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Retail Evolution and City Transformation in the Post-Pandemic Economy

Retail’s evolution will be reshaped in the years ahead by how stores assess the changing needs and desires of customers, but it will also be a byproduct of the environment in which stores are located. How cities evolve, and the action planners and officials take—or don’t take—to encourage vibrant communities and discourage crime will play an integral role in where stores are, what they look like, what risks they face, and how successful they are. The futures of cities and stores are intertwined. 

Brooks Rainwater

Retail was hit hard by the pandemic. Longtime businesses closed and were not able to reopen — but they’re also opening in more innovative ways,” said Brooks Rainwater, director of the National League of Cities’ (NLC) Center for City Solutions, during the release in June of a new NLC report, The Future of Cities — Reenvisioning Retail. The report examines how city planners can support businesses in the retail sector and facilitate the meaningful evolution of retail.  

The NLC project acknowledges that the fates of cities and retailers are connected. Retail forms the foundation for local economies, workforces, and community main streets. As goes retail, so goes our nation’s cities — and vice versa. 

For retailers, the report is a call to engage more cooperatively with communities and city planners. As they transition out of the pandemic, cities are starting to confront choices and make decisions that will have significant impact on retail operations both near and long term.  

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Shaping Retail 

In the wake of the pandemic, city leaders have an unprecedented opportunity to help shape the retail landscape in ways that benefit the communities they serve. “We are again at a critical inflection point in the way retail takes shape in our cities,” the report notes.  

Much in the report’s findings and analysis will please retailers, including the fact that flexible land use codes will likely persist postpandemic. Analysts noted that cities were compelled during the pandemic to decrease regulatory hurdles — to allow curbside dining, for example—and that it’s a “genie that will be hard to put back in the bottle.” 

Once retailers can do innovative things, it gets harder to tell them, ‘No,'” said Erin Simmons, senior director at the American Institute of Architects’ Communities by Design. During the pandemic, cities allowed restaurant tables and retail stalls to displace cars, she noted. “Suddenly, this thing that cities focused on — parking — did not matter. And people loved it, and now they have a taste for what their cities can be.” 

Simmons thinks cities are prime to embrace a more “why not” attitude for city spaces and hopes they recognize the need to drive people to public spaces with events, fire pits, play areas, reconfigured parking areas, and other investments to support the retail evolution to regain a foothold in commercial districts.  

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Given greater rein, experiments in retail could transform entire towns, said analysts. More experiential retailing, out-of-the-box experiences, and themed retail could be winners — and there is no shortage of businesses willing to give it a try. “People are thinking retail is a good area to start a business in,” said Michael Mandel, chief economic strategist at the Progressive Policy Institute.  

Michael Mandel

The NLC’s message to city planners is to not stand in the way. “Retailers need the flexibility to meet the needs of customers — both online and physical — and cities must support them.” A hair salon needs reliable high-speed Internet to facilitate online scheduling, for example. “Leading cities will enshrine outdoor dining, retail, and people-friendly streets into their visions for the long-term success of their communities,” according to the NLC report. 

City investments in technology could have important benefits for the retail evolution. For example, cities adopting parking space sensors and digital signage conveying parking availability to retail customers provides a benefit to surrounding business owners. Additionally, many cities are investing in smart city programs that greatly increase the amount of data cities receive from their communities, and “cities have opportunities to make better use of that information and provide actionable insights to support their retail sector,” according to NLC’s recommendations.  

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For example, technology‑enabled cities can provide data on counts of pedestrians or vehicles that pass a storefront each hour, which can help business owners better understand customer flow and adjust store hours accordingly. “Cities can amplify the benefit of [technology] investments through increased data sharing with businesses that could make use of this operational insight.”

City planners should also be more responsive to communities as they attempt to support a vibrant retail environment, says the NLC. “Most communities know what they want and what they need, they can reel off what their community doesn’t have,” said Simmons. “The people that live there have ideas, and you’re starting to see people’s minds expand with what can go into an old big-box store, for example.”

More than 12,200 major retail chain store locations permanently closed in 2020, translating to 159 million square feet of emptied retail space. “Now it is up to city leaders to make sure these spaces will continue to meet community needs,” the report concludes.  

With a surplus of commercial and retail space, it is a prime opportunity for cites to pursue mixed-use development, meet demands for affordable housing, and make urban centers more walkable, according to Laurie-Anne Sayles, a councilmember in Gaithersburg, Maryland. “This is a prime opportunity for local governments to attract retailers that are going to repurpose empty city spaces in a new way to engage with residents.” 

Laurie-Anne Sayles

There are indications countrywide of the trend toward mixed-use projects. In Miami-Dade County, Florida, commissioners just approved a $1.17 billion lease for a 43-acre mixed-use project of 1,700‑plus homes, retail space, a hotel, and a school. The former Niagara Falls retail shopping center is getting new life as a mixed-use development with retail and tourist attractions. 

 Locating Retail 

Where retailers will locate in cities is unclear, according to Mandel. Little clusters of shops could increasingly dominate but downtown malls may also experience a surge in popularity. Retail will respond to consumer demand, but It’s not yet entirely clear what people want,” he said. “And is it work-from-home? Is it going back to the office?” 

For some retailers it could be a time of complicated transition, depending on where jobs come back. “Some retailers might find that they are not in the right place,” he said. “But overall, there is more demand for retail than people probably think.”

There is a gap post-pandemic between what communities need, what consumers want, and how retail is delivered. Aligning those interests requires cities to support retail evolution and to be proactive.

While questions remain, it seems clear that the pandemic has caused the division between work, life, shopping, and home to erode. Communities are likely to evolve to promote a more seamless blend of all these experiences — and that’s a good thing, according to the NLC report. “The colocation of retail, public, and residential space benefits all,” it concludes.  

It’s crucial to meet customers where they are,” added Rainwater. Whether that is online from their homes, or in brick-and-mortar storefronts in their neighborhoods, or in city centers. “The flexibility of shopping from the location most convenient for the customer will remain a primary driver of sales.”

Retail evolution is expected to respond to shifting demands, with localization of retail emerging as a trend. Retail will continue to expand beyond storefronts in business districts and into other parts of the community, according to the report. The success of “buy local” movements during the pandemic and an emphasis on hiring local workers will persist as many retailers look to participate more fully in their cities and build strong business communities. 

Decentralized retail and the formation of neighborhood community hubs need to be prioritized,” according to the NLC. “The 15-minute city, in which most residents can meet their needs within a short walk or bike ride from their home, has been gaining traction again.”

There is a post-pandemic gap between what communities need, what consumers want, and how retail is delivered. Aligning those interests requires cities to support retail evolution and to be proactive, according to the NLC.  

With continuing changes in the demand for commercial space and the desire for decentralized retail, cities will have to take the lead in developing solutions,” it concludes. For some cities, that will require addressing underutilized office and retail spaces, especially in core business areas.  

Given that business travel to many cities remains sluggish to the detriment of related retail services like hotels, restaurants, and car rentals, “these cities must be active in repurposing spaces to serve community needs,” the report reads. “This could mean transitioning commercial office spaces to residential and encouraging residents to move back downtown. In contrast, other cities will have to adapt to assist retail moving into their communities.”

As cities begin to support the filling of empty storefronts or encourage distributed retail areas across the community, they should consider whether zoning is too restrictive for potential low impact uses of space, the NLC believes. For example, it thinks that small‑scale or artisan manufacturing can be a good companion to retail evolution, citing the positive experience of Nashville, Tennessee, after it added artisan manufacturing as a permitted land use to its code. Such businesses draw in customers interested in seeing the production process and are quiet, clean neighbors to traditional retail establishments, according to the NLC. Cities that have made it easier to establish pop-up businesses in empty spaces have also seen positive impacts, the group says.  

Cities also need to look at diversifying, to help claw back from the pandemic-fueled recession and to create more resilient business development and job growth. “A diverse local retail economy will prove crucial,” the report insists. 

Threatening Retail Evolution 

Crime is a complicating factor in cities’ relationship with retail. Specifically, lax enforcement can work at cross purposes with efforts to build a vibrant retail environment. The situation in San Francisco underscores the risk of crime hijacking a city’s retail landscape, with shoplifting currently running retailers out of town and altering store hours.  

To support healthy cities, retailers should support the effort of law enforcement and city planners to rebalance the scales in favor of retail crime prevention and enforcement. One way is to highlight the full impact of crime and to expose it as a quality-of-life issue for communities rather than a loss-of-revenue issue for retailers.

At a May board of supervisors hearing in San Francisco, representatives of Walgreens said thefts at its stores there were four times the chain’s national average and had gotten so bad that it closed seventeen stores because business had become untenable. In July, Target announced that it was cutting store hours because of store theft — both opening later and closing at 6:00 p.m. instead of 10:00. “With the safety of our guests, team members, and communities as our top priority, we’ve temporarily reduced our operating hours in six San Francisco stores,” a Target spokesperson said.  

Such moves run counter to city efforts to attract shoppers and build a strong retail core but are often a consequence of other policies, such as treating the crime of shoplifting more leniently. In a piece in The New York Times, a San Francisco-based reporter said that people brazenly walking out of stores with merchandise is such a common sight that he once asked a Safeway clerk if paying for things had become “optional” in the city. San Francisco is especially bad, but there are four other cities in the nation where retail theft is worse, data show.  

Rachel Michelin

Responding to the move by Target, Rachel Michelin, president of the California Retailers Association, said she wasn’t surprised, noting that the problem has been developing over several years. “There comes a point — with what we have shared with the elected leaders of the city — where these types of decisions have to be made,” said Michelin. “The bottom line is when these employees don’t feel safe coming to work. That’s when they have to take these drastic measures.”

As cities look to revitalize in the wake of the pandemic, they need to account for the pandemic’s impact on crime, suggested a session at the NRF Converge conference in June, “The Quest to Rein in ORC.” While some of fallout was unavoidable, such as the economic hardship it caused, cities are also making unforced errors by allowing the risk-reward ratio to become skewed.  

Kevin Stone

More than ever the perception is of low risk, high reward — and recidivism seems to be peaking,” said Kevin Stone, organized retail crime manager at Columbia Sportswear Company. “There are citations even for habitual offenders, and for those that are forwarded to prosecution, the punishments are minimal if charges aren’t dropped altogether.” 

For cities, it seems to be a problem of policies and priorities. While retailers are shortening hours or closing-up shop, Sergeant Jennifer Marino of the San Francisco Police Department said she is too resource strapped to help them. “I am one of two people doing [ORC] investigations for San Francisco, where it’s a huge problem,” she said. “Some retailers are closing store locations and others are contemplating it. We’re working with them, but it’s a trouble spot with legislation the way it is, and the way cases are adjudicated.”  

Jennifer Marino

Because of her office’s limitations, Marino acknowledged that she needs retailers to work together on cases and to bring ORC investigations to her department fully baked. “The gift-wrapping of cases is critical because I am just one of two people, so if I can just walk it to the DA office, it can [move forward]. If I have to take it from ground zero, it’s not going to happen.”

It’s a clear mandate for individual retailers to join forces on ORC investigations when they share suspects — and outreach shouldn’t stop there. “We’re involved with the INFORM Consumers Act,” explained John Goldyn, senior director for loss prevention at Ulta Beauty, which would require basic information from online sellers that could disrupt illegal sales on online marketplaces. “We really want to work together as a group,” he said.  

John Goldyn
John Goldyn

More retail friendly legislation on the local level can help those cities and build momentum for crime prevention, suggested Todd Isenhour, LPC, Lowe’s division director for asset protection, operations, and safety. “In North Carolina, we have a great ORC bill here that allows for the aggregation of cases into one charge,” he said, noting that local successes can help drive legislation on the state and federal level.  

Retailers may also want to counter certain local legislative efforts, such as those that restrict security measures that retailers can employ to protect their associates. In Baltimore, for example, the city council voted in June to approve what would be the most extreme ban by a local jurisdiction on personal and business applications of facial-recognition technology. 

To support healthy cities, retailers should support the effort of law enforcement and city planners to rebalance the scales in favor of retail crime prevention and enforcement. One way is to highlight the full impact of crime and to expose it as a quality-of-life issue for communities rather than a loss-of-revenue issue for retailers. “I have found it easier [to get people interested] when it’s sold as a community problem rather than an individual company issue,” Isenhour said.  

The impact on community has revealed itself in San Francisco, Marino acknowledged. “There is suffering in our city.” Retail evolution and city transformation must work hand in hand to not only serve local communities better but also reduce crime that is negatively impacting both.  

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