Report: Trends in Retail Sector Shift to Meet New Consumer Demands, but Brick and Mortar Shops Will Remain

National League of Cities, Apple
Image Courtesy of Robert Bye

By Catherine Sweeney

COVID-19 has caused major shifts in consumer retail trends, with more consumers switching to online shopping. However, a recent report from the National League of Cities suggests that brick-and-mortar retail will not be going away anytime soon. The report, ‘The Future of Cities Reenvisioning Retail,’ identifies several key changes in consumer behavior, pointing to what could possibly be the future of the retail sector. 

“We really see the future of cities and the future of retail being inextricably linked, and as we recover from the effects of COVID-19 in our cities, we’re going to need to do what we can to make sure our retail environments are there to support our cities and to keep people working and residents happy and able to get the goods and services they need,” NLC’s Program Director of Urban Innovation Lena Geraghty said. 

With the onset of the COVID-19 pandemic, more than 12,200 major retail chains permanently closed their doors, creating approximately 159 million square feet of empty retail space, the report shows. The number of small businesses in the U.S. also decreased by 33.36 percent since January of 2020. 

However, NLC suggests that these initial losses will not mean the end of retail forever, but instead show shifts in consumer habits. While traditional retailers closed their doors, more consumers turned to online shopping. In 2020, 14 percent of retail sales were made online; this is a slight increase from the year prior, when 11 percent of retail was from e-commerce, according to the report. At the same time, employment in the warehousing and storage sector grew by eight percent from 2020 to 2021, as more businesses upped their warehousing facilities to meet the rise in e-commerce demands. 

“We still see a role for both aspects in the future of retail. I think that people will continue shopping online and even when offices open back up and they’re in their downtown area, I think people have really come to rely on the convenience of being able to shop and have things delivered to their homes, so I don’t see that changing. I don’t think things like curbside pickup are going away either. That’s become sort of a mainstay at this point and I think a lot of businesses are investing in tech and infrastructure to make that really happen,” Geraghty said. 

In fact, the report showed retail remains relatively strong despite the economic downturn causing an increased dependency on e-commerce. According to NLC, nearly 40 percent of retailers have announced new store openings in the past year. This is believed to be due in part to businesses shifting a percentage of their sales to e-commerce. 

“I do think we’re going to see some increased shifts still to e-commerce but that will also probably translate to a different use of brick and mortar storefronts. I think we’ll see a lot smaller stores but with a wider variety of products and they’ll have a more centralized distribution and warehousing system that enables the flow of goods to those storefronts,” Geraghty said. “People, even when they’re buying online, are really prioritizing things like free in store returns so they don’t have to pay for that return shipping, and I don’t see that changing any time soon.”

According to NLC, these trends will not just allow for more online shopping, but will change the in-person consumer experience. The report suggests that the increase in e-commerce will lead to the development of more mixed-use commercial spaces, which will give retailers both a storefront as well as more distribution space. 

Consumers also will rely more heavily on experience-based retail. Geraghty explained that consumers are more interested in shopping in person if they receive an experience they cannot receive through online shopping, leading brands like Apple or other tech companies to be highly successful in continuing in-store operations. 

“What we’re seeing as an overall trend more is that people are super interested in experiences where they can connect with their friends and families, and now that economies are opening back up, really get out there and feel like they’re doing something different than sitting at home…We talked a little bit about the technology sector and how Apple stores are just as popular as they were previously because they’re adding a little extra experience to that shopping that means that people are more motivated to do it in person when they could order things as easily online,” she said. 

As local economies continue to reopen, NLC predicts storefronts will continue to shift as a way of meeting consumer habits. In turn, this will lead to an increase in retail sales, the report shows. 

“We’re up 10 percent February 2021 over February 2020 in retail sales, so I think the retail sector can feel pretty confident that things will be continuing to move in that direction through the end of the year,” Geraghty said. 

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