June 11, 2018

Retail in the District: What Is Going On?

Photograph of an outdoor seating area and walkway in between multi-story buildings.The Pike & Rose development in Rockville, Maryland is a mix of residences and retail options, a movie theater, a car dealership, a bowling alley, and restaurants.

On April 24, 2018, the Urban Land Institute in Washington, DC, hosted “Retail in the Age of Amazon — Strategies for Retail Success,” a presentation featuring prominent local retail managers and investment professionals that focused on how local businesses can adapt to a rapidly changing retail environment in which consumers are doing more of their shopping online.

The technological revolution in the world of retail is happening with dizzying speed, and even the most seasoned industry professionals can have trouble keeping up with the changes. According to John Asadoorian, principal broker for Asadoorian Retail Solutions, these technological and cultural changes are forcing property and business owners to play by a new, different set of rules. Most sales are online, and although retail space is still in demand in and around the District, a surplus persists.

Many small business owners lack both the technical knowledge and the funds to maintain an online presence, and some of these retailers are suffering huge losses as more consumers, particularly millennials, make more of their purchases online. In downtown Chevy Chase, Maryland, for example, the area’s luxury retailers are losing sales to online shoppers, forcing many to close, and the remaining businesses are too homogeneous to attract enough shoppers, particularly younger shoppers, to maintain a healthy retail environment.

Poor planning is a major reason many retail markets fail. Property owners may not agree as to which types of shops will flourish in a given area, but any well-planned retail community will include a variety of relevant and established small businesses, major retailers, restaurants, and a vibrant social and cultural environment. Bethesda Row in downtown Bethesda, Maryland, is an example of a successful mixed-use area. Many Chevy Chase residents now shop at Bethesda Row, according to Chris Weilminster, executive vice president of Federal Realty Investment Trust. Strategy and logic in the planning stages are vital to the sustainability of any retailer, particularly in the intensely competitive world of online retail.

Another reason why many retailers fail is a poorly implemented or absent online presence. Not understanding or being able to incorporate an online presence in today’s market can be devastating to a business. Amazon, for example, is a business with a massive online presence that has dominated the marketplace by strategically selling other businesses’ products. Although many retailers have tried and failed to compete with Amazon, Best Buy is one company that has managed to successfully hold its own against Amazon’s online presence and pricing. Best Buy decided to forgo complicated and confusing marketing strategies, instead choosing to simply to beat any posted price on the merchandise it sells, mainly electronics. As a result, Best Buy has become a very competitive online retailer in the electronics industry while still maintaining brick-and-mortar stores for consumers who like to see and feel products before purchasing them. Best Buy demonstrates how adaptability, effective strategy, and logic are critical to success in a marketplace in which most major retailers derive roughly 60 percent of sales from online purchases.

Georgetown, another prominent District neighborhood, is currently experiencing excess vacancies and a lack of long-term leases. Most properties in Georgetown are individually owned, and many property owners are charging high rents based on the past performance of the area rather than on current conditions while offering nothing new to attract potential tenants. Property owners in Georgetown should counteract the effects of this poor planning by joining forces and reassessing the retail mix of the shops in the area.

The Pike & Rose development in Rockville, Maryland, a 250,000-square- foot, mixed-use project, is an example of how urban themes and a good selection of amenities can be just what a suburban area needs. Some Rockville residents have long complained that the city is a bedroom community with few options for entertainment and nightlife. Pike & Rose offers residents a mix of residences and retail options, an iPic movie theater, a Porsche dealer, a bowling alley, and restaurants (70 percent of the activity at Pike & Rose involves food and beverages). Pike & Rose is still under construction and integrating into the community, but the project is off to a great start and is on track to fulfill its mission to create a retail district with a thriving urban vibe in the suburbs.

Although the retail environment has changed dramatically in recent years, improving planning, strategy, logic, and property owner cohesion as well as paying attention to consumer trends may help local businesses find a successful path through the new landscape and revitalize depressed retail areas.

 
 
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