Traditional Retailers Adopt the Experiential Model
More and more retailers are learning the importance of creating a retail experience as a way to compete with ecommerce.
The experiential retail trend is here to stay, and now more traditional retailers are developing in-store experiences. The trend has spread to more traditional retailers and big name brands that have adapted to meet the needs of today’s consumers. Creating an in-store experience is a response to ecommerce and a strategic way for brands to compete with online shopping.
“We’ve very recently seen traditional retail attempt to respond to the rise of e-commerce by making shopping fun. Since leaving Burberry to join Apple five years ago, Apple Retail SVP Angela Ahrendts has completely transformed Apple stores into community spaces,” Matt Berres, executive managing director at Newmark Knight Frank, tells GlobeSt.com. “Amid the trend of store closures seen in many cases since 2017, Apple closed only four since then and has repurposed many of its existing ones.”
Apple isn’t the only nationally recognized brand to realize the importance of the in-store experience. Lululemon and Nike are also creating in-store experiences to drive foot traffic. “Lululemon features workout studios on the second floor of what is now its largest store in Chicago’s Lincoln Park neighborhood,” says Berres. “Special events, movie screenings, concerts and special yoga classes are on the way as well. Nike’s primary retail location in New York has repurposed the fifth floor to become a Nike Basketball Trial Zone surrounded by HD simulation screens. I anticipate other retailers will follow suit in order to encourage customers to buy tangible goods in-store rather than online.”
Experiential retail is proving to be a winning strategy for both new and established brands, and retailers that enter the market with a unique experience are seeing fast success. “I am seeing the stabilization of earnings among early entrants to the experiential retail sector as this market matures and competition increases,” says Berres. “Dave and Buster’s for example enjoyed years of double-digit earnings growth exceeding virtually all analyst expectations, but rivals such as TopGolf have emerged as dominant competitive forces. This has challenged Dave and Busters, who is swiftly responding by improving their existing venues and monitoring the popularity of each of its services more closely.”
As a result, there is rising competition in the retail sector amongst newer and more established brands. “This flurry of competition will likely put upward pressure on experiential retail rental rates and compress cap rates over the long term,” says Berres. “It’s a very exciting sector within net lease and I look forward to monitoring in the coming years as it evolves to serve its growing customer base.”