Operation and Opportunity

January 31st, 2022

By Yaromir Steiner

It isn’t just real estate and design differences, but operational innovation that will shape tomorrow’s retail.

In two recent posts, I wrote about some of the changes and challenges facing the retail development space, and about how those influences might shape the contours of the retail landscape in the not-too-distant future.

As retailers and commercial developers alike continue to wrestle with how to evolve and adapt to a changing world, some of the most interesting and impactful changes on the horizon won’t just be evident in what future retail environments look like, but how they work. Some of the operational changes likely to be made manifest in the years ahead will be just as fascinating and transformative as any real estate, design or leasing considerations.

On the operational side, the impact of ongoing labor challenges is likely to be profound. What we are facing is not simply a short-term labor shortage, but part of a longer-term pattern that has very real implications for retailers. With structural labor challenges likely to be a durable industry feature, there is opportunity (and perhaps necessity) for more creative, outside-the-box solutions.

One possibility is kind of an Uber for mall labor. A retail center might have a full-time GM and management team, but be staffed by employees identified, retained, and compensated through an app or other similar platform. The seasonal and tenant-specific flexibility that would unlock could be a game-changer for retail centers. Such a system would also lend itself to enhancement through predictive algorithms and other complementary tech.

A similarly flexible approach might permeate through to the merchandising and operational dynamics of future retail centers. Forward thinking retail owners and operators might structure some or all of their space as less of a traditional center and more like a kind of brick-and-mortar Amazon: a host for a wide range of products and services. The owner/operators could provide labor, retail analytics, and assistance with designing and branding spaces—all in exchange for a percentage of sales.

This would not only make it easier to evolve retail environments as needed, but would allow larger retail centers to backfill and benefit from an enhanced ability to identify new and intriguing/promising concepts. In the context of a future retail landscape with dramatically fewer traditional malls and a range of smaller and mid-sized retail and mixed-use concepts, some of the lines might begin to blur and traditional retail development categories might become more fluid and flexible. The retail centers of tomorrow might ultimately be better defined as organized physical transactional and gathering environments.

Questions remain about how aggressively retail brands might move to evolve their operational models. They could start essentially contracting out the daily operation of their assets, becoming more of a franchise type of model. We could also see more partnerships with universities, healthcare companies, and other institutions.

The biggest question, however, is how successfully industry professionals can embrace these changes without losing sight of the deep connection between operation and experience. If anything, the consumer experience is only going to become more important moving forward, and operational shifts must acknowledge and support that priority—not impede it. At a time when so much is changing, and the future of retail will be one characterized by exciting and sometimes profound change, the bright through-line of experiential horsepower will remain a critical constant for successful retail environments.

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