The State of Retail

August 04
The State of Retail

“But, can I really afford this?” is a question many ask themselves when making a significant purchase of something they really want versus something they really need. This notion (and sometimes nagging thought for shopaholics on a budget) is referred to as Consumer Confidence, an economic indicator which measures how optimistic consumers feel based on their overall economic state and their personal financial situation. The basic concept of Consumer Confidence is actually pretty simple. If the economy is doing well and consumers are making more money, then they are more likely to make substantial purchases or purchase something that does not fall in the boundaries of basic necessities; a new car, an outfit for a special event, an excessively large television, and the list goes on.

Luckily for retailers today, the Consumer Confidence Index (CCI), a scientific measure by The Conference board, a non-profit business group, of the overall confidence, relative financial health, and spending power of the average US consumer, is on a steady, upward move. This is evident in increasing mall occupancy rates across the country as reported by The Wall Street Journal.

 "U.S. malls occupancy as of March 31 is 95.8% occupied, up from 95.5% a year earlier, as the base minimum rent per square foot increased 11% to $47.59 SF. Total sales per square foot grew 7.8% to $621." ¹

As the CCI continues to rise, retailers are growing, adding, and re-designing stores while many online retailers are adding brick and mortar locations. Evidence of this growth is everywhere - including in the halls of a recent industry trade show, RECon. RECon is held in Las Vegas every May and is one of the industry's largest trade shows produced by International Council of Shopping Centers (ICSC). Attendance was estimated at 35,000 attendees and 1,000 exhibitors exceeding that of previous years.

The growing trend behind CCI is a cycle, linking the state of the economy directly to the state of retail which accounts for roughly 70 percent of all economic activity.² As more retail and brick and mortar stores arise throughout the US, additional workers are required to staff and manage newly rooted locations. In turn this creates a rise in employment and boosts consumer confidence, further exemplifying the theory.

As retail regains its strength, it's important that stores are designed with not only the company's brand in mind but also in a way that suits the needs of the consumer. No one wants to frequent a shop that is understaffed, cluttered, or aesthetically unpleasing. Retailers must influence consumer confidence through strategic layout, design, and the retail experience.

1. http://www.wsj.com/articles/simon-property-profit-rises-on-higher-occupancy-rates-1429875050

2. http://www.usnews.com/news/business/articles/2015/06/30/consumer-confidence-index-climbs-to-1014-in-june

 

For more on NELSON’s Retail Practice, please contact Eric Eberhardt, Director of Retail Practice at: EEberhardt@NELSONonline.com

 

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