Consumers Force Brick-and-Mortar Restaurant & Retail Brands To Adapt
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Consumers Force Brick-and-Mortar Restaurant & Retail Brands To Adapt

Consumers Force Brick-and-Mortar Restaurant & Retail Brands To Adapt

I'd like you to cast your mind back to the early 2000s, when e-commerce was just on the rise and many experts and industry veterans were seeing doomsday signs. There was an expectation that online commerce and online retail competitors would simply suffocate the retail industry, with a similarly dire ripple effect on the restaurant and retail franchise industries.

Today, the omnichannel consumer is beyond a trend - it's the profile of the modern shopper. Franchises have adapted, and having an "omnichannel strategy" is considered a non-negotiable for modern-day restaurant or retail concepts.

So what does a franchise's "omnichannel strategy" mean for real estate?

Unpacking a buzzword

First, what is "omnichannel," and how does it affect restaurant and retail real estate portfolios? Basically, omnichannel describes the ways retailers and consumers combine multiple channels to market, sell, buy, and deliver goods. Less basically, how this plays out in the real estate of different industries can vary by consumer and retailer.

An omnichannel strategy is an investment, but it can reap big benefits, like driving more customers and higher spend. In fact, single-channel consumers tend to spend less and behave with a less brand-loyal mindset than omnichannel consumers. We've already seen the ways an omnichannel strategy continues to shape retail. And for brick-and-mortar franchise concepts, there remains sizable opportunity to continue to tailor real estate to drive efficiencies and achieve a competitive edge.

Center the in-store experience

A brick-and-mortar location is no longer a requirement to run a franchise, from retail to service to restaurant concepts. Instead, it's a choice, and more retailers are justifying that decision by creating a unique, enjoyable in-store customer experience that cannot be replicated online or through e-commerce. This can include finding space that allows a retailer to offer additional in-store services, such as a tasting room or bar, yoga classes, or live entertainment - anything that helps drive in-store traffic. It can also mean focusing on unique architecture and design; on creating a space that moves a consumer's focus from quick and easy, in-and-out convenience to more of a café experience, where they are encouraged to sit back, relax, spend time (and more dollars) in a comfortable environment that cannot be delivered or experienced through online retail alone.

Pivoting stores to distribution

People spend so much time decrying the state of the brick-and-mortar store that they often overlook a key advantage: these stores are often closer to where their customers actually live than distribution warehouses used by e-commerce juggernauts. Using a store location to fulfill online orders can allow a retailer to serve consumers faster and for less cost. This isn't just for smaller retailers; major chains are increasingly leveraging store locations for pickup and returns. While brands with bigger store footprints are naturally suited to effectively reach their customer base, smaller franchises can partner with third-party delivery services to supplement the ability of their own store networks for quick product or order fulfillment.

Omnichannel for everyone

While retailers long ago reckoned with the impact of an increasingly omnichannel consumer, the restaurant space was considered safe from the impact of e-commerce. Even as more digital channels were introduced into retail, services, and other areas of commerce (moving more transactions online and out of brick-and-mortar locations), many still assumed consumers would remain consistent in their behaviors with restaurant concepts. Third-party delivery changed the game, and restaurants have had to respond, finding ways to cater to off-premise dining and adapt the restaurant space itself to cater to pick-up, delivery, and online ordering.

Invest in diverse store formats

It's a fact of real estate that a brand's brick-and-mortar locations look different in different locales. Now, in conjunction with more traditional factors such as suburban or urban location, geographic region, and population density, e-commerce is an additional determining factor on the look and feel of a store. Retailers can adapt by diversifying store formats, as well as the features and size of each location to better suit an omnichannel strategy to reach the consumer. Many retailers are also experimenting with temporary pop-ups, a unique use of real estate to test products, services, approaches, and markets without a robust financial investment.

What's ahead

Although there's a perception that retailers are downsizing real estate portfolios in response to e-commerce, I'd argue instead that we're seeing an evolution: to put forth an omnichannel strategy, retailers are seeking to tailor the size and redesign the function of their real estate portfolio to best serve the new omnichannel consumer.

 Carl Jenkins is director of real estate at Huddle House. Previously, he spent more than 28 years in commercial real estate roles for Advance Auto Parts, McDonald's, and Panda Restaurant Group, where he supported both corporate and franchise development.

Published: February 25th, 2020

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