How new technologies are changing the retail real estate market

Digital technology has been making its way into retail gradually. A decade ago, pioneers were looked upon with a smile. But the pandemic has changed the balance of power. Consumers have developed a new shopping experience: they’re used to finding products with a click of the mouse, checking their specifications with another swipe, and paying with a third. Retailers have had to work hard to keep the physical store visit from being frustrating all the time. What all this means for commercial real estate investors and how the requirements for premises and business are changing – in our material.

The scale of the problem

According to estimates by eMarketer1, in 2020 the total volume of retail sales worldwide fell by 2.8%, although before the pandemic the company’s experts predicted an increase of 4.4%. According to their calculations, in 2021 the figure will return to the level of pre-pandemic 2019.

Online commerce, on the other hand, is gaining popularity at a breakneck pace. It grew 25.7% in 2020 and is expected to grow another 16.8% in 2021. Among the leaders in this segment are India, Brazil, Russia and Argentina – these countries are expected to have annual growth of at least 26%. By 2025, e-commerce will account for about a quarter of all sales.

So is it time for regular stores to go out of business? Not at all! First, they will remain in demand for the foreseeable future, and second, multichannel shopping is now gaining popularity. It’s a mixed format in which part of the user experience is online and part is offline. For example, online ordering with pickup from the physical store, home delivery from the store, trying on or selecting goods in the store with subsequent online purchase, information support for the customer in the store, online payment for purchases, and more.

For this reason, before purchasing retail space, it is useful for an investor to understand how in-demand the facility will be, and before entering into an agreement with a tenant, to audit his project to see if it is in line with new trends.

What’s new?

Startups offering digital retail improvements are plentiful, but not all ideas are in demand by users and not all will pay off. Let’s look at what’s already in use and is of interest to customers.

So what should a retailer look out for if they want to improve store efficiency?

Smart carts

Such a cart becomes the customer’s personal in-store consultant. With a built-in touchscreen, the customer can download a shopping list and create a route around the sales floor. The built-in scales and computer vision camera record the type, weight and quantity of goods put into the cart. To pay, simply attach a loyalty card and bank card to the card reader on the cart.

Thus, the customer is spared unnecessary contacts, his time in the store is minimized, and the store has the opportunity to deliver promotions and personalized offers to the customer. Kroger and Microsoft4 are among the pioneers of this solution.

Smart shelves

The point of application for a variety of automation solutions has been store shelves.

Electronic labels. One of the first and already massive implementations. They allow more information to be delivered to the customer, save staff efforts to keep prices up to date and allow for quick and coordinated price changes in stores, and make it easier to conduct promotions, including short-term ones.

Stock gauges. Several types of indicators determine whether there are enough items on the shelf. These include built-in weight detectors, infrared sensors, and light sensors. Sometimes computer vision is also added to them – giving you the ability to recognize the actions of the shopper who is taking the item – like in Amazon Go stores.

Quality sensors. They allow you to determine the freshness of products. Usually attached to the package of products.

Interactive tags on products. They help customer or employee to find a particular product on the shelf and get more information about it.

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