Retail Sector Update: Brick-and-mortar retail may be down, but it’s not out - July 2020
By Jessica Chevalier
The retail landscape is undergoing a radical evolution. Whereas the mall was once the place to see and be seen, today e-commerce has flipped the shopping experience on its head, enabling literally any place-be it the living room recliner or the great outdoors-to serve up a shopping experience with nothing more than a smartphone and an Internet connection-and stay-at-home orders in the pandemic have reinforced this trend.
However, this does not mean that brick-and-mortar retail is dead or even dying, only that it is metamorphosizing. And the new iteration-which prioritizes brand identity and connection with the consumer, reinforced in an omnichannel approach-may, indeed, yield a more refined retail experience in which consumers increasing prioritize doing business with organizations that align with their own values and worldviews. As these significant transformations rock the category, it is imperative that specifiers of flooring stay abreast of the changes in order to shape retail environments for the contemporary shopper.
Chinn: It’s amazing what can be done in porcelain with [digital] printing. We use tile on a larger scale in mall concourses. We like to do polished and unpolished mixes. Shimmer from a distance really pulls the consumer into the property. We recently used large format tiles for the first time on our Valley Plaza Mall project [in Bakersfield, California]. The CEO at the time wanted terrazzo, which was too expensive, so we did a porcelain with a terrazzo look, using brass Schluter joints to make it look like a seamless terrazzo installation.
Ohanele: There are so many great looks in this long-lasting and inexpensive format. You can get the look of concrete without the concrete. You can get terrazzo looks. And you don’t have to worry about heavy equipment atop it.
Ruscio: The size of porcelain tile is getting larger. When the large formats first came out, there were some issues with finding the right installers, and the floors needed to be very level. There was some resistance, but today, that is less of an issue. It makes flooring more interesting when we use large format tiles. It has changed the way we cover our floors.
Chinn: We usually go Spanish for wall tile, Italian for floor. I really wish the domestic manufacturers had the same technology because it would be so much easier than waiting for product to come from overseas. For grout, we always go with what I call “mall grey” [so that we don’t have to worry about it looking dirty over time].”
While 2020 has been anything but normal, true to its name, it has brought things clearly into focus for many, including the importance of family, home, health and equality. The transformative nature of these times has greatly impacted the retail sector in a multitude of ways, and, as this happens, the physical space of our retail landscape is altered, as well.
First and foremost, businesses deemed non-essential had to shut their doors during lockdown, so brands that were hobbling before COVID-19 didn’t fare well during it. As such, we have seen a great many familiar names seeking bankruptcy protection, including J.Crew, Pier One and Neiman Marcus. Perhaps more importantly, many smaller and family-owned businesses-without the benefit of backing and investors-have turned their door sign to “closed” permanently, a loss both of cultures and economies. Some of these businesses may stand vacant for a time; others have already been claimed by a new enterprise and may need updating before they are reopened to the public.
Secondly, the ways in which consumers feel comfortable moving through the public space has changed. Social distancing demands make cluttered shops or tight aisles less appealing. Consumers need personal space, and that increases the importance of wayfinding, which is often communicated through flooring, both overtly and subconsciously.
Thirdly, with so many important conversations taking place in society, many companies are issuing statements of their values-think of this as the contemporary version of the ichthys on the business card or outdoor sign. Today’s consumers want to do business with companies that share their values, and a representation of those values should be echoed by the brand’s physical space. Today’s consumers are voting with their dollars.
“Expressing values and intentions is a way to attract consumers with similar values,” says Jason Wollum, retail practice director and SVP for Henderson Engineers, a Kansas City-based firm with 11 offices nationwide. “Those are the ways to create emotional connection to the customer, and those things extend into design.” Wollum points out that a retail company that declares itself earth-friendly, for instance, may make green choices related to its lighting and HVAC systems and refrigeration, and those are important; however, the customer cannot see these elements, and therefore, it is crucial that the retailer must also convey that priority in visible means throughout its physical environment, such as, for example, through a green flooring choice like bamboo.
Adds Craig Chinn, president of Architecture Design Collaborative, “The days of utilizing cheap finishes are gone. The experience has to be stronger than those provided. The brand identity has to go from the front door through the entire store. If you have fewer people in the store, the experience has to be that much stronger, with more intricate designs.”
Ohanele: LVT has really taken over the world. What we struggled with early on was the lack of variety, all the wood looks. The woven LVT that we first saw from Chilewich and now from Armstrong, Interface and Mohawk is phenomenal. LVT is so much easier to remove than porcelain tile, and it checks all the boxes without being overly expensive.
Chinn: We use vinyl mostly in office or back-of-house settings. We never use it in the mall environment because it doesn’t hold up or look great once it’s scuffed.
THE BIG PICTURE
The transformative events of 2020 came as the retail sector was already in transition. Even prior to COVID-19, it was clear that many once-juggernauts of retail, including Sears, Macy’s and JC Penney, were going extinct-giant, cavernous dinosaurs with out-of-date interiors and offerings that simply aren’t compelling enough to pull shoppers in. These are largely retailers that have stayed true to what worked in the pre-Internet days. As department stores shed their Mrs. Maisel glamour in favor of an Everyman approach, shoppers were left with unwieldy acres of generic products that neither offered delight nor differentiation. They didn’t appeal to any particular audience or buyer, and, as a result, their brand promise-if such a thing was even articulated-essentially became retail white noise.
Their major fault, in short, was seeing the retail model as a static one. That has never been the case, and it will never be. Consider Patagonia founder Yves Chouinard’s statement about why his outdoor goods company is now selling grocery items: “What’s an outdoor clothing company doing selling food? A similar question was asked of me in 1968, when we were blacksmithing new tools for mountain climbing, and suddenly started selling shorts, shirts and pants. Skepticism seems to rise whenever a company refuses to ‘stay in its lane,’ but as an entrepreneur, I see business opportunities everywhere. As a lover of the outdoors, I see a way to save our home planet and its creatures-including us-from the destructive habits we’ve invented for ourselves.” As Chouinard indicates, upheaval in what many see as “the way things are” is often construed as disruptive, but it’s from that disruption that something better may spring.
“When was the last time failing stores like JC Penney did anything innovative?” asks Bethany Ohanele, FF&E specialist with Ohio-based WD Partners. “There is no draw, no brand principle. In retail today, if you stand for nothing, you will fall for anything. A retailer must really know their brand and stay true to that brand while evolving in such a way that you remain relevant.”
“One thing that is very clear and has been going on for some time is that there is a polarity between the value discount retail and branded items,” notes Robert Ruscio, president of Montreal-based Ruscio Studio. “That polarity will not disappear and will pull farther apart. People are looking for value in stores like Costco or Sam’s Club. They will always exist, and they will be growing. Dollar stores will remain popular, but if we take a walk into the common mall, we see that multi-brand retailers have faded, and we see single-brand retailers or the brand itself that has a store. This is something that will continue.”
Retail expert James Dion of retail training and consulting firm Dionco notes that “the retail apocalypse” isn’t unexpected and, in fact, is overdue. “We have been seriously over-stored for years in this country,” he says. “We have four times more retail square footage than we need, and four times more per capita than the UK, Canada, Germany, any other developed country. We believed if you build it, they will come, and from 2000 to 2014, we were adding one to three new malls annually, while the Internet was accelerating, and we were not adding anywhere near that population, so it was a recipe for disaster before [COVID].”
In some cases, shuttered stores stand empty, but some have been filled with ventures not previously common in retail space, such as healthcare locations (frequently drop-in type urgent care facilities), arts and culture venues, residential units and experiential entertainment spaces. Of course, despite all the chatter of experiential retail being the breath of air that might revive the sector, many purely experiential retailers have fared particularly poorly in the pandemic. Indoor trampoline parks felt like biohazard minefields when our biggest health fear was the common cold, but now?
Dion doesn’t expect that the U.S. will see virtually any new retail construction in the coming years. “There will always be optimistic retailers,” the consultant notes. “There will be some new concepts, and some retail space will be repurposed. But as far as new construction, that is going away.”
And while that may seem like a dismal outlook, it is helpful to remember that brick-and-mortar retail isn’t so much collapsing under the weight of ecommerce as it is right-sizing to a scope more fitting for the U.S. population and its collective pocketbook.
“What makes retail interesting,” says Ruscio, “is that there is always something new. Retail is always chasing the latest. But in order for there to be something new, something old must fade away. It’s not like we have more money to spend. It’s the nature of retail to have new things emerge and others disappear.”
Chinn: We have moved away from concrete because it is expensive and hard to replace. If you replace the flooring every four to six years, you are doing a great service to the store. While porcelain is permanent, we don’t want something as permanent as concrete. There are however some great looking large format concrete-inspired tiles.
Ohanele: Clients love the look of a concrete floor. It’s an easy backdrop and a neutral base. People expect that it will be the cheapest thing out there, but that’s not the case. The ins and outs of it are complex. In addition, for our clients, terrazzo is too expensive.
Ruscio: If we wanted poured floors, we’d have to get workers out of their graves to do them. It’s not an option for us. In retail you have to be sensitive about cost. You are designing a space that will last at most five to ten years, so you have to be really mindful of dollars.
ALL HAIL CONVENIENCE
Going back through the ages, the broad sweeps of change in retail have been driven by the consumer’s search for convenience. “Over time,” says Wollum, “what people deem as convenient has changed. If we go back in history, the first retail was a bazaar or town square where street vendors gathered. Consumers saw it as convenient to go to those locations [with multiple vendors] to shop. That morphed into malls, then, over time, it shifted to a single store where you could buy almost anything, from groceries to wiper blades to a pair of pants. That shifted to a prioritization of connection and great customer service, which is what people were deeming as convenient before COVID-19. COVID has accelerated and forever changed that.”
Wollum explains that, prior to COVID, there were items that people would resist ordering online, like produce. People wanted to pick out their own apples. However, pandemic lockdowns have made them comfortable with ordering even those things. Post-COVID, people may prefer to buy something packaged that has limited human contact along the supply chains. “COVID will permanently change what we buy and how items are merchandized in the store,” he says.
It is interesting to note the consumer’s definition of convenience is intimately connected to transportation. In rural locations where cars are necessary to reach commerce locations, large, expansive parking lots are a necessity, making shopping centers and malls a greater convenience, whereas in urban locations where consumers have walk- and bike-ability, neighborhood-type stores are likely considered more convenient than getting into a vehicle and driving out of the city.
Of course, the ultimate convenience is sitting on your couch, ordering with a touch of a screen and having packages appear like magic on your doorstep. But these transactions eliminate the pleasures of shopping, which include socialization and the opportunity to touch, feel and try on products, so, though online shopping is the very definition of convenience-not to mention safety during a pandemic-it doesn’t necessarily scratch the itch that in-person retail does. And who among us hasn’t clicked “buy,” only to wish they could walk into a store, grab a few swimsuits off a rack and find the perfect one without the weeks-long back-and-forth buy-return rigamarole of online shopping, which is anything but convenient and renders our bank accounts a dizzying, incalculable web of debits and credits.
That being said, it’s incumbent on all retailers-large to small-to provide solutions of convenience for their customers, be that home gelato delivery, drive-thru sushi or pick-up-at-curb charcoal. Says Ohanele, “Amazon has changed everything with Prime. I don’t know how a retailer can really survive today without an effective logistics platform. The absolute minimum is buy online and pick up in store.”
Ohanele: Area rugs are always the kicker. We try to do inset rugs for ADA compliance and to reduce tripping hazards. We have used edge banding and transition strips, but we inset where possible.
Chinn: We utilize commercial grade carpet for soft seating areas, generally inset carpets or rugs with an ADA transition edge, so that they stick to the ground. We like Shaw Contract and Interface products.
Ohanele: We certainly find that some of our more traditional clients have strong ideas about using soft surface. When you strip away softness, you end up with acoustic problems, so there is space for carpet, mostly in zones. Carpet hasn’t gone away, but it comes down to operational cleaning. We are having COVID-19 conversations all the time.
IN WITH OMNI
Ruscio compares online retail to the microwave oven, “When the microwave came into the kitchen, it was an appliance that people believed they needed, but it didn’t exactly replace the other appliances. Some meals can be nuked. It’s good for making popcorn and warming coffee, but, in the end, it’s an appliance that works hand-in-hand with the other kitchen appliances.” He continues, “In retail, the term ‘customer experience’ gets thrown around quite a bit; I don’t see it as bells and whistles but about how the consumer discovers what the brand is about and builds a connection with the brand. Online, that is very difficult to do. Scrolling is not the same as being in the space. It’s like meeting someone on a dating site versus going to their house and seeing how they live.”
A successful brick-and-mortar store immerses the consumer in the brand culture and “in the passion of that category,” as Ruscio puts it. He adds, “That’s what you are really trying to evoke, but of course that can be elusive and hard to define. It’s an intangible. And we have to be careful that it doesn’t become hokey because then it will do the opposite,” and turn off the customer. As such, to build a successful retail space, a designer must be fully in tune with what defines the brand and differentiates it from its competitors.
“Connecting consistently across all communication methods-in person, social media, on the website-is what we refer to as an omnichannel presence,” explains Wollum. “This is a huge buzzword in retail today. And the retailers who have been successful and will be successful after COVID really doubled down on that omnichannel presence and having the same customer experience whether you are in-store or visiting virtually, including the delivery methods that go along with that. Many of the closures we are seeing were those brands that didn’t create an omnichannel presence and build connection with its customers.”
Dion refers to yoga retailer Lululemon as “the poster child” for success in building a community connection via an omnichannel approach. “When Lululemon moves into a city, it gets all of the local yoga instructors involved. It has studio space in-store. It allows yoga instructors to advertise their classes in-store.” Lululemon has succeeded at both moving beyond transactional to relationship-based retail as well as translating its concept into an experiential three-dimensional space.
In addition, Chinn points to Anthropologie and Tommy Bahama as brands that are effectively using their stores to showcase their design and style. “The quality of the finishes reflects the quality of the merchandise,” he notes.
For some retailers, according to Chinn, it also makes sense to build community by incorporating local imagery and the like into the design, but those themes should not overpower the branding.
Ultimately, the designer strongly believes that a retailer should make its space its own. “If a retailer is taking over an old space and keeping the existing flooring, they are missing out on something,” he says. “The arc of experiential retail is on the rise, and it should be portrayed in every [part of the design.] If the flooring is dingy and dirty, you have to replace it. It is so hard to keep the shopper’s attention. Flooring is critical, so is lighting. If you update those in any shopping environment, it totally changes it, and it’s not even that expensive.”
Ruscio: Flooring plays an important role because our design must sit atop something. It ties a design together and sets the tone. It anchors the whole design together.
Ohanele: Flooring is one of the longest lasting finishes. It will be the last thing to change in a refresh because doing so is disruptive to business. So the floor specification has to be strategic and really well thought out. I seek a minimum ten-year warranty for flooring products, since it’s generally ten years before the customer considers replacement. In ten years, they should be in process of brand refresh anyway, though if we have chosen well and the aesthetic has longevity, the look should be good for years.
Ruscio: We use porcelain, stone, vinyl-anything that is easy to clean with a mop of basic maintenance. We are using much less carpet over the decades, and with heightened attention to hygiene, carpet will become even less popular in the short term. But I do think that the funny thing about trends is that the more something is pulled back, the more it will eventually re-emerge. When COVID is gone, we may see even less carpet for a while but then it may come back stronger.
Ohanele: Aesthetics are my top priority. You have to have the right look. But you also have to have the right price point. It’s extremely irresponsible to suggest something expensive, especially in a roll-out scenario where the product will be used in hundreds of stores or for a franchise where the burden of cost in a refresh is on the owner. You really have to be mindful of that. Maintenance is also important. Don’t put something there that the customer will have a hard time cleaning and ruin the aesthetic.
Ruscio: When you are specifying flooring, you need to know who is maintaining it. Stores typically do their own flooring maintenance. Sometimes, the same person who is opening the store will be mopping it, which means that you aren’t necessarily getting top maintenance because it’s a forced task. I remember getting a call a few years ago about a porcelain floor in a street-level store. In the winter, there was film on the tile. The tile supplier and everyone in the supply chain got involved. Ultimately, it was decided that whoever was mopping the floor wasn’t changing the water.
Ohanele: We love LVT that will butt against carpet tile, but the challenge is always cleaning. If the cleaner uses a dirty mop, will that damage the carpet?
Chinn: Retailers need to do a refresh every five to seven years. Bathrooms are the same. Concourses need a refresh every ten to 15.
SEEKING SAFE SOLUTIONS
Henderson Engineers is one of the largest retail engineering firms in the country, working across all retail sub-sectors. To assist its retail clients in reopening during COVID-19, the firm did extensive research on transmission, leaned into its expertise of retail space and developed guidelines specific to each retail sub-sector. The company is disseminating the information via social media and also created a resource on its website.
Grocery is an important segment of Henderson’s business, and Wollum reports that it has been interesting to see how grocery stores have transitioned during the virus to serve the customer in new ways. That has involved transforming a part of the sales floor or back-of-house or both into a staging zone for customer pick-up orders. Many grocers had already begun this transition prior to COVID-19, or had plans to, but the pandemic hastened the pace of change.
Chinn reports that he hasn’t seen a lot of changes to flooring maintenance during the pandemic because the cleaning process is generally chemical-based anyway. He notes an uptick in antimicrobial porcelain products in the market, and while those may not be mandatory for floors, they are good choices for walls, which consumers are more likely to touch, lean against and even cough on.
And while we have all the tools at our disposal to fight the virus now, it is important to remember that the current situation is temporary. “One day we will have COVID-19 behind us, and we will see more restaurants, more traveling,” says Ruscio. “After 9/11, travel was down considerably. It took about nine months before corporate America allowed traveling again. Before COVID, travel was up 100% to prior to 9/11. These situations do have an impact, but the long-term trend won’t go away. This pandemic will also change our lives going forward. We will have a different outlook on sanitation and hygiene. But it can’t stop human beings from having the desire to experience life, to travel, to go to restaurants, to experience new brands. Part of what we need to do is be patient until we find a vaccine. We are in the middle of the storm. But we need to have a long-term view of things and be hopeful that we will get back to where we were.”
The lines of what the design world once considered “true retail” are blurring, says Ohanele, “We see retail expanding into other categories, such as banking and healthcare.” The designer points to her First Financial headquarters project in Cincinnati, Ohio as an example of this. At the start of the project, Ohanele reports, “First Financial asked, what can we use our building for when so much banking takes place online, and how can we serve the community better with our space?”
WD Partners’ solution was to open the space up for activities beyond traditional banking, providing space for the community to use for non-banking activities. “First Financial is now a place where people can come in and work [akin to a Starbucks]; a place to meet; a place for the bank to hold events, such as bringing in speakers to educate about investments,” explains Ohanele.
The designer reports that the idea of transparency was an important design element for the project, so while there are more private workspaces at the rear, the customer space is largely open and airy with playful furniture, tables to serve as workstations and even a self-serve coffee bar. The palette is largely neutrals, with a light-toned wood floor serving as the foundation, and pops of vibrant yellow, orange and royal blue in the furniture and carpet. “We designed a boardroom that is completely visible, as a jewelry box space in the center,” explains Ohanele. “We have workspace in the back that is more private, and as the traditional teller role has transformed a bit to be more one on one, we have them situated in something more like a kiosk.”
The designer continues, “More than ever, because there are so many brick-and-mortar buildings standing, we urge clients to make their spaces multidimensional and multiuse, asking what we can do to make consumers feel more a part of the business. So, within the design elements, it becomes about creating zones, asking, what is the customer journey as they move through the space? What happens when they walk in, and how do you want the customer experience to be? This has to do with wayfinding and strategic placement. Flooring is a perfect way to designate zones and create transitions from space to space.”
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