The Retail Fall That Never Fell: How Experiential Retail Has Thrived

Contributed by: Neha Govindrajm, Founder and CEO of Bonside

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In preparation for ICSC this year, I attended NRF in New York City to learn more about how retail is continuing to innovate and how real estate at large has benefited and will continue to benefit, from Retail’s resilience.

How Retail Projections Missed the Mark

Let's go back to the 2010s when headlines called for the death of brick-and-mortar and the rule of Amazon. What we know today, is that Amazon was more of a catch-all to capture the onslaught of optimized logistics – and the modernization away from storefronts also acting as micro distribution centers. With Amazon’s total overhaul of the logistics model, retail was momentarily caught in the crossfire and struggled to keep pace. 

But what we should have learned by now is that retail is extremely flexible and when change sweeps in, it’s ready to respond. Almost overnight, thousands of brands sprang up online, launching the newest iteration of a “storefront”. 

But, what about brick-and-mortar? As discussed at NRF,  the road to today’s booming retail sector had some bumps.

With the rise of online, many brands attempted to replicate the digital space by streamlining and simplifying the in-person experience. This period of trial and error took many forms, including:

• Re-designed interiors to be hyper-efficient and focus on speed
• Removing communal waiting areas and amenities  

• Stocking more into less square footage
• And reducing support and hospitality 

What we know looking back is that retail missed the mark. What we know now, is that whether for a service or a product, consumers are frequenting brick-and-mortars because they want an experience.

Whether it is new or repeat, consumers are driven by a desire to experience something real – that they can touch, see, smell, taste, or hear. It’s sensory-driven and now, it’s called Experiential Retail.

Experiential Retail

Experiential retail optimizes for convenience and brand connection, relying on technology and tools, but layering that in with what brick-and-mortar does best. One of the best examples of this is the Restoration Hardware (RH) 3 Arts Club in Chicago, IL.

RH was early to this trend. They converted a downtown historic building and brought it back to new life. On top of the architectural revival, RH mixed up the standard showroom model with complimentary experiences that today are massively popular draws.

First, they altered their showroom model away from the traditional furniture store operation of “buy and bring along” to the less bulky journey of customizing, purchasing, and shipping.

Then, they layered in the 3 Arts Club Café – an on-site restaurant in the building's garden space that not only serves delicious meals but also showcases Restoration Hardware finishes and furnishings. It’s a convenient mix of keeping customers on-site, having an additional draw and revenue stream to the space, and being a vibrant example of seeing the product shine and living the Restoration Hardware lifestyle. 

The model worked so well that RH has rolled out the mix across other cities and is now testing a new prototype – branded, shoppable estates, like The Gallery at The Deehan Estate in Indianapolis.

Changing the Office Experience

So how can other assets learn from retail’s experience? Talking with a friend the other day he made a great analogy,  “Logistics was to retail, as AI is becoming to office.”

The office market is in a reconstruction phase and no amount of “back to office” push is going to be enough. Ultimately, my belief is that the office sector needs to alter the value scale.

Work-from-home was a proof point that most employees can execute efficiently and effectively from home, but it also highlighted that creativity thrives when shared and experienced in person. The times I loved being in the Brookfield office in Chicago were when our whole team was in a big conference room riffing on site plans and pro formas. Creativity flows from good conversation and good environments.

Physical office spaces will need to evolve to center creativity and collaboration. A desk with a screen can exist anywhere, but what will reignite the drive to in-office are unique build-outs that hit specific needs. Think meeting rooms, private offices, collaborative common areas, personal phone booths, etc - concentrated and arranged in a way that cannot be replicated elsewhere.

Elevating Residential Experience

Residential real estate has been in transition for quite some time. Have you been in a new luxury rental building lately? Many of these buildings are nicer than condo buildings.

Why? For similar reasons that retail evolved – renters crave nice spaces, comfortable communal areas, and relevant amenities without having to front a down payment and lock in high interest rates.

To meet this market, developers are prioritizing place-making - crafting retail neighbors on the street level and including hospitality-level finishes and services to build units that blur the line between what used to be the “for-rent” and “for-sale” bar.

The Continued Rise of Service Retail

Retail is a malleable asset class. If you build an office, 8 out of 10 times, you can only use it for an office. If you build a residential building, it's either residential or a hotel. But if you build a retail center, the possibilities are nearly endless. “Boxes” can be retrofitted for another user - and in a few months, a gym can become a daycare center.  

Service retail is mixing in with shopping retail like never before. Whether it’s a utility service like pet care, car wash, dry cleaning, or experiential - pickleball game and a beer, anyone? - the mix of city and rural destinations has changed. And each part of retail reinforces the other.

“Service-powered businesses are an integral part of the retail mix. They have turned traditional shopping centers into experience centers - you can drop your kids off at daycare, go to a workout, have lunch with friends, and purchase a birthday present, all without having to get in your car,” explains Neha Govindraj the Founder and CEO of Bonside, a brick-and-mortar fintech company.

“Retail is a diverse sector and what is interesting about the space, is that the real magic happens in environments where experience reigns supreme and your days can have different permutations. Just think of the brick-and-mortar scene in New York City - you can have a markedly different mix every single day if you wanted.”

All of real estate can learn from the flexibility and grit that retail brick-and-mortar has shown this last decade. It will be exciting to pull back up in a few years and see what comes next!