CGA Outlook on Retail

Large brick and mortar stores, constrained by overhead costs, have not been able to compete well as consumer attitudes have shifted to seeking the lowest price online. Additionally, traditional analytical tools such as same-store sales no longer provide an accurate assessment of performance or prices. The outlook on retail includes a smaller footprint with a preference for experiential shopping or social shopping experiences where shopping is a side-effect rather than the main attraction.

According to research by Cushman and Wakefield nearly 8000 retail stores will close this year. Gymboree, Payless, rue21, Wet Seal, American Apparel, RadioShack, Gander Mountain and hhgregg are some of the big retailers that filed for bankruptcy. Large retail stores are particularly not sustainable because they are not attracting the amount of traffic and consequently purchases that justify their size.

Consumer spending habits have changed drastically in the past five years. Most prefer to shop online where they are not constrained by store hours and can shop around for a good deal. Amazon brand awareness is such that even though it may not offer the best price, the convenience of receiving the item at your doorstep is the opportunity cost most consumers are willing to pay, also known as, the Amazon effect. This is also why the same-store sales measure no longer works well to provide an understanding of prices and competitive forces.

The current mixed-use development trend where retail, housing, and entertainment co-exist in smaller-scale, open-air street grids will continue to evolve and flourish. Retail stores will become synonymous with marketing and branding with the main objective of providing a social experience complete with exceptional customer service that keeps bringing the customer back or “Experiential Shopping.”

Case in point: Restoration Hardware’s (RH) store in Chicago’s Gold Coast neighborhood that, “blurs the lines between retail, hospitality, and home.” The Three Arts Club historical building at 1300 N. Dearborn was built in 1914 as a women’s art school and was sitting vacant. Gary Friedman, Chairman and CEO of RH had a vision that transformed the 70,000 total square feet over six floors space into not only retail but also a coffee and pastry shop, rooftop park, performance stage, a wine bar, and a new glass- and steel-enclosed garden courtyard cafe.

The store serves more than 450 people a day and people line up outside on the weekend waiting for the opportunity to browse “the store offering furniture, fountains and an amazingly wonderful experience.” Nordstrom recently announced a new store concept that does not display items for sale and instead focuses on consultations with personal stylists to provide experiential shopping. Online shopping is, after all, an isolating experience. Compare that to the sheer fun of shopping at the local farmers market on the weekend, “which can be as much a social outing as a way to get groceries.”

Bottom Line: Retail industry is at the cusp of a big change leading to experiential shopping that will be categorized under marketing departments for branding purposes where shopping is a side effect rather than the main attraction.

About the Author: Naziha Hassan is a contributing author at Cambridge Global Advisory
Have a question or comment? Email the author at,

Cambridge Global Advisory © 2017

About Naziha Hassan

Leave a Reply

Your email address will not be published. Required fields are marked *