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For investors, omni-channel retail strategy can help maintain returns

11th June, 2019

The relentless march of technology has transformed almost everything about the way we lead our lives. Only death and taxes, those stubborn outliers, remain impervious to the business of disruption.

One of the aspects of the day-to-day that has evolved beyond all recognition is the concept of retail shopping. The very word ‘shopping’ seems almost quaint in the galloping digital age; a throwback to the idea of a weekly ritual or occasional treat. Really, who goes shopping these days?

Actually, most of us do. Still! Like so much else, we just do it differently. In the past two decades, the retail sector has shifted from online to multi-channel – more options to maximise revenue and drive customer loyalty – and again to the current trend of omni-channel strategy.

Omni-channel is an integrated approach to the holy trinity of retail marketing, sales and service, designed to ensure a consistent customer experience regardless of how that customer is interacting with the brand.

Whether it’s by mobile device, desktop, any social channel, telephone, or of course within the physical store, the consumer gets the same ‘feeling’; the experience is seamless across all brand touchpoints.

Omni-channel retailing

Apple is one of the brands getting the most out of an omni-channel approach, with an acclaimed mobile app that works in tandem with its Irish network of stores and resellers to cover all retail bases. The app does not merely help to drive footfall, it also works to enrich the brand experience when customers are in the physical store.

Of course, omni-channel means different things to different retailers. From a real estate perspective, however, we are seeing traditional retail spaces being used and leveraged in new and different ways. Here are three of the key trends.

The rise of the in-store ‘experience’

With so many browsing and purchasing options, there is often very little need for people to physically set foot in a store. Savvy retailers are therefore creating different, distinct events and experiences to help drive footfall.

Brown Thomas, for example, has launched a range of themed afternoon tea events to deepen the retail experience. Shoppers at the flagship Dublin outlet can join a Veuve Clicquot-inspired afternoon tea while in Cork, the Whittard branch recently offered an intriguing Alice in Wonderland-themed experience.

This type of event can reinforce long-standing brand values while giving customers an opportunity to see that brand in a whole new light. A yoga class in your favourite department store. A barista course in your go-to shoe shop. An organic, zero-alcohol beer tasting at your local health food store.

Different shapes and sizes

In the US, forward-thinking retailers like Target and Nordstrom are experimenting with physical diversification: flexible-format versions of the original bricks-and-mortar space.

The temporary pop-up is probably the best-known version of this strategy. In Dublin alone, the pop-up has been successfully trialled by the likes of Volvo, Lynx, Maltesers, Tayto, Coca-Cola and Cuisine de France, not to mention a slew of eateries and restaurant brands, from fast food to high-end, and all points in between.

Different physical formats can be rolled out according to location (city centre v suburban) or season (Valentine’s weekend, St Patrick’s, back-to-school) and this physical experimentation can provide retailers with a high-value, low-risk form of market testing.

When is a shop not a shop?

There’s a reason your favourite coffee shop is located where it is. Physical shops and retail outlets almost always enjoy a massive logistical advantage because they are convenient (close to where people live) and highly accessible (parking, public transport links).

It makes sense, then, for retailers to further press home this advantage by leveraging their physical space to support other operational necessities: delivery, distribution, storage, collection, returns.

The key benefit for the consumer is time-saving. Most logistical functions take place in far-away industrial estates and hard-to-access warehouses on the outskirts of town, so bringing them closer to home (literally) is just another way of adding brand value.

Maintaining investment returns

For hard-nosed, bricks-and-mortar investors, the common denominator in the examples listed here is obvious: physical space.

Retailers still need that space to innovate and diversify; consumers still need somewhere they can see and touch a brand and its products – even if they are ambivalent on the idea of purchasing. (In any case, research has shown again and again that retail shopping drives online purchasing and vice-versa.)

Like many other industries, the retail sector is changing at a mind-boggling pace. There are challenges galore. However, while the concept of ‘the shop’ may be on the way out, the concept of shopping is here to stay – and for most retailers, physical space is still a necessity.

As retailers embrace technology and the evolving needs of their customers, the real estate industry must also evolve, not only to understand the changing landscape but to maintain investment returns now and into the future.

For investors, the retail sector’s growing adaptation of omni-channel ensures that physical real estate should retain its value. As part of a balanced, diversified real estate portfolio, there is still plenty of life in retail property.

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