Repurposing retail space: How e-commerce has created brick-and-mortar opportunities

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By James A. Schnur, CCIM
President and Managing Broker
Integrated Real Estate Solutions

From the time that Amazon expanded beyond selling books and Zappos’ free returns gave shoppers a reason not to go into a store, the face of retail began an evolution. In the past ten years, major retailers like Blockbuster, Kmart, Toys R Us, Circuit City, Borders, and Sports Authority have become just a few of the high-profile big box stores that fell victim to e-commerce. As their customers shifted loyalty to the online alternative, the stores closed, leaving vacant retail space in shopping centers around the country.

But when one door closes, expect another to open. While the demise of once-loved merchants is a sad consequence, there’s some fortuity here. Find purpose by repurposing retail space left vacant in the aftermath. In addition to repurposing these spaces with medical and entertainment uses E-commerce has created brick-and-mortar opportunities that reflect the change in retailing to embrace multiple channels.

Expedite delivery and click-and-collect

The lure of e-commerce is often irresistible for its unmatched convenience. While it has taken away from some retail operations, it gives to another.

We should focus on opportunities created by the race to the last mile of online shopping: delivery and distribution. Amazon, Target, Home Depot, and Walmart are among the major retailers scurrying to expedite delivery of online orders. To achieve this objective, they need distribution points in the major markets they’re targeting. Target, Home Depot, and Walmart can use their stores as mini-warehouses and pick up / return centers, but as more e-commerce businesses pursue faster delivery as a differentiator to their shoppers, these empty stores present the space and location they need.

Look at the online retailers who are picking up speed in their markets. Amazon is already establishing retail storefronts. Yet, they also need to broaden their distribution, for both delivery and pick-up, so this monster e-tailer could be seeking vacant buildings for that purpose.

Other e-commerce leaders include Overstock.com, QVC, eBay, HSN, and Buy.com, with more launching and growing weekly. The barrier to purchase for many shoppers is shipping costs, both receiving and returning. Upscale retailers like Zappos, Nordstrom, L.L. Bean, Barneys New York, and Neiman Marcus have offered free shipping. With about 46% of online purchases being returned[1], the service is costly to the retailer but a requisite in order to be competitive. Distribution points for delivery and click-and-collect could defray that expense and strengthen customer loyalty, which also happens to boost sales.

Bring the touchy-feely aspect

There are still businesses that attract customers to a brick-and-mortar location. We need to look at the vacant storefronts in a different way, exploring long-term occupants who aren’t actively competing with online channels.

What would people prefer to see, touch, and experience in person?

The Apple Store is a perfect example of a successful omnichannel retailer. Before buying one of the pricey devices, customers who are not already Apple devotees (and some who are) enjoy the experience of “test driving” the technology with an Apple expert who can entice them by demonstrating the features they only read about before.

Sharper Image was doing this long ago, and it worked because their inventory was so unique. Technology has created more innovations that could benefit from showrooms and demo centers—drone cameras, for example, and smart technology for the home.

Other uses such as medical clinics, testing centers, doctor offices, and entertainment uses such as restaurants and bars, rock climbing gyms, other health clubs, and indoor children play places, are often good fit uses of these spaces.

The once-bustling strip malls can be revived with a combination of these repurposed operations. The right mix will drive traffic to the location, which will boost the appeal for many new nontraditional users.

Integrated Real Estate Solutions proactively looks at commercial real estate opportunities and solutions that make sense on all levels for our user clients. Leverage our experience and expertise by talking to us about your plans and vision.

 

Integrated Real Estate Solutions, Inc. provides clients with the in-depth knowledge and experience that is critical to determine the right path to your next move, lease renewal, or strategic repositioning of your real estate portfolio. Contact us or call 847.550.0160 today about your needs, and put our success to work for you.

[1] Mattson-Teig, Beth, “Rapid Evolution: Bridging the last mile is reshaping strategies for retailers and e-commerce firms”, Commercial Investment Real Estate, May-June 2018.

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