Since the start of the pandemic in early 2020, the message that’s been on repeat is that brick-and-mortar retail is dead. It was predicted that the lockdowns and subsequent surge in online shopping would deal physical retail a blow which it could never recover from. However, the numbers don’t lie, and they are telling us a very different story.
In 2022, there have been double the amount of retail store openings than retail store closures, and even the word “closures” can be misleading as we’re seeing retailers move locations or merge with other brands to open new stores. This is especially apparent in the discount and big-box retailer realm, where stores like Family Dollar and Dollar Tree are merging and cohabitating in a single retail space.
Another number to track is physical store sales, which I prefer to analyze quarterly instead of a month-over-month comparison. Brick-and-mortar naysayers pounced on the dip in retail sales in September, claiming it as another example of the death of physical retail. This is another misleading message – retail sales have historically shown a tendency to surge in July and August with back-to-school shopping, so the month-over-month comparison isn’t the best indicator of retail health.
Even at the peak of the pandemic, e-commerce sales only accounted for 16.1% of all retail sales, and that number has declined down to 12.9% at the end of 2021. This means more than 85% of all retail sales are still conducted in physical stores; it’s still important to consumers to see and touch the goods they’re considering purchasing. The traditional retail model still reigns supreme when it comes to apparel, beauty, furniture, and appliances.
One of the most notable retail trends I’ve seen that underscores the importance of a brick-and-mortar presence is direct-to-consumer brands seeking a physical footprint to sell their goods. Whether it’s a pop-up store like we’ve seen eyewear brand Warby Parker utilize, or retail partnerships like the presence of Casper mattresses, Native deodorant and quip toothbrushes in Target, direct-to-consumer brands see the value in physical retail.
In closing, it’s not always wise to listen to the negative hype surrounding retail real estate, because if you do you might not get the memo that physical retail is alive and thriving.
To learn more about this topic, watch my recent video.
Justin Langlois, CCIM is a Commercial Real Estate Investment Advisor with Stirling Properties servicing Baton Rouge, Louisiana and surrounding markets. Please reach out to Justin to discuss your real estate investment strategies.