A fundamental shift for physical retail…
It was great to see so many familiar faces at the GRO spring event last week.
I also managed to attend a couple of interesting panel sessions and the overwhelming theme was that there has been a fundamental shift in what success looks like for physical retail and shopping centres.
Physical stores are no longer just a space to sell products. They are a data channel, a place to showcase, a place to create experiences and draw attention and a place to foster brand loyalty. Whilst a material amount of actual purchases may take place online, physical stores are still an important part of the retail business model.
We have seen a rise in pop-up stores, where smaller businesses can test their readiness for physical retail and gather data. A physical space allows these businesses to create a closer connection with their customers, obtain real-time feedback on their products and generate hype.
Combined with the diversification of offerings (think gyms, health centres and leisure), shopping centres are becoming community hubs and driving footfall. There is a more scientific approach to matching services with community needs as well as mixing long-standing, reliable brands with new and exciting concepts.
For many years the turnover rent lease has prevailed. However, I have to wonder if the measure of success of a physical store moves towards promotion rather than sales, we may see a re-imagining of the rack rent lease model to reflect the ever-changing partnership between landlords and occupiers.
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