How to drive Millennials to brick-and-mortar
In recent years, the millennial generation surpassed baby boomers as the largest population of consumers in our country. This shift presents a number of opportunities for retailers to target and build loyalty with a new generation; however, the opportunity also comes with its challenges. One of the greatest of which, is identifying ways to keep brick and mortar locations relevant to a convenience-seeking and highly digital audience.
Seeing an opportunity to target a key millennial demographic, some developers are now focusing on the creation of mixed-use residential and commercial properties targeting college students. Long gone are the days of the starving college student. The spending power of today’s college demographic can be upwards of $15,000 per student. Combine this with higher levels of free time and more time spent at their residences than young professionals, and you will begin to see how mixed-use developments can present a particularly promising opportunity for driving millennial traffic to retail outlets.
There is little doubt these mixed-use formats are growing in popularity in college markets. About 20 percent of all new college-student housing appears to fall into this category, mostly because the combination of residential and commercial space addresses key preferences for millennial living.
A 2014 Nielsen report on millennials stated that 62 percent of millennials prefer to live in mixed-use communities, similar to urban centers, where they live close to everything, from work, to restaurants, to shopping. And while millennials are strong mobile and online shoppers, they favor shopping experiences that integrate traditional retail tenants with restaurants and leisure amenities.
What’s more, retailers are finding significant opportunities with mixed-use retail space. Retailers and developers are beginning to see sales-per-square-foot revenue for mixed-use or urban storefront footprints can be anywhere from 50 to 100 percent higher than typical suburban locations. So while some retailers may hesitate to open locations in storefronts that require a reduced footprint, they stand to experience more value per square-foot of leased space.
Based on these market trends, it appears storefronts in mixed-use communities have a particular advantage when it comes to attracting millennials; however there are two main millennial preferences driving these trends:
Extreme convenience: A generation accustomed to instant gratification and on-demand everything defines “convenient locations” very differently from their parents or grandparents.
Living community: Retailers in mixed-use developments become part of a larger ecosystem of millennials’ everyday life, forming a community for living, working and playing.
Extreme convenience
Convenience is one of the greatest challenges to brick and mortar locations today. Millennials and most of today’s consumers value and demand convenience more than ever, but it can be challenging for storefronts to beat the convenience of online shopping. Mixed-use developments lend to extremely convenient retail locations. While previous generations may have considered convenient locations to be within a 5 mile radius of their home or along their daily driving route, the millennial definition of convenience is “right downstairs” or “within walking/biking distance.”
To meet college students’ desire for extreme convenience, most mixed-use developments targeting these groups are developed within walking or biking distance (ideally, one mile) from campus – an area the target demographic must visit on a regular basis. In some cases, these developments will even establish bike share programs to support tenants and customers desires to bike to and from these communities.
Sometimes retailers are hesitant to consider mixed-use communities because of parking limitations. Surprisingly, these communities typically only require enough parking for about 75 percent of the tenants. Many students chose to live in mixed-use communities because they don’t have a car or prefer to limit their dependence on this form of transportation. But, when it comes to customers who live outside the community, developers often account for additional retail and restaurant parking and may even partner with the city to create more off-street parking for these customers.
Living community
Building a living community is one area where physical stores have an unbeatable advantage over e-commerce formats with their ability to participate and benefit from localized community building. By integrating residential units with retail space, mixed-use developments naturally create this community feel, but it doesn’t stop there. Retail environments in mixed-use communities that support events such as regular farmer’s markets, food truck days, or local concerts and festivals transform locations into community centers that foster greater interaction.
These communities also offer opportunities for retailers to connect more deeply with their most captive audiences, tenants. Tenant appreciation events, discounts or incentive programs for residents are all effective ways retailers can become a part of the living community.
The need for a living community reveals an unrealized opportunity for one large group of retailers. One of the most common question residents pose to urban or mixed-use developments is, “where can I buy groceries?” The footprint constraints of mixed-use retail space may create a challenge for traditional food retailers, but there is certainly a demand for their products. Often, having a location where residents can quickly grab standard grocery items completes the feeling of a living community or ecosystem.
Looking to the future
The future of mixed-use developments brings more opportunity for retailers as the millennial generation increases its spending power. In the future, the industry could see integration of more commercial office space and upscale boutique hotels in these communities. This influx of professionals and transients will lead to more retail customers who are drawn to extreme convenience and the living community. At the end of the day, it’s these serendipitous interactions between consumers and businesses that will form the true lifeblood of any mixed-use community.
Judd Bobilin, pesident and CEO of Chance Partners LLC, has more than 15 years of experience in the residential and commercial real estate business and has focused on the development of college student mixed-use communities since founding Chance Partners in 2009.