It has indeed been a rough stretch for the retail industry, starting with the “retail apocalypse” narrative of the mid 2010’s and now with this seemingly never-ending pandemic. And given the defensive posture that the Downtown and Main Street community has been forced to take ever since the emergence of the regional mall some seventy years ago, many of us naturally assume that the so-called “retail apocalypse” represents an even greater existential threat to our districts.
Well, not quite. I have always maintained that shopping centers are far more vulnerable to the rise of the online channel than Downtowns. Regional malls and power centers are filled largely with interchangeable commodities, and appeal primarily on the basis of selection and convenience – in these respects, they are easily outflanked by e-commerce, and indeed, longtime mall staples and once-impregnable category killers have comprised its primary victims these last several years, in Connecticut and elsewhere.
Downtown, meanwhile, has already spent decades trying to adapt to the disruption of its original model and, after some fits and starts, finally happened on a winning formula in the 1990’s that focused on food, beverage and entertainment, on small-scale operators, on texture and place-making and on captive submarkets (including residential). And this recipe seems just as insulated from the digital threat of today as it was to the mall monoliths of yesterday.
Its retail mix, skewed towards the experiential economy, has no doubt sustained a body blow these last eighteen months. Yet the actual data suggests that food and beverage has managed to pull through with minimal damage. In fact, based on estimates from the Connecticut Restaurant Association, there might have been even fewer restaurant closures in 2020 than in a typical year. In communities like Stamford, New Haven and West Hartford, more dining establishments opened than shuttered.
Meanwhile, the entrepreneurial energy that powers Main Street has been unleashed by the pandemic. Connecticut, for example, saw a 9% increase in new small businesses last year. Indeed, in my work as a consultant across North America, it is often the Downtowns filled with commoditized mall staples – like Westfield, NJ, Walnut Creek, CA and Westport, CT — that appear to have been struggling the most in recent years and, along with office-heavy central business districts (CBD’s), through the pandemic.
Traditional shopping is not a lost cause for Main Street either. In fact, top-tier Downtowns located in submarkets with dead or dying regional malls (and no competing lifestyle centers) might even be able to entice the growing number of mall refugees now looking to shift their portfolios “off-mall” and able to exit their existing leases owing to co-tenancy clauses.
They should also be able to benefit from a changing of the guard in these categories. Yes, some well-known “legacy” brands have contracted if not disappeared entirely in recent years, but newer ones have been emerging to take their place, such as Bluemercury, Madewell, Brandy Melville, South Moon Under, J. McLaughlin and West Elm as well as the “clicks-to-bricks” retailers like Warby Parker, Athleta, Casper, UNTUCKit, Allbirds and The RealReal.
While these chains are zeroing in on only the most well-established Downtowns, even lower-tier ones could benefit from the changing competitive dynamics, with boutiques and smaller chain-lets potentially filling the void left by the digitally-driven devastation of their rivals. After all, consumers are not about to stop buying clothes, shoes or accessories, and they will likely continue to prefer brick-and-mortar for true fashion.
For those who doubt such bullishness, consider the windy and unpredictable path that bookselling has taken over the last three decades. First, there were the superstores (“You’ve Got Mail” and all that). Then, Amazon, which resulted in the liquidation of Borders and contraction of Barnes & Noble. This void was then filled by… independent bookshops, which increased in number by some 50% in the 2010’s. And now, who is opening brick-and-mortar bookstores? Amazon.
So, don’t buy into the hype. The paradigm might be shifting somewhat, but there is a viable retail mix for Downtowns today. And while traditional shopping will in most cases not be the primary driver, it does have a role to play. We just need to be ready for some nuance, for the answers will vary by district, based on psychographic profile, competitive context, available inventory, landlord expectations, local leadership and various other factors.
We will also need to stay ahead of the curve. As dead or dying shopping centers look to reinvent themselves, they are increasingly co-opting elements of the formula that Downtown has perfected, and as they desperately try to backfill vacant space, they are pursuing the kinds of tenants that Downtown used to have all to itself. Downtown’s recipe is a winning one, but it will have to keep iterating and innovating, with new takes and twists on once-pioneering forms that are now headed towards mass.
We’re not the ones who should be panicking, though. These may be uncertain and scary times in the industry, and your landlords and brokers might be a bit freaked. But the retail industry is not a monolith. Even if the overall brick-and-mortar retail footprint is shrinking, different formats face different prospects: some are falling, others rising. And for once, Downtown might actually be in a somewhat better position than its competitors, with a more solid foundation and a clearer direction.
About the Author
Michael Berne is the President of MJB Consulting (MJB), a New York City and San Francisco Bay Area-based retail planning and real estate consultancy hired by municipal, quasi-public, non-profit and private sector clients across the U.S., Canada and the U.K. to conduct market analyses, devise tenanting strategies, lead educational workshops, advise on land use / zoning policy as well as spearhead implementation efforts. His Retail Contrarian blog can be found online and he can be reached at email@example.com.