We were in the planning stages of the development of the 207,000 SF Tucker Meridian open air retail center in 2016. The project included Dick's Sporting Goods, Sprouts Grocery, Ross, DSW and Hobby Lobby.
One of the objections from investors, lenders and tenants was the ominous threat to Brick-and-Mortar centers from the continuing rise of online sales. In 2016, 10% of all sales were via the internet. The consensus was that online would continue to take market share from in-store sales. People’s habits were changing, it was argued. The 10% was rising. Someday the Big Box stores would be obsolete.
The 2020 Pandemic made online sales a main mode of purchasing in America. Tucker Median faced the challenge by the tenants arising from the quarantine that they wanted to be compensated by rent reductions or total rent abatement.
Stores adjusted. Curbside pickups and drive throughs offset some of the damage. Government relief programs put a lot of money in the pockets of millions of Americans.
When the pandemic subsided, there was a lot of disposable income to make purchases. One could postulate that remote working saved the large office supply retailers like Office Depot and Staples. Pre-pandemic, both retailers seemed to be on the verge of bankruptcy. Dick's and other athletic suppliers greatly benefitted from the new habit of wearing leisure wear in and out of the house. Remote workers also spent money on newly purchased gym equipment for the home.
A combination of “free” money from the US Treasury, more free time to go out to shop, and the loosening of restrictions motivated people to get to get out of the house to buy. When states began to relax restrictions, people flooded to the stores. For example, Dick's (DKS) stock price just before the pandemic in 2020 was about $32 per share. Today it is $200. Sprouts Farmers Market (SFM) was about $19 in March, 2021 vs $77 today.
Customers had developed a pent-up desire to go to the stores that they had taken for granted in the past. The competition between online vs instore has reached a happy median. People buy online but collect the product from the store, or they buy online and return the product at the store to replace with an item that they can try on or check the fabric in hand.
The stores have become both a retail destination and a fulfillment center. Stores that started as online only now have opened retail operations; Warby Parker, Allbirds, Casper and Bonobos are a few that decided they need to present their sales to the swarm of people who visit shopping centers. Allwork, a freelancer consulting firm, reports that 67% of online retailers now have hardscape stores.
Earlier reports that Brick-and-Mortar stores are obsolete appear to have been greatly exaggerated.
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