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The Global Live-Work-Shop Report
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CBRE Survey Reveals Five Key Trends for U.S. Retail
Consumer preferences and the role of the store continue to evolve in far-reaching ways.
Read MoreThe pandemic-driven surge in e-commerce penetration is providing consumers with more choice than ever on how they shop.
While shopping online has been praised for its variety and promotional deals, many appreciate the immediate availability of product facilitated by in-store shopping, as well as the superior customer experience.
Weaker consumer confidence is set to drive changes in shopping behavior in the short-term. With personal finances coming under strain, consumers will likely cut back on experienced-based retail such as dining out and leisure. Asset managers will need to respond by adjusting their tenant mix.
As ESG consciousness grows among consumers, more shoppers are taking action to consume less, buy locally and use smaller or independent brands. This will require retailers to explore strategies to improve the sustainability credentials of their products to ease consumption concerns.
Most consumers still prefer to buy items in-store
Clearly demonstrating that physical retail remains a valued amenity, the survey found that consumers prefer in-store shopping for 7 out of 10 product categories.
However, preference of sales channel varies according to region and generation. Consumers from Asia-Pacific displayed the highest propensity to shop online, while those from the Americas are most likely to shop in-store.
While it is widely assumed that younger consumers are highly engaged with e-commerce, Gen Zers are less likely to shop online than millennials. This seems to indicate that despite being digital natives, even the youngest consumers are choosing to shop in-store.
Product, not experience, remains key to brick-and-mortar retail
Recent years have seen a significant focus on the in-store experience, with many retailers channelling investment into store designs to create visually attractive and entertaining consumer experiences.
While this is something recognized by one-quarter of survey respondents, it ranked as only the fourth most popular choice. The primary driver for the consumer to visit the store remains the product, whether that be opportunities to see or try out the goods or the immediate availability.
The support provided by a salesperson was the third most common reason for consumers choosing to purchase in-store and is particularly relevant in the luxury/jewelry, do-it-yourself (DIY) and electronic product categories. Retailers should therefore continue to invest in talent training and retention to ensure that the consumer benefits from a strong service that assists with their purchasing decisions.
Reasons for preferring to purchase products offline
Source: CBRE Research, 2022.
Online offers more variety and promotional deals
When considering drivers for purchasing through e-commerce, this sales channel challenges its in-store rivals by providing more variety and better promotional deals.
However, the breadth of offers provided by e-commerce may well be an opportunity for brick-and-mortar stores. Using sales analytic platforms, retailers can better understand shopping patterns to create a curated product mix that is relevant to the local customer base, thereby saving consumers’ time and increasing purchasing propensity.
Reasons for preferring to purchase products online
Source: CBRE Research, 2022.
The role of the store continues to evolve
More than half of survey respondents agreed that they like to see a product in-store before ordering online. With the costs to acquire consumers online increasing as competition to capture their attention grows, stores provide an opportunity for occupiers to boost online sales within local customer bases.
Slightly less than half of respondents said that they prefer to return online orders in-store, instead of by mail. Postal returns are costly for retailers and as a result many have now started or are considering charging for this service. Utilizing store networks can therefore increase supply chain efficiencies for occupiers.
To support these non-traditional uses of the store, where re-configuration is required, landlords should be mindful of use zoning and how this can be best facilitated in terms of design.
How much do you agree with the following statements?
Source: CBRE Research, 2022.
New technological disruptors set to emerge
As retailers become more accustomed to e-commerce, new technology disruptors such as the metaverse and non-fungible tokens are emerging rapidly. While three-quarters of survey respondents have relatively high levels of awareness of these new technologies, actual usage is far lower.
Results by geography varied, with European respondents less likely and Asia-Pacific respondents more likely to have used the technologies than the global average.
As part of this discovery phase, both landlords and retailers should assess what these new technologies could add to their current business model. Current innovations in the sector include immersive metaverse fashion shows and advertising, digital clothes for avatars and purchasing of product using cryptocurrency.
Are you aware, and/or have you used, any of the following technology?
Source: CBRE Research, 2022.
Asia-Pacific respondents are 21% more likely than the global average to use new technologies
Actions for Occupiers and Investors
Carefully calibrate tenant-mix
Although brick-and-mortar retail remains essential, consumers display different behaviors across various retail categories, meaning that optimizing tenant-mix is key to driving sales. Asset managers must ensure their leasing strategy not only considers location demographics, but also aligns with consumer preferences of shopping channels.
Ensure consumers can see and buy products in-store
While consumers continue to regard product availability as the most important aspect of brick-and-mortar stores, ongoing disruption may affect supply. Landlords and retailers should therefore strive to shore up supply chain and inventory issues where possible. Initiatives may include on-site storage solutions, together with investment in inventory and sales management tracking systems to further enhance forecasting demand capabilities.
Drive the evolution of brick-and-mortar retail
E-commerce sales can be costly for occupiers, both in terms of customer acquisition and delivery of product. Retailers should therefore utilize their store portfolio to increase efficiencies and enhance the omnichannel experience for the consumer, such as by introducing click & collect facilities, showrooming and in-store returns. Investors should consider how store and mall design can support these non-traditional uses.
Weaker confidence will change consumer behavior
Older generations feel less optimistic about their finances
Given the current global economic outlook, it is unsurprising that 30% of consumers believe that their personal economic situation will worsen in the next 12 months.
Older generations feel the least optimistic, perhaps driven by their career stage and associated potential income growth, together with their pre-existing financial commitments. Consumers from Asia-Pacific and the Americas present relatively similar levels of confidence, while Europeans are slightly less optimistic.
Worries about finances set to drive cutbacks on dining out
With personal finances likely to come under increasing strain, real estate occupiers and investors must identify the areas of spending consumers are likely to cut back on. While experience-based retailers such as restaurants and leisure operators have boomed in recent years, these are the areas where consumers will reduce spending first.
Priorities nevertheless vary by generation, with Gen Z stating a preference to buy more from discount brands to save money for leisure experiences. There were also some differences by region, with consumers in Asia-Pacific much more likely to prioritize personal services such as haircuts and massages, but lower spending on holidays.
When you are feeling less positive about your personal finances, how do your spending habits change?
Source: CBRE Research, 2022.
Actions for Occupiers and Investors
Strengthen occupier-landlord dialogue
With economic pressure continuing in the short/medium term, landlords should ensure they are regularly engaging with retailers as part of their customer relationship management initiatives to better track and manage asset performance.
Reconfigure long-term tenant-mix
While the experience sector remains key to asset managers’ long-term leasing plans, this is an area where consumers typically cut back on during times of economic difficulty. To increase asset resilience in the short-term, asset managers are advised to consider offering flexible leases to occupiers that are relatively more insulated from economic downturns.
Almost all consumers are taking action to help the planet
ESG consciousness is rising among consumers
As evidence grows of the sustainability challenges facing the planet, environmental and societal issues are increasingly moving up the agenda for both consumers and businesses. Almost three-quarters of survey respondents feel more aware of these issues than they were pre-pandemic, with consciousness having grown the most among the younger generations.
Focusing on the retail industry and its impact, consumers are most concerned by recyclability of products and depleting the planet’s natural resources, with Europeans expressing particularly strong concerns about these issues.
Most consumers are trying to consume less
More than 90% of survey respondents stated that they have taken action to help the planet, with younger generations most likely to do so.
The most popular action is attempting to consume less, undertaken by almost two-thirds of those surveyed, followed by purchasing locally sourced/produced products and smaller/independent brands. With these trends having emerged throughout the pandemic and now likely to be a longer-term habit, landlords should consider taking on local brands as tenants to enhance customer loyalty.
While actions linked to the sharing economy, such as purchasing second-hand goods or renting products, are lower down the priority list for consumers, these actions are more popular among younger generations.
Which of the following actions (if any) have you taken over the past 6 months?
Source: CBRE Research, 2022.
Actions for Occupiers and Investors
Augment product sustainability credentials
Consumers aiming to buy and use less poses a clear challenge for the retail sector, which has historically focused on growth. Retail occupiers must therefore explore ways to improve the sustainability credentials of their products to ease consumption concerns.
Strengthen environmental features of real estate
As consumers take action to help the planet, retail landlords should seek to enable environmental actions at their assets to increase customer loyalty. Potential initiatives include installing material recycling points, adding water bottle fill-up stations and reconfiguring their assets’ tenant mix in favor of tenants with strong environmental credentials.
The Global Live-Work-Shop Report Data Dashboard
How do your attitudes around how you live, work and shop compare to those in your region, market and age group?