According to a recent Forbes article, last year was a great year for retail real estate! By Q3, vacancy rates were down to 4.3% (one of the lowest rates in decades), driven by retail space demand and a scarcity of new development. Many new stores opened while mature brands continued to expand.
Of course, the question on everyone’s mind is whether inflation and possibly recessionary influences will impact consumer demand and retail overall. However, according to Forbes, strong evidence suggests that stores and physical retail may be the key to success in 2023.
Stores are the preferred, more affordable marketing channel to acquire loyal, good-quality customers.
The cost of acquiring customers online has increased exponentially over the past few years for many digital brands, probably due to more stringent privacy laws preventing retailers from easily targeting their preferred demographic and overcrowding in the online advertising space. Customer acquisition cost can be significantly better in-store than through paid digital investment.
In addition, brands report fewer returns and more repeat purchases from customers who purchase in-person, another significant factor for many brands.
Furthermore, the Forbes report cited a PwC survey that showed more than 25% of customers stopped using or purchasing from a business in 2022, due to bad experiences, but identified human connection as essential to their loyalty to a brand – which connection is far more easily provided by physical stores.
Logically, turning to independently profitable stores is the next step for brands that were previously exclusively online.
If there isn’t enough real estate or capital, brands will find a way to exist in a physical space.
Due to the lack of vacant retail real estate, many brands are on waiting lists and contemplating going to neighborhood centers, destination street locations, or even class-B malls. Expanding into new real estate categories is a shared prediction with Placer.ai’s Retail Trends Forecast for 2023.
Forbes.com, Brin Snelling