Closer, smaller, more exciting: tomorrow's retail spaces

The dynamic in online retailing has been apparent since before the Covid-19 crisis: there is no retail concept that cannot be digitalised. But what about physical retail space? What should remain, what should disappear, what needs more space?
5 August, 2021 by
Näher, kleiner, spannender: Wofür der Handel morgen noch Fläche braucht
GDI Gottlieb Duttweiler Institute

GDI infographics: tomorrow's retail space gdi_flaechenverschiebung_08_en.pdf

"Convenience" primarily means comfort, speed and simplicity. The consumer should hardly notice anything about retailing in the true sense of the word. Most of this takes place invisibly in the "back end". With "experience", we are more interested in sensory and inspirational elements. Time is a different factor: more is more. In this context, retail can be part of the experience and takes place quite consciously in the "front end". Retailing, the exchange of values and goods, is celebrated.

The variety of retail formats spans these two poles. The respective positioning towards convenience or experience will influence space requirements in retail – at least in the coming years, before these trends merge again into "convenience experience", for example through extended reality. Technological, economic and social change are leading to a realignment of demand. If, for example, the pinnacle of convenience is no longer "everything under one roof" but "everything directly to your home", this has consequences not only for department stores but for all retail categories. 

We have taken a closer look at developments in both traditional and emerging categories. The infographic shows what the space is needed for, how large the areas used are, how they are likely to develop in the next three to five years and where they are located.

Not only do we all have to eat every day, eating is also an experience in itself and involves all our senses. Regionality, organic farming, animal welfare: we can afford to spend more on food and pay increasing attention to where it comes from. This promotes food as an event, which manifests itself in cities via markets, food halls and speciality traders, and in delivery, convenience, takeaway and gastronomy.

Fashion and lifestyle are having a hard time. Sales have been declining for years. Since the arrival of digital retailers such as Zalando, it is not only possible to shop online for a larger selection of clothes and have them delivered to your home, but consumer demand for and expectations of fashion have also changed. Upcycling, second-hand or sustainably produced clothes are becoming increasingly popular. Here, too, globally-operating online platforms are establishing themselves. Physical retail can only score points in this segment using experience. Instead of having every item available several times in every size and colour on the sales floor, the sales floor is becoming an experience area for the brand. Purchases are made online, or the goods are delivered to the customer's home the same day in the desired size.

Everything can be conveniently delivered to the customer's home: from tandoori chicken to facial care masks to personalised tennis rackets. More convenience would be hard to imagine. In cities, however, traditional delivery logistics are reaching their limits, clogging streets and flat entrances with parcels. But decentralising logistics through microhubs can provide a remedy: not only will kitchens be shared and become ghost kitchens, but warehouses and logistics can also be operated jointly by retailers.

Large shopping malls and shopping centres on the outskirts are losing importance. Proximity is on the rise, as the idea of the 15-minute city or the rediscovery of the neighbourhood during the Covid-19 crisis show. Shopping and services should be within short walking or cycling distance. In densely populated cities, this often means downsizing formats and focusing the product range. Combined with microhub logistics, however, this does not necessarily reduce the range of products, but rather reorganises it.

A quick trip to the hairdresser, to get your nails done or to a session on the treadmill. Lifestyle services related to human wellbeing, beauty and health are on the rise and continue to differentiate themselves. They require little space and infrastructure.

Being able to use space flexibly and at short notice has been a popular model since before the arrival of the pop-up concept. With container shops, some of which are fully automated, retail is becoming adaptable. Once the event's over, the container's gone.

Rural towns are losing their banks, post offices and local grocery shops. With increasing mobility, people are getting their supplies elsewhere; staffed retail spaces with a large supply of fresh food are barely worthwhile any more. A sustainable rural exodus spurred on by the Covid-19 crisis is rather unlikely, but as shops become more automated and flexible, this provides opportunities for rural supply points. They can be run just as efficiently by the big retailers as by local suppliers. They can include 24/7 operation and automated receipt and payment processes.

This overview does not claim to be a complete list of concepts. The focus is on the concept of European urban structures. The time horizon refers to the next three to five years.
Sources: GfK Retail Switzerland 2021, EHI Retail Data 2021 Expertise: GDI, WSL Strategic Retail NYC

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