As retail industry leaders and real estate executives virtually convene later this month for the International Council of Shopping Centers’ RECon Digital event on May 25 and 26, the current state of physical retail will be top of mind.
When online sales soared during the COVID-19 outbreak, retailers had to rethink the role of their physical stores. Among other trends that emerged was a need for improved safety and services. Here, Tom McGee, president and chief executive officer of the ICSC, discusses these trends, the expected rebound of retail this summer and how physical stores play an essential role in an omnichannel approach.
WWD: As consumers reemerge from pandemic-related cocooning, what role does physical retail play in a post-COVID-19 environment?
Tom McGee: Consumers are eager to shop in stores, and we expect them to return quickly as public health restrictions are lifted. For example, a majority of both retail and CRE leaders in our recent b-to-b survey were optimistic that foot traffic would return to pre-COVID-19 levels within 12 months of containment of the virus.
About a quarter of respondents believe shoppers will return at pre-COVID-19 levels even sooner — within six months. Consumers like the convenience of seeing products in-store, picking up click-and-collect orders, and the sense of community that physical retail continues to create.
WWD: Why are physical stores key to elevating the customer’s shopping experience?
T.M.: Most shopping is still done in stores. Our Halo Effect Part 2 report in 2019, for example, found that even at digitally native retailers, consumers made approximately 60 percent of their purchases in-store, despite those companies starting out online. While the pandemic has certainly shifted some of those habits, we expect consumers will continue to value the unique and personalized shopping experience, customer service and personal connection in physical stores.
In fact, as the pandemic wanes, many consumers may miss the experience of going into a store and trying on clothes, seeing merchandise firsthand, or browsing for a product.
WWD: What do shoppers expect from an in-store shopping experience?
T.M.: Consumer expectations are changing as the pandemic enters a new phase of widespread vaccination — many will continue to expect safety measures, from hand sanitizer and mask-wearing to sanitizing high-traffic areas, to continue. Still, at the end of the day, consumers prioritize customer service, convenience and the ability to see merchandise firsthand in-store.
We’ve also found an increase in curbside pickup and other services, and we expect that to continue to redefine the shopping experience in-store. Consumers have come to rely on physical stores for the “essentials” during this challenging time, and we expect that to continue.
WWD: Do you expect services such as buy online, pick up in-store and curbside pickup to continue? Why?
T.M.: Absolutely! Our b-to-b survey found that 71 percent of retailers and 77 percent of CRE leaders strongly agree that online order fulfillment will be essential to ensuring physical stores remain financially viable.
Similarly, 67 percent of retailers and 85 percent of CRE leaders surveyed believe online order fulfillment will be the main driver of foot traffic post-COVID-19. Consumers find these offerings convenient, and they help retailers improve logistics and increase sales. Overall, it’s a win-win, and we expect that trend to continue well after the pandemic.
WWD: Why should direct-to-consumer brands consider a brick-and-mortar component as part of their overall retail strategy?
T.M.: First, ICSC’s 2016 Halo Effect report found that online sales in a market actually increase when a business opens brick-and-mortar stores in that same market. That means that physical stores can help direct-to-consumer brands increase sales by acting as “billboards” that drive traffic across the board.
More recently, though, we’ve seen a huge influx of businesses use physical stores for online order fulfillment and other new tactics. Our b-to-b survey, for example, found that 73 percent of small retailers offered a click-and-collect option in response to the pandemic, and those efforts have been quite successful. Direct-to-consumer brands can use these strategies to reach consumers in new ways, especially as consumers are increasingly interested in pursuing click-and-collect options.
WWD: What’s your sense of retail sales for the second half? What’s in store?
T.M.: We expect retail sales to continue to surge as consumers become increasingly confident, vaccination increases and public health restrictions are relaxed. A revitalized retail environment is likely this summer as pent-up demand for goods and services drives robust economic growth. We think the recent positive trajectory will continue, and retailers will benefit from an influx of spending.