We saw heritage retailers and restaurants closing many underperforming stores including; Macy’s, The Gap, JC Penny, Nordstrom’s, Office Depot, Forever 21, and many others. At the same time, online shopping made huge strides, soaring far beyond numbers we’d ever experienced before. Even online grocery sales and delivery expanded greatly. We saw that shoppers’ attitudes and habits were changing quickly in many ways we never imagined. Restaurants were facing hard times because of the virus restrictions and consumer concerns, with the hardest hit on full-service restaurants that depended on indoor dining and bar service. Both retailers and restaurants alike, soon created new or expanded ways to service customers wherever possible. Restaurants added or expanded drive-thru or pickup service and utilized the services of third-party delivery companies such as GrubHub. Retailers like Ace Hardware began to offer next day delivery and pick up. In addition to deliveries, many retailers initiated “order online and pick up later today at the store” services which also proved to be very popular.
It is very true that hard times bring out the best creativity. During the pandemic, we also saw it bring out an expansion of entrepreneurial activity throughout the country. As unemployment rose, so did new business formations. Many people took their layoff as the trigger to start that business they’ve always thought about. In retail, many of the larger landlords took advantage of this trend by offering promising new retail businesses three to six months free rent for their startup. If successful, the tenant signed a new five-year lease. There have been enough successes with this approach that we expect it to continue.
When looking at how existing retailers have performed over the past year, it is surprising to note that most of the retailers who did not file for bankruptcy or close many stores stayed current with their rental payments. This was partially due to the stability of the companies but also due to the PPP program and government loans. Opportunistic retailers have also taken this time of uncertainty to implement significant expansion plans. This is especially true in the categories of discount stores and primary services. In 2021, some of the companies planning store expansions include:
- Dollar Tree – 600 stores
- Dollar General – 1050 stores
- Target – 49 stores
- Tractor Supply – 75 to 80 stores
- Ollie’s Bargain Outlet – 50 to 55 stores
- Aldi – 500 stores
- Costco – 7 stores
- 5 Below – 1100 to 1200 stores
- American Eagle Outfitters – 400 stores
- Citi Trends – 100 stores
- Ross – 67 stores
- 7-Eleven – 3900 stores
- Starbucks – 600 to 850 stores
- Sonic Drive-in – 100 stores per year for the next 10 years
- Bank of America – 500 branches
- Chase Bank – 400 branches
Overall, twice as many stores are projected to open in 2021 than are projected to close. A very positive sign for the restaurant industry is that the US Labor Department reported that 75% of the 379,000 jobs added to the US economy in February (or 285,900 positions) were from within the food service and drinking places subsection.
THE BOTTOM LINE
As we move past Covid, we will begin to see what “the new normal” is. We do know however that retail (both online and in stores) is more resilient than many thought. Some companies will be either gone forever or totally changed. Some will have a more robust combined store and online presence. We will see many new concepts and new ways to deliver the goods and services that customers now want. We can look forward to new retail concepts, stronger and expanded established concepts and exciting new restaurant concepts.
Thank you to Bill Bussey, CCIM and Associate Broker at Bradley Company for contributing this article. Bill has been a leader in retail related consulting, site selection, development, and leasing for over 30 years and works with clients in the Grand Rapids, MI market.