Rethinking retail: changing footprint of shopping

NRU
Nov. 25, 2015
By Leah Wong

With retailers across the Greater Toronto Area becoming more strategic about store locations, municipalities may need to rethink commercial areas.

While retailers may not close all their stores they are certainly rationalizing their store locations, J.C. Williams Group research insights senior partner Maureen Atkinson told attendees of the Canadian Urban Institute’s Clicks + Bricks event Friday. Retailers with growth in online sales but not in physical stores are reducing the cost of operating an excessive number of stores. However, some locations will remain open to keep a presence in the marketplace.

“[Retailers] find if they close stores they don’t lose, but they have to close strategically,” said Atkinson. “They won’t go from 23 to zero stores, but they might go from 23 to 15. This is happening and is the type of strategic thinking we are seeing.”

While online shopping is increasing, consumers continue to shop at physical stores. A survey of Canadian shoppers by J.C. Williams Group shows 26 per cent of respondents make a non-grocery purchase in a shopping centre at least weekly and 52 per cent make a purchase at least monthly.

“Enclosed shopping centres still [perform] a really important function. When people go shopping they go shopping most frequently there,” said Atkinson.

Canadians are shopping online - 75 per cent of respondents made an online purchase in the past three months - though Atkinson said e-commerce is not growing exponentially.

Brick and mortar stores continue to play an important role in the retail landscape, but with the prevalence of online shopping and retailers rethinking their locations municipalities will have to decide how much retail is sufficient to serve their residents.

Atkinson said there is no more growth in power centres, which is forcing property owners to reconsider how this space is used. With well-located power centres, she said “good real estate is good real estate.” They present opportunities to repurpose the spaces to meet other needs.

This is already happening across Ontario as municipalities start to consider how much retail is really needed. SGL Planning partner Ute Maya-Giambattista told Clicks + Bricks participants that some municipalities have found they have an oversupply of commercial lands that may not be needed in the future. The City of Kingston, for example, has enough commercial lands to accommodate the population up to 2041, but Maya-Giambattista said the city hasn’t taken retail trends into account and as a result needs to rezone the land for other uses.

“E-commerce is effecting planning and urban design at different scales,” said Maya-Giambattista. “E-commerce is blurring the lines between the manufacturer, distributer and retailer, and we are finding that e-commerce is putting pressure on employment areas.”

With e-commerce comes distribution centres, which have large spatial footprints but low employment densities. While these centres are needed to keep up with consumer demands, they generate less jobs per hectare than municipalities had anticipated on employment lands.

As more people shop online, what customers want when they go to bricks-and-mortar stores has changed. Maya-Giambattista said customers want to be able to walk to retail and want increased food and entertainment options.

While shopping centres are being built with the new consumer in mind, existing centres will have to adapt within their locations to stay relevant. For shopping centres, property owners will need to take changing retailer needs into account when rethinking spatial design. As more retailers adopt omni-channel strategies that allow consumers to shop seamlessly online and in-store, their spatial needs will change.

One challenge is the high cost of delivering packages quickly in a country with large pockets of low population density. To address this, some retailers choose to ship from store so that online shoppers receive their packages more quickly as it comes from a nearby location. While this means the cost of shipping is cheaper for the consumer, it is very inefficient for the delivery company as it requires picking up the package from a store rather than a centralized distribution centre and delivering it to a single address. Delivering the last mile to individual homes has always been inefficient, but this system is also problematic in a package’s first mile from the retailer.

“My problem is that there is no density there, so [we’re] taking a hit,” Canada Post strategy and e-commerce market development director Marc Smith told participants. Canada Post currently picks up from 900 stores, with more coming. Smith said this will force a discussion about commercial space planning. He suggests that shopping malls should create a designated hub for retailers to bring their shipping items, which would mean a delivery service, such as Canada Post, could pick it up from one location.

“Stores and shopping malls are starting to become part of Canadian logistics infrastructure, for urban planners and shopping mall planners this is very important,” he said.