Placer.ai report: Can store closures be a sign of growth?
Every year there are new trends that rise that not only impact a number of brands but an entire sector. 2019 was no different, with huge breakthroughs coming across the retail and commercial real estate landscape.
Placer.ai decided to look back at the year, and highlight some of the most important trends that defined 2019 and could have a critical impact in 2020.
From the rise of mega projects in the world of commercial real estate to a new approach to store closures, the biggest stories of 2020 may have already been uncovered in 2019.
You can read the full report here.
The Rise of the Mega Project
Hudson Yards launched, Essex Crossing continued to rise and the Boston Seaport established itself as one of the hottest retail locations in the country. The common thread between the three? They all served as proof that the growing Mega-Project trend has staying power.
When Hudson Yards officially launched in March 2019 the site quickly saw visits that reached the levels of other NYC landmarks. The ability of the location to sustain this interest with a mix of high-end retail and Instagram-worthy visuals demonstrated the ability of well-developed projects to stand above the noise, even in one of the most crowded locations in the world.
Celebrating Store Closures?
2019 taught us that not all store closures are equal. While some are certainly the result of overexpansion or brands that are struggling to maintain engagement, there is another critical cause - optimization.
Earlier this year, Walmart announced the closure of several Supercenters - the brand’s flagship store format - leading to concern of wider troubles. Yet, digging in showed a very different story. Walmart wasn’t randomly closing stores, but removing locations where the primary competitor was a different Walmart Supercenter.
Walmart wasn’t struggling, they were optimizing.
The impact here is that in some cases the decision to close stores shouldn’t be cause for panic, but instead, a reason to feel even more confident in a company’s long term viability. With brands from Best Buy to Macy’s talking about store closures, this concept provides a critical lens from which to view their actions. Not every store closure is equal, and some may lay the foundation for future success and growth.
Filling the Retail Vacuum
Sears, Dress Barn, Kmart and others are among the list of declining, if not already extinct retail brands. Yet, with every empty location comes an opportunity for new or different brands to fill the gap and leverage the opportunity to maximize their offline retail potential. 2019 has been marked by the rise of a group of brands that fit this trend from Lululemon to Nike. The latter has enjoyed an exceptionally strong year with nearly constant year-over-year visit growth in each month of 2019.
Lululemon’s growth has been equally impressive with the brand augmenting its widescale expansion with pushes for greater same-store optimization led by a heavier push into men’s apparel and a plan for new store formats. Yet, both of these brands are part of something much bigger - classic product brands that are pushing more into offline retail. Whether it be boosting direct consumer relationships, improving national distribution or taking advantage of higher in-store conversion rates, the trend of product companies filling the retail vacuum is likely to pick up pace in 2020.
Poultry and Veganism Dominate QSR
The battle for the biggest story of 2019 in QSR likely comes down to a tight race between the rise of vegan options and the pull of Fast Food chicken. Popeyes had one of the most impressive product launches of the year buoyed by the #chickenwars feud with Chick-fil-A. The brand saw a huge traffic increase upon the launch and then an even more impressive peak when they relaunched the product later in the year following a sell-out of the product. Yet, poultry-based success wasn’t limited to Popeyes with Chick-fil-A continuing its seemingly endless growth to the top of the QSR mountain - all without selling a single item on Sundays.
Not to be outdone was the rise of veganism within a QSR kingdom far more connected with beef and chicken. But the strong success of early roll-outs prompted nearly every top QSR brand to experiment and deliver its own answer to the growing plant-based trend. The stark rise and success show a unique staying power that may come to define a great deal of success in QSR’s 2020 landscape.
Maximizing Retail Footprints
CVS launched Health Hubs, Wendy’s announced a new breakfast menu, Panera moved into dinner and Lululemon put a restaurant and Yoga studio in its flagship store. The thread that ties all these stories together? A desire to maximize each brand’s retail footprint.
Instead of just focusing on expanding to more locations, top brands are looking to improve efficiency by maximizing the output of each existing location. In QSR that means creating a full day menu that can drive revenue from breakfast through dinner. For CVS and Lululemon it means offering services that can drive visits during off-peak hours and provide a new revenue stream while simultaneously creating new opportunities for purchases. The ability to maximize the earning potential of each location is a key factor in creating a powerful and sustainable retail footprint and the push to do so will likely spread even more widely in 2020.
The ‘retail apocalypse’ narrative certainly had its roots in truth with much of the traditional retail landscape struggling to evolve with the times. Yet, as catchy as the title was, it was exceptionally misleading. The world of offline retail is here to stay with many of the biggest - formerly, online-only retailers diving deeper into the world of physical retail. But the real question isn’t whether the world of offline retail is ending, but which strategies will set apart the next wave of giants in the space.
And the first look at the strategies that will define 2020 may just come from looking back at those that took off in 2019.