Creating Resilience

Three Ways to Ensure Retail’s Resilience in 2023

January 20, 2023


Retailers overcame some tough challenges in 2022, including economic uncertainty, product availability shortages and rising prices. With little new retail real estate development in recent years, the competition for attractive space drove rental rates even higher. But with persistently high inflation, tepid consumer confidence and a looming recession, retailers likely will slow expansion plans in 2023, causing rent growth to wane.

Following are three ways that retailers can contend with cooling consumer demand and remain resilient next year.

1. Execute a balanced omnichannel strategy

Brick-and-mortar retail remains popular, with a majority of recently surveyed consumers preferring in-store shopping for seven out of 10 product categories, including clothing and jewelry. Product preferences for in-store shopping correspond with consumers’ desire to try on an item before buying. Savvy retailers can leverage both the e-commerce and in-store experience to secure a sale.

Consumer behavior varies among retail categories. Using online sales analytics platforms, brick-and-mortar retailers can better understand both digital and in-person shopping patterns to create a well-balanced product mix that is attractive to the local customer base, saving customers time and increasing the likelihood of a sale.

2. Capitalize on grocery e-commerce growth

Online grocery sales, which currently account for just 7% of the e-commerce market, continue to grow even though pandemic-related store restrictions have been eliminated.

Grocers hoping to capitalize on e-commerce growth are adapting quickly to cut down on delivery time and logistics costs. For example, one major grocer has devised a new distribution strategy to shorten delivery times by using last-mile fulfillment centers rather than its stores. To ensure a smooth customer experience, grocers must continue to upgrade in-store return capabilities, expand curbside pickup options, redesign their stores to fit an omnichannel experience and automate checkout.

3. Elevate environmental sustainability

To meet demand for luxury goods, younger generations are turning to resale opportunities because of affordability and environmental concerns. A recent CBRE survey of more than 20,000 global consumers found that popular actions to address these concerns are to consume less and purchase locally sourced or second-hand products.

Consumers planning to buy less pose a clear challenge for the retail sector. Retailers must find ways to appeal to consumers’ growing environment sustainability concerns. Potential initiatives include adding product recycling points, installing water bottle filling stations and reconfiguring the tenant mix to favor those with strong environmental credentials.

Despite pandemic challenges, economic headwinds and changing consumer demands, the retail real estate industry is transforming how spaces will be used, valued and transacted in 2023 and beyond. Both retailers and asset managers will need to respond by adjusting their strategies to meet evolving consumer needs.

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