Retail Landlords: The Game Is Over For Renting Store Space

A couple of years ago, I wrote an article that got some attention. We were right in the middle of the retail crisis, with stores closing all over the country and retailers struggling to rethink their business. Despite its dooming title, “Why Most Retail Stores are Destined to Fail,” my output was optimistic. I laid out a strategy to face the crisis and invited brands to rethink the way stores should function. Instead of a place to sell products, a store needed to be what I called an “activation point” — a place to interact with customers and share the brand values. Sales would then happen on a website, Instagram, a dedicated app or somewhere else.

Fast forward a few years, and the reality is completely different. Covid-19 has decimated the entire retail industry. Many stores have closed, and many others will soon follow. We are not going to get out of this anytime soon, at least in the U.S., and we need a plan.

In New York, stores are empty. I have quite a few clients and friends who own stores, and they are all struggling financially. Most streets are deserted (just walk in Soho) because there are only a couple of stores left, and people don’t feel comfortable entering enclosed spaces. There is a desire to shop and to go back to life pre-pandemic, but the reality is that customers are not ready.

Only a few businesses will be able to continue to pay rent while waiting for the crisis to be over; everyone else may go bankrupt. Rents in large cities like New York are astronomical and have been detached from reality for a very long time. I have talked to several landlords in the past, and they all told me the same story: We are waiting for this negative wave to fade out, and then rents will go up again. For as much as you want to believe this story, unfortunately, in my opinion, it isn’t true. The game is over, and landlords and retailers need to wake up.

My advice for landlords is to work with the tenants and allow them to survive this pandemic without abandoning the stores. They spent money building them, and nobody else will rent these stores now; they would sit vacant for a very long time. Only a handful of brands with a large cash reserve will be able to keep their stores. All the others should close now and get ready for the next evolution.

What exactly is this next evolution? The answer might be found in an amusing story from my childhood.

When I was a kid walking to school every morning, I passed a florist with a tiny shop setting up his plants and flowers to start the day. He would line them all up on the sidewalk in a way similar to what they do here in the flower district of New York. One day I saw the police giving him a ticket and no plants outside. Apparently, you needed a permit and pay a fee to occupy public property, so for a few days, all his plants remained inside the store with no room to move.

Then, suddenly, I noticed he had set up two plywood boards laying flat with four wheels each. He “parked” the boards like a car in front of the store and displayed all his products on them. Parked vehicles are legal, and they did not need a permit. When I think of this story, I think that as humans we have always figured out a way to overcome obstacles with creativity, a bit of ingenuity and some risk. Often it pays off.

What does this have to do with retail? I feel there could be an opportunity for brands to develop mobile stores like the one from the florist and display the products on the streets for people to see. These mobile stores would be a lot better than a plywood board and would serve to promote the brand and sell merchandise. If customers are not comfortable entering stores, then maybe stores should not be indoors.

A website is a great tool, but a physical location is always a better one. There is still a desire to shop, see things in real life and pretend nothing has changed in our life. These mobile stores would have to be very well-crafted. They would need to represent what the brand is about in the best way possible and move from place to place just like the food trucks do.

If we look at the point of view of the retailers, 2020 has changed the perspective on what a retail location needs to be. An old motto said “location, location, location.” But in today’s world, the location is virtual. It’s an online website or a social media app, and your followers are your foot traffic. A physical location is still essential for many businesses, but where this is located is totally up for debate.

Retail stores in 2020 are a destination. Until this pandemic is over, your store or showroom can be anywhere. This might be the 20th floor of an office building, at your house, in a mobile truck that moves around the city or anywhere else you can think of. Clients can come by appointment only, and they can receive the attention they fully deserve. They can feel safe, and they can feel important.

If you follow this game plan, then maybe you’ll be able to get out of this pandemic with your business still largely intact. But business owners, and especially retail landlords, need to act now before it’s too late.

Sergio Mannino Studio is a multi-disciplinary design studio specializing in retail, residential, interiors, and furniture.