The Future of Brick and Mortar Retail: Navigating Fluctuations and New Opportunities

Over the past decade, we've witnessed a significant shift in retail, with traditional brick and mortar stores losing ground to online alternatives. Steve, an experienced retail professional, shares his insights on the future of physical retail and the ongoing transformation of the real estate landscape.

Phase 1: The Digitization of Retail

For those who expected physical retail to disappear with the rise of giants like Amazon, the trend of real estate conversions to business offices could be seen as a continuation of this shift. Steve notes that many small retail spaces are now being repurposed into business offices, reflecting a broader cultural trend toward remote work. This transformation can be observed in his town, where a once-vibrant town square, designed for retail and restaurants, now houses attorneys' and real estate firms' offices. This trend marks the first phase in the evolution of retail: a phase characterized by the digitization of traditional shopping experiences.

Phase 2: The Shift to Digital Shopping

Steve anticipates that current trends will lead to a long-term shift away from physical retail, especially as the generation that grew up with physical stores retires and is replaced by digital natives. As more people work from home, there will be less need for physical shopping experiences. However, Steve argues that there will still be a significant demand for hands-on interaction with products, particularly for items like clothes and shoes. This demand can create new opportunities for physical retailers and can mitigate some of the challenges posed by online shopping.

The Fallacy of Online Pricing

Steven refutes the common belief that online shopping is always cheaper. He emphasizes that early online shopping was characterized by lower prices due to the overhead costs of maintaining physical stores. However, today's brick and mortar shops are becoming more competitive, offering better values on-site. Steve discusses his experience opening a new brick-and-mortar shop from scratch and finding that in-store purchases are almost always better value than online. His shop's strategy is to offer a refund for the price difference if a customer finds a better deal online, demonstrating their confidence in the in-store shopping experience.

The Ongoing Process and Future Challenges

While the current trend towards digitization and physical store repurposing is clear, Steve emphasizes that this evolution will continue for years to come. He predicts additional vacancies in physical retail spaces and eventual conversion to other uses. The process of retail adaptation is ongoing, and the real estate market will continue to respond to changes in consumer behavior and technological advancements.

Final Thoughts and Rude Awakenings

Steve concludes with a warning about the potential disruptions to local retail in the future. Largely due to the loss of K-Mart, ShopKo, and Sears, many local brick and mortar stores are now being replaced by online services. He raises the question of what will happen when these services face disruptions, either due to logistics or other unforeseen circumstances. This digital transition leaves local communities at risk, as these companies are not locally owned and operated. Steve predicts that the lack of local services in times of crisis could lead to significant challenges for communities.

Steve's insights highlight the complex and multifaceted nature of the retail landscape. As traditional retailers adapt to a new digital reality, they must consider both the opportunities and challenges presented by the ongoing shift in consumer behavior.