By Mark R. Smith, Contributing Writer
Retail professionals who think it’s good to learn a new word every day can make this add to their vocabularies: “eatertainment.”
Yes. “Eatertainment.”
That clever combination was recently passed along by Shawn Massey, partner and executive vice president of The Shopping Center Group, Memphis, Tenn. He said the main focus of retailers today is on “entertainment and ‘eatertainment’ as we redevelop former malls and big box spaces.”
That word was, no doubt, bandied about amongst many amused attendees when Massey posted in L.A. at the recent Experience Entertainment Evolution conference, where many a concept to attract shoppers to brick-and-mortar sites were presented, including pickleball, axe throwing, virtual experiences, etc., as well as residential or office space to centers as they adapt to the evolving market.
“This movement is about experiences over commodities,” said Massey. “People don’t always want to shop online because all people are, to some degree, social creatures. So center owners are addressing that by integrating entertainment, experiences, art, interactivity and open spaces, which are very important, into their offerings.
“That’s because sometimes,” he said, “people like to just sit down and talk.”
While those trends are front-and-center, it’s become more apparent that online shopping isn’t the end-all, others forces are influencing today’s thriving retail scene.
What’s Up
Next, Massey pointed to big box downsizing. Like many companies that have purchased or leased large amounts of office space, retailers “no longer need 50,000 square feet for a Best Buy, which can now operate from 5,000 square feet,” he said, “to present merchandise to customers who can order what they want.”
That trend has even extended to the neighborhood centers, where landlords are “concentrating more on leasing 5,000-square-foot spaces so they don’t lose a 50,000-square-footer,” because “that’s a big space to subdivide and renovate and (or) backfill.”
Massey also reported seeing “more public-private partnerships” as industry insiders “see that improving the quality of retail is really about improving the quality of life. The building owners want to see more public interaction in center design via charrettes, stakeholder meetings,” etc. “The community needs to be involved in the process.”
The buzz around redeveloping centers is resulting in another awakening. “We’re seeing the investment sales market start to thaw out,” said Bill Clements, partner with The Retail Companies, of Birmingham, Ala. “It’s been asleep for a couple of years since interest rates started to move up and inflation continued to increase. However, with interest rates stabilized and likely dropping in the foreseeable future, many observers feel we’ll see deal volume start to flow as the year progresses.”
As for overall new development, however, Clements thinks that sector “will continue to be as slow as it was for the past 12 months,” with the key issues being the usual triple-whammy: land, material and labor costs remaining high.
He thinks what new construction the market does see “will be driven by companies that want to expand and need a purpose-built building to satisfy their needs. Tenants who need shop space and service-oriented retailers, like tanning salons and nail salons, will continue to sign leases in existing centers,” Clements said, while adding that other users, “like Starbucks, Dunkin’ and other chains that require space for a drive-thru – which are hard to find – will require new construction.”
As for malls, he’s with Massey. Construction will arise via “redevelopment led by sports and entertainment-oriented businesses like Dave & Buster’s, pickleball courts,” etc.
“If restrictions are negotiable, other uses like medical, lodging and educational concerns are possibilities, too,” said Clements. “These sectors will continue to drive that part of the industry, as will the construction required to make the malls more inviting by opening them up and heightening outdoor entry to enhance the customer experience.”
Getting Techie
Catherine Timko, CEO of The Riddle Company in Washington, D.C., offered her observations on the “three big trends in retail.”
Also echoing Massey, she said, “One is that the retail footprint is shrinking. According to Costar, the average retail space in 2023 was 3,200 square feet. Even the big retailers like Best Buy, Macy’s and Ikea are shrinking their footprints,” said Timko. “For instance, Ikea typically operates in 215,000 to 500,000 square feet, but is now offering smaller showrooms of 19,000 to 200,000 square feet where customers can see items and have them delivered.”
The second is the popularity of what she termed “experiential retail. People want to be entertained when they’re out shopping,” she said, be it at a restaurant, sports venue, performance venue or other attraction; third is “the continued integration of ecommerce by retailers, including smaller ones, who realize that they need online offerings, as well as a brick-and-mortar location.”
Speaking of those smaller stores, they’re also on the data bandwagon. They’re using it to track stock and to analyze who their customers are. “The larger stores have been doing this for years,” Timko said, “but the data has become more accessible to the smaller stores, especially with the enhanced use of technology.
“What’s cool about technology right now,” she said, “is if you walk into a store, you might get a text about an item you’ve wanted that’s on sale, available,” etc. “Shopping is becoming hyper-personalized, with retailers like ZARA,” which is billed as a Spanish multinational fast-fashion company. It sells clothing, accessories, beauty products and perfumes. “It’s another part of the trend toward experiential retail.”
Aaron Farmer, president of The Retail Coach, in Austin, Texas, also offered a sunny forecast. When he returned from the International Council of Shopping Centers conference earlier this year, his mood was good “because every conversation I had was positive,” he said.
Despite some suggestions to the contrary, Farmer said that “even brick-and-mortar still seemed to be pretty strong, with the priority being on existing space, though we’re seeing more development in the pipeline with the interest rates dropping.”
Also of note was that the upward arrow in online shopping graph “has leveled off. It’s still strong, but the high of the COVID-19 era the growth that we saw is slowing,” he said. “We’re seeing more emphasis from stores about buying online and their pick-up in-store options. While that’s nothing new, that’s where the growth is occurring.”
Farmer also pointed to the strength of grocery stores and warehouses. Noting the Kroger acquisition of Albertsons that is expected to be finalized later this year, he said the grocery sector “should boom during the second half of this year and all the way through 2025. We’re also seeing warehouses like Costco, Sam’s Club – which hadn’t opened a new store in seven years – and BJ’s Wholesale Club expanding, as well as Walmart, which is opening 150 new stores.”
Also prominent in that positive retail news “is restaurant growth,” he said, “with the key being “having a drive-thru for any kind of eatery.”
However, there are also those aforementioned challenges.
“We’re also seeing various ends of the spectrum with malls and big box centers, with their relevancy depending on the market,” he said. Many “are becoming mixed-use centers that now offer not only shopping, but sports and entertainment, as well as medical concerns and even offices to backfill certain properties and anchor the centers.”
Interestingly, those traditional “anchors” ― as in department stores, “seem to be doing O.K.,” he said. “I wondered for a while if they would exist at all, but stores like JCPenney, Dillard’s, Boscov’s and Kohl’s seem to be holding steady. Many of the department stores, such as Kohl’s, are shrinking their footprints with new concepts that are about half of the square footage of what they’re used to.”
On that note, Macy’ recently announced plans to close roughly 150 stores, or 30 percent of its locations. The closing of these stores is to help reduce the waste of underperforming locations and allow the chain to open more of its Bloomingdale’s and Bluemercury stores, which are performing well.
Yes, that’s right: despite the general reserve when it comes to building new space, some major retailers are building new stores. “Second generation space is at a premium,” Farmer said, “but it was running out and that market is getting tighter. We need developers to build now.”
Sustaining Growth
Another trend in retail is that it’s becoming more demand driven. Nathan Ohle, CEO of the Washington-based International Economic Development Council, observed that across the organization’s membership, “We’re seeing an increase in retail businesses catering to previously underrepresented groups, such as minorities and seniors.”
“This demand-driven approach to retail should significantly enhance development in these communities,” said Ohle, “by fostering inclusivity and diversity in the marketplace.”
By catering to these previously underrepresented groups, he said retailers “are not only expanding their consumer base, but also encouraging innovation and competition in the market. This trend will lead to more sustainable, long-term growth through increased consumer spending in these new segments and continue to ensure that under-represented groups benefit from these approaches.”
Holding that thought, Stephanie Cegielski, vice president, research and public relations for the International Council of Shopping Centers, pointed out that “there are several mixed-use projects in underserved communities, with the goal to drive economic development. By offering housing and needed retailers and services, like grocery stores, health care and child care facilities, developments like Northeast Heights in Washington, D.C., are helping to revitalize communities.”
Ohle continued, with his next point about how hybrid retail, “the mixing of traditional brick and mortar retail with e-commerce, continues to revolutionize consumer experiences. Blending digital and physical shopping realms opens up new revenue streams and marketing channels. I expect this convergence will drive economic growth by attracting a broader consumer demographic and encouraging increased spending.”
But perhaps most importantly, this hybrid approach could serve to jump-start the growth of digital infrastructure and technologies.
That said, he still considers it more of an option than a requirement.
“This move towards hybrid retail may not be the right approach for every community,” he said. “As with every emerging trend in business, local leaders must assess the assets in their regions and determine if the approach fits the specific needs of their business climate.”
And Ohle means business climates, in the ecological sense, too. “When our members consider climate-smart economic development approaches, responsible and sustainable growth for retailers is at the heart of those strategies. This shift in priorities will have a profound impact on economic development by promoting sustainable and ethical practices within the retail sector.”
And those practices will come with benefits, he said. “This trend will likely lead to job creation in these emerging sectors, drive innovation in product sustainability and open new markets. Economic developers expect this trend to impact everything from the clothes we wear to the food we eat and, ultimately, contributing to economic resilience and growth in their communities.”
Collaboration
While observers often speak of the importance of working together, Ohle brought that thinking to perhaps another level, equating it with crossovers between entire industries.
“The future of economic development is in collaboration,” said Ohle. “In every region, we’re seeing industries overlap. The integration of industries in the retail space should serve to catalyze innovation and new business models, especially in personalized nutrition and social commerce.”
Ohle said the IEDC expects this trend “to stimulate economic development by fostering cross-industry collaborations and creating new opportunities for startups and established businesses alike. The maturation of social commerce will further diversify retail channels, potentially increasing sales and influencing the dynamics of consumer engagement.”
Cegielski concurred. “Collaboration between retailers is becoming more important for a few reasons,” she said.
“Experiential collaborations can help to attract consumers who want to see innovation from the brands with which they choose to shop,” she said, as well as “enable retailers to offer convenient services for their customers. For instance, a nationwide retailer that offers curbside pickup can partner with a coffee chain so customers picking up their curbside orders can also order a coffee to go.”
It can also help address “operational pain points, like fulfillment and returns challenges,” she said. “An online retailer can collaborate with a retailer that has a large brick-and-mortar presence to enable store returns for customers. In exchange, the stores might benefit through added foot traffic and brand awareness.”
Changing economic policy and environmental landscapes have also “forced a seismic shift in how retailers approach supply chains,” Ohle said. “By diversifying supply chains and adopting shared services models, retailers can enhance sustainability, efficiency and resilience.”
On that note, ICSC’s research shows that Gen Z is a socially and environmentally conscious generation.
“Our report on The Rise of the Gen Z Consumer found that nearly half want the brands they shop to support the sustainability efforts,” said Cegielski. “Retailers continue to ramp up their sustainability efforts, such as using renewable energy or participating in utility green tariff programs.”
Ohle added that lessons learned about supply and distribution in the past few years will provide a long-term economic infusion into the economy.
“This trend will likely spur economic development in many communities by promoting collaborative competition, while reducing operational costs and improving supply chain sustainability,” he said. “The move towards localized and transparent supply chains will embed wealth locally and regionally, creating opportunities for that wealth to revolve in those regions and leading to more equitable economic outcomes.”
Sales Strong
Also running with that strong long-term industry forecast is Jie Zhang, the dean’s professor of marketing at the University of Maryland College Park’s Robert H. Smith School of Business.
Overall, the retail industry “is going strong and defying the expectations of many experts,” said Zhang. “One example was the 5.6 percent rise in retail sales last year that outpaced the inflation rate of 3.4 percent,” according to the U.S. Department of Labor. “That’s a key indication that the retail market is going strong.”
The main story in recent years “is the economy’s recovery from the COVID-19 pandemic and the corresponding rise in consumer confidence,” said Zhang. “While consumers have cut spending on goods, they’re spending more on services, travel and entertainment.”
In terms of the hottest sectors, restaurants and food are still hot. “In the past two years that sector has made a gradual, yet remarkable recovery,” she said, noting that total restaurant sales in the U.S. were $997 billion last year, which represented 10 percent growth from 2022, according to the National Restaurant Association.
That sector’s success falls in line with people also spending more on that aforementioned ‘eatertainment,’ “including travel, concerts, theater, sporting events,” etc., said Zhang. “That’s been one of the hottest areas in terms of overall growth.”
However, like Farmer, she noted the ecommerce sector has cooled. “The pandemic accelerated the growth of ecommerce, but we’re now seeing somewhat of a slowdown in that area.”
“Before COVID-19, [ecommerce] accounted for about 11.1 percent in 2019 for all U.S. sales and rose to 15.6 percent by 2023,” according to Statista. “That’s a rapid growth rate, as so many retailers ramped up their ecommerce capabilities and upped the ante with their infrastructure,” Zhang said. “While the growth rate has slowed, the question now is, ‘How quickly will it grow again?’”
When it does, “it probably won’t happen in a dramatic fashion, given the growth in the general entertainment sector,” she said. “Many people have returned to in-person shopping due to the entertainment and even the social angles,” she said. “Many people want an experience or to simply get out and do things.”
What this has all led to is what’s called omnichannel initiatives, which are aimed at providing a seamless shopping experience to consumers through multiple channels.
“Take, for instance, doing research online before buying a car,” said Zhang. “Shoppers still need to test drive cars in person, but the greater amount of information sources empowers consumers and levels the playing field with dealers.”
Going Social
Speaking of leveling the playing field, Zhang cited the influence of social media.
“Companies understand how peer-to-peer influence impacts marketing and thus the bottom line,” she said. “That’s why influencers, who are often paid by brands, are having such a huge impact. That’s a growing area and many retailers are also diving into this domain.”
What’s next in the world or retail? Massey discussed the influence of technology while he explained what to expect when walking into brick-and-mortar locations in the next year or so. “It sounds like the need of the general market to interact and participate in life,” he said, “may be keener than some people thought it was for the past several years.”
That means also customers may want to show up and smile for the camera―and what may ensue.
“We’re embracing AI more,” Massey said, so when the customers show up, “You’ll see stores using facial recognition technology. That will allow customers to be addressed by a sales clerk who will have their purchasing profile and be able to speak to them” about their recent purchases, what’s on sale, etc.
That trend also points toward heightened automation. “More automation will take place in the back rooms of various establishments,” he said, pointing to one chain “that plans to automate six out of 10 positions to allow employees to have more interaction with the customers.”
Massey said that such moves will heighten service while cutting costs. “You can’t pay $25 per hour for food preparation,” he said, “and not have prices go up.”
Also, retailers will be paying more attention “to the younger generations, Gen Z and Alpha, who are having a great influence on retail,” said Timko. “Alpha spends so much time online they know what they want. And tell their moms to buy it.”
To her, all of the above is just simple evolution and another step toward the future.
“Anyone who says retail is dying is wrong,” Timko said. “It’s not. It’s just changing.”
Odenton, Maryland-based Mark R. Smith joined Expansion Solutions after having written about site selection among the vast number of topics he has covered in the 
business universe. That part of his career began in 1993 when he joined The Daily Record, a Baltimore business and legal publication, where he delved into the worlds of economic development and commercial real estate, among numerous other industries; in 2003, he was named editor-in-chief of The Business Monthly, another Maryland publication that covers the scene in the Baltimore-Washington Corridor counties.
Concurrently, he’s written at length about the film and video industry for a variety of publications, and about his other loves, including music, sports and leisure.
