Amazon and other e-commerce sites have seen record sales in the past few months. Brick and mortar stores are increasingly closing. The accelerating transition to online and omni-channel retail has major implications for how shopping areas are planned and designed. During a session at the American Planning Association’s National Planning Conference @ Home, a group of planners outlined how this shift to e-commerce may play out.
According to Rick Stein, an urban planner and founder of Urban Decision Group, there have been 30,000 store closures in the past five years. In just the first few months of 2020, 2,000 more stores have shut their doors, with another 15,000 expected this year.
While recent closures are due to the pandemic, the underlying issue is that “U.S. retail is overbuilt.” In a comparison of retail space per capita in the U.S., Canada, Australia, UK, France, and elsewhere, the U.S. tops the charts with 24 square feet of retail space per capita and $14,614 in per capita sales annually. While incomes have increased 11 percent since 2009, the amount Americans spent shopping each year has increased by 37 percent in the same time frame.
Stein outlined four types of brick-and-mortar shopping centers, which total 6.2 billion square feet of retail space and generate $2 trillion in revenue annually: strip malls, neighborhood centers, community centers, and malls. There are 70,000 strip malls, which account for $300 billion in revenue; some 32,000 neighborhood centers that total $750 billion; 10,000 community centers that generate $620 billion in sales; and then 1,200 remaining malls, which are “rapidly shrinking” as a retail type, that account for $325 billion in retail sales.
In-store retail sales in the U.S. have been declining since the early 2000s, with sales now less than $325 per square foot. But the pandemic rapidly accelerated this decline in sales. “Some 60-70 percent of retail stores are now closed,” with an estimated $1 trillion in lost sales.
Most shopping centers were built in the suburbs because land was cheap. But within suburbia, there are different levels of risk. Stein argued that locally-owned shopping centers — the community and neighborhood centers — are likely more stable. Malls, which are mostly owned by large corporations, are at greater risk of closure.
E-commerce, which increased by 25 just last year to reach 12 percent of all sales, is now putting pressure on all types of purely brick-and-mortar retail stores. Large grocery stores aren’t safe either: e-commerce now also accounts for 8 percent of all grocery sales.
In the future, “the winners will be omni-channel retailers, which are not purely e-commerce,” Stein believes. Stores like Target and Walmart that successfully leverage brick-and-mortar with e-commerce are the new model other stores need to follow.
Stein also sees more companies like Kohl’s partnering with Amazon as distribution and return centers. These brick-and-mortar stores can leverage their prime locations in local markets as part of a “hub and spoke” distribution system that makes it easier for customers to pick up or return purchases (see image above). He sees many more relationships forming to maximize the benefits of the “last mile” — being close to the consumer.
Stein surveyed some 500 retailers from mid-March to mid-April and found that 80 percent of retailers will be moving to an online or omni-channel approach. Included in the survey responses was some bleak news: “40 percent of apparel retail may never re-open. And 1 in 5 restaurants may never re-open.”
“30 percent of what is purchased online is returned. 15 percent of what is purchased never makes it into customers’ hands. What does this mean for local traffic?,” asked Lisa Nisenson, a vice president at WGI, an engineering and transportation consultancy. “Deliveries have spiked. Will this stick?”
She thinks the pandemic is the optimal time for technology-based delivery companies to perfect their approach. And many are ramping up tests in a “context-sensitive” way in order to facilitate same-day delivery in more places across the country.
Proposed delivery solutions for rural, suburban, and urban areas are different. There are cargo bikes and terrestrial delivery drones of all sizes for dense urban areas, vans that can launch drones in suburban residential communities, and drones for long-range delivery of medical supplies in rural areas.
The delivery model is also changing. In the past, goods moved from the factory to the distributor to the store where consumers made purchases. With the expanding same day delivery model, with a highly-local approach to distribution, goods are moving from the distributor to either stores or local sorting centers that then enable in-store picket, local deliveries, or access to delivery lockers, like you find with Amazon lockers in Whole Foods stores. Consumers can easily bypass interacting with the store.
That model will further evolve with the rise of autonomous delivery drones. Distributors and warehouses will become even more local. Niesenson even envisions “micro-warehouses” in neighborhoods.
The configuration of all those retail hubs with acres of parking has become outdated. “Dwell times in stores could drop from 40 minutes to 2 minutes,” really just enough time for picking up or returning items. “Or if the store also has a coffee shop, dwell times could increase to 1.5 hours.” What is clear is that these retail hubs needed to be redesigned to become more flexible and allow for a higher number of consumers visiting for a few minutes to handle pick ups and returns.
According to Jason Sudy, national lead on transportation technology planning at HDR, autonomous delivery drones, whether terrestrial or aerial, could be coming to your community soon.
Wing, an aerial drone company of Alphabet, Google’s parent company, has partnered with Walgreens to deliver medications to customers in Virginia. They have seen a surge in drone deliveries since the COVID-19 crisis began. The drone drops packages in backyards, so only lightweight deliveries under 5-10 pounds are allowed. At The Villages, a retirement community near Orlando, Florida, UPS and CVS are also testing drone deliveries of medications. To apply the technology in rural areas, the company Zipline is running long-range drones in Ghana that can make deliveries of up to 70 pounds.
Sudy imagines parts of streets and neighborhoods reconfigured for aerial drone launch zones, and new permits to allow vans to launch drones into suburban neighborhoods. Demand for deliveries by terrestrial drones could mean re-imagining how space on streets is allocated. “Are drones deployed from the public right of way or private property?” There are many zoning implications.
Sudy believes solutions will need to be crafted for different types of communities — rural, suburban, or urban — creating new work for planners, transportation engineers, urban designers, and landscape architects. Autonomous vehicles may need to be integrated into the planning and design of buildings and public spaces.
In the Q&A, discussion veered towards Main Streets and downtown shopping districts. Stein believes that “Main Streets will have a tough time over the next 18 months until a vaccine is discovered, but over the long-term they will be extremely important. Main Street retail is most likely to survive this great disruption.” Nisenson added that with the rise of online deliveries, there will still be a place for “experiential retail” that offers more meaningful and social shopping experiences. With so many people craving community and connection, stores that offer a safe coffee shop or social space may be ahead of the curve.