basket. Digital-savvy firms have moved to omnichannel solutions to turn buying a product into a wholistic experience and making it truly consumer-centric. Most other modern retailers are already multichannel — a term that refers to companies with websites, social media accounts, and an email list.

Going omnichannel means increasing the number of content mediums, seamlessly tracking individual customer interactions across them, and then directing them to a sales funnel. Omnichannel has developed by increasing the number of channels from the five basics of e-mail, in-person, phone, website, and e-procurement portal. And, of course, we’ve all grown accustomed to additional channels such as webchat, mobile apps, and video conferencing options.

“The power of true omnichannel is understanding all the channels our customers use, and how they want to use them, throughout their entire journey,” said Ferguson Enterprises Chief Marketing Officer, Victoria Morrissey. “If you don’t understand what that journey is, you can’t provide the right information at the right time.” Ferguson works across multiple levels in their supply chain by selling plumbing fixtures as a B2B distributor and a retailer by selling through their own showrooms. The feeling imbued inside a retail store is also being enhanced.

“There are companies out there that are personalizing the sounds you hear in the store and the scents that you smell,” said Praveen Adhi of McKinsey & Company. “They’re personalizing what the associates know about you. You’re going to see digital mannequins that quickly change what they’re wearing based on who you are. When you buy the product, you might not just be grabbing it off the floor. It might meet you in your car, or at home.”

While e-commerce surged during the pandemic, many customers still longed for the in-store experience. Immersive shopping emerged. Retailers and property owners adjusted to concerns about safety and convenience by combining physical shopping with digital, which resulted in phygital, a new type of commercial real estate space.

The concept of phygital is exemplified by Dick’s House of Sports, where consumers can receive advice from fitness experts and join a community of people with shared interests in sports and outdoor activities. The company’s Minnetonka, Minnesota, store includes a 17,000 square foot outdoor turf field and running track, a rock-climbing wall, a batting cage, golf hitting bays with simulators, a putting green, plus a health and wellness destination to help customers with recovery and well-being.

Retailers continue to push farther into the metaverse looking for an edge and sometimes go too far. British based retailer Marks & Spencer got mixed reviews after rolling out a computer-generated virtual influencer designed to elevate the brand to new heights. Customers reacted but not in a good way.

Many successful hybrid models of retail space are exemplified as pop-ups that appear in underutilized retail spaces existing in high traffic areas or trade show kiosks. High-end speaker company Sonos formed a strategic alliance with Google, who is moving its Assistant app into new realms, including wrist bands that monitor heart rate, body temperature, and moisture to track emotional response. The combination teamed up to create an experience in conjunction with Johns Hopkins University’s Arts + Mind Lab. It premiered at Salon del Mobile in Milan Italy last year with an encore performance in London. What appears as an art exhibit — complete with sculpture and music — doubles as a marketing showcase for two high-powered international tech firms.

The potential of utilizing wearable devices has also permeated the hospitality industry and event management. Hilton has been tinkering with wearables at conference that allow attendees to exchange contact information since 2017, way before the pandemic changed the world.

Banks have moved into the phygital space by turning branches into coffee shops. The banking with coffee experience at Capital One includes “ambassadors” as opposed to tellers, a full-service coffee bar, baked goods, free Wi-Fi, workspace, and ATMs. Capital One also offers free workshops on financial topics including budgets, credit reports, and how to save money.

What’s Next

Retail has changed and is coming back. Even the humble strip mall is getting nods of approval. According to CBRE, there were more store openings than closings in the retail market over the past year — with nearly 100 million square feet of absorption. The strip malls that are thriving lean toward tenants that provide in-person services, like hair and nail salons, or fast casual-dining. Commercial real estate mixed use developments such as KBS’ Accenture Tower blends well with the new changes.

Learn more by visiting KBS.com/Insights.