Jeff Hoch
The Kulka Group
October 2020
3 Min Read

Building Blocks for Change: Retail Apocalypse

Last night, I had the pleasure of participating in the Weekly Virtual Real Estate Meetup Zoom Call hosted by my friend, Yonah Weiss.

Yonah is a Commercial Real Estate Cost Segregation Specialist from Madison Specs and is the now the acclaimed host of the Real Estate Podcast Weiss Advice.

During the call, which was focused on business networking, I had the opportunity to meet a Commercial Real Estate Broker from California named Shmuel Siegel. In the course of the conversation, there were a couple of points that he raised to me that I found really thought provoking in relation to his outlook on the Retail Asset Class.  We spoke about how we would evolve forward generally, and more specifically how the COVID-19 pandemic has shaped certain people’s thinking about the Retail Sector.

Thought 1 – This or That versus This and That

Many people in society have developed a mentality that there is a Retail Apocalypse.  “Nobody will ever shop in a Retail Store or again”. “Why do I need stores when I can get everything on Amazon.” While it is true that Amazon has leapt forward what some experts assess as a much as three years because of COVID-19, consumer sentiments toward retail are not completely unfavorable.

A more realistic and probable outcome coming away from COVID-19 would be This and That. “I do love the convenience of buying items via E-Commerce, but I also want the choice to leave my home and experience something.” There is something to be said about going somewhere.   Leaving the confines of our home to get our food, trying clothing on a store instead of shipping it back in an envelope because it is the wrong size, or simply the satisfaction of needing something and leaving with it in your hands right now.

For retailers to stay relevant and profitable, they will inevitably have to craft a more interesting, thought provoking, valuable experience to customers to enter their stores. I would expect to see more of a hybrid experience where even E-Commerce giants begin having local outlets for higher demand items.  It might surprise some readers to learn that Amazon is in the process of rolling out some brick and mortar stores right now.

Thought 2 – The Four F’s of Retail (Fitness, Fashion, Fun, Food)

I am highly confident that these are the items that will survive in the new world order. As human beings we do seek and want experiential activities. Of course, health and safety will always need to be in consideration, but I am confident that the retail sector will stay focused on how to shape their offerings in a new way to accommodate the tastes of their clients.

Companies that have a truly infinite mindset will challenge themselves to be innovative and will not rest on the laurels of past performance or past success. It will be very interesting to see some new players that enter the market. Established players that embrace the challenges before them and seek innovation and others that will wither because they are too slow to adapt to change or believe that the only way forward is to keep doing what they did in the Pre-COVID era.

Overall, I am of the opinion that the real innovators will come out of this period stronger than ever if they are attune to customer sentiment, deliver excellent service experiences and are a providing a reasonable price to the underlying value of their product.