Remote work is rough on big retail districts

Discussion
Photo: Getty Images/Massimo Giachetti
May 05, 2021

The shift to remote working due to the novel coronavirus pandemic, while convenient for those employees who do not like commuting, has shrunk foot traffic in some business districts to a fraction of what it was pre-pandemic. This is having an especially significant impact in New York City where some retailers, once dependent on working commuters, are wondering how to keep their doors open.

Retailers in Midtown and the Financial District in Manhattan are still waiting for a rebound despite the overall improvement of the national economy, according to a New York Times article. A Midtown alcohol retailer tells of offices once buying crates of alcohol for Friday office happy hours, business that has completely dried up since the pandemic. Retailers in train terminals complain of huge drop-offs in business due to a lack of daily commuters.

Friday afternoons in such areas are often as quiet as Sundays, with few customers visiting once crowded drop-in retailers like Starbucks. Some retailers have changed their business models slightly to address the consumer shift. A Union Square men’s apparel retailer, for instance, has moved suits to the back of the store and put casual apparel, like hooded sweatshirts and t-shirts, up front.

Throughout the U.S., major businesses have announced reductions in office space in anticipation of a post-pandemic world in which a significant portion of the workforce may remain working from home part or all of the time. Nordstrom, Old Navy, Ralph Lauren, CVS Health and Target have all announced plans to cut down on corporate office space.

As the U.S. has taken steps to bring the pandemic under control, though, there has been a move by some businesses to try to get workers back into offices.

LVMH announced in February that Tiffany’s staff was to return to the office two days a week beginning in March. LVMH acquired the jeweler in January.

Other companies are being more flexible, while still envisioning a return to the office. The parent company of QVC and HSN announced it wanted corporate workers back in offices, but adjusted the deadline from May to September based on the U.S. vaccine rollout.

DISCUSSION QUESTIONS: Do you see particular retail districts in major cities significantly changing due to remote work trends? What do you think retailers in areas that have taken hits in foot traffic due to remote work can do to recapture lost sales?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Classes, lectures, club meetings, parties, trunk shows, and influencers must all become part of store offerings if we want people to come back."
"It’s fluid and, probably, temporary — so creativity, innovation and evolution take over. Retailers can, and do, adapt to the ebb and flow of consumer sentiments."
"It might be time to consider making these stores multi-purpose locations: retail for foot traffic and micro-fulfillment for online orders."

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31 Comments on "Remote work is rough on big retail districts"


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Mark Ryski
BrainTrust

Traffic is the heart of brick-and-mortar retailing and the remote work trends are reducing the concentration of traffic. Retailers located in central business districts will need to hunker down and play the long game as corporate offices slowly open back up. The hard truth is that there will likely be less traffic in these areas for many months if not years, if the traffic ever returns completely. Retailers need to focus on the traffic that they do receive. The pandemic has made one thing clear – store traffic is precious.

DeAnn Campbell
BrainTrust

I can’t help but wonder if, longer term, this won’t be a boon for retailers. Last mile delivery in dense urban city centers is a nightmare for retailers.

Neil Saunders
BrainTrust

Big cities have had it hard. Migration of residents (temporarily and permanently), a sharp reduction in commuter traffic, and a drop in both residential and domestic tourism have all damaged sales. Districts like Midtown Manhattan suffer disproportionately as there are fewer residents to make up the balance of sales. This is further exacerbated by the fact that retailers in these locations often own big, expensive properties with high overheads. I am sure cities will come back, especially as travel opens back up. Until then retailers have to try and reduce costs, perhaps use stores more to support online (as Whole Foods did in its Bryant Park store in Midtown), and look at how they can appeal to local footfall.

Gene Detroyer
BrainTrust

Ironic! “A Midtown alcohol retailer tells of offices once buying crates of alcohol for Friday office happy hours, business that has completely dried up since the pandemic.” Meanwhile the liquor store owner in my neighborhood in Manhattan tells me he can’t keep his wines and spirits in stock. He said not only is demand way up, but he is being short shipped.

Dave Bruno
BrainTrust

The importance of experiential retail just doubled as the dramatic downturn in city-based foot traffic represents yet another challenge foisted upon retailers by the pandemic. There is some good news, however: one way to address this challenge was already incubating long before the pandemic arrived: we must re-start our efforts to create new experiences in our stores (beyond just selling product) in order to generate our own traffic. As vaccines make it safer for people to spend time indoors again, stores must find reasons for people to visit that extend far beyond just trying out merchandise. Classes, lectures, club meetings, parties, trunk shows, and influencers must all become part of store offerings if we want people to come back. I would also suggest a heavy investment in neighborhood associations to coordinate activities and increase the traffic impact to a neighborhood or even a block. It’s time to get very creative!

Liza Amlani
BrainTrust

Totally agree with you Dave – experiences must be part of retail’s day-to-day and new ways of capturing the customer’s attention will get them back to stores. Creativity is the key and retailers + shopping malls + the community need to partner and work together to increase footfall.

Paula Rosenblum
BrainTrust

In a word, yes. Some people will gladly go back to work in offices, but even if only half opt to continue working from home, that’s a real hit to traffic.

Restaurants will have to focus more on dinners, and retailers will have to rethink the suburbs – probably more strip malls than the classic mall.

DeAnn Campbell
BrainTrust

I feel for the dry cleaners, shoe repairers and restaurants who built their business around office traffic. But at the same time, suburban communities are going to see a big boost in the quality and range of choices they have closer to home. In my suburban community a solid 70 percent of residents have typically left the area for not only work, but also shopping, dining and other services. Now they are starting to do their business locally to a much greater level. When one door closes, another opens, or something like that.

Christine Russo
BrainTrust

It’s fluid and, probably, temporary — so creativity, innovation and evolution take over. Retailers can, and do, adapt to the ebb and flow of consumer sentiments. Certainly sitting and waiting is never a good business practice in any industry.

Gene Detroyer
BrainTrust

In Manhattan, the business districts and tourists districts are very quiet. Both are coming back slowly, but it will take time. The opening of Broadway will send an important message. Unlike early in the pandemic, when both companies and workers seemed to be embracing WFH, companies are now telling employees they will be coming back in September or January 2022.

Meanwhile, residential districts around Manhattan are lively and vibrant. Last Saturday was beautiful. If you wanted to have lunch, drinks, dinner outside, there wasn’t a table readily available. Good for restaurants as many have developed larger outdoor dining spaces than they ever had indoors.

Scott Norris
Guest

We’ve certainly had a hard year in Minneapolis, but construction cranes are everywhere and the downtown residential property market is white-hot. Yes, the restaurants and merchants catering to the office-tower clientele have suffered, but just six blocks north the cafes, clubs, and grocers are vibrant and growing as the permanent population balloons. Working from home isn’t bad when the office is minutes away, and the Guthrie and riverfront is minutes in the other direction! At this pace, by mid-decade even the central core will have transitioned into a 24-hour community instead of the open-for-lunch scene that it was for the last 40 years.

Gene Detroyer
BrainTrust

New commercial and residential rents hit a 10-year low in April in NYC.

Steve Montgomery
BrainTrust

The equation is simple – less foot traffic equals less sales. Retailers dependent on foot traffic from office workers will have a difficult time recovering from the pandemic as long as the companies in the business district don’t require workers to return to their offices. Those located near businesses that embrace a hybrid schedule will likely see some of their business customers return on the days they are in the office.

Brandon Rael
BrainTrust

Remote work and the pandemic have significantly impacted the independent retailers, especially in larger cities such as NYC.

While landlords have cut small retailers a break on rent during the pandemic, independent retailers still struggle because too few office workers and tourists have returned. Unfortunately, at the same time, the landlords are also under growing financial pressure as office vacancies soar and commuters and visitors stay away.

While the city is home to some of the largest companies in the world, small businesses employed about 900,000 people and made up 98 percent of all businesses before the pandemic.

NYC has always proven to be so resilient and has recovered from many disruptive periods. Let’s hope that the independent retailers and their landlords could come out stronger on the other side of the pandemic.

DeAnn Campbell
BrainTrust

Retailers are going to have to change their location strategy to be more flexible and mobile. By shifting to shorter term leases, a wider range of store formats, pop-ups and partnerships for click and collect and returns they can stay in tune with shoppers as they find and settle into new routines over the next couple of years.

Ryan Mathews
BrainTrust

It all depends on what happens, and it’s way too early to make firm predictions. We don’t know if the pandemic will be contained or if a new variant will drive everyone back off the streets. And we don’t really know if employees will prefer to continue working from home, be forced to return to offices, or if some hybrid model — say three days at home, two days in the office — will become the norm. My guess, and it could be 100 percent wrong, is that the hybrid model will win out in the end and foot traffic will be redistributed, not disappear.

Ananda Chakravarty
BrainTrust

I think Ryan has it — no way to predict and organizations like DoorDash have grown 241% in 2020 to over $2.9B in revenue. This might just be an economic shift to suburbia where foot traffic and by definition, where smaller retailers will fan out to. I’ve seen multiple restaurants boarded up in our area and it’s not even metro. This would be a redistribution.

Lisa Goller
BrainTrust

Toronto can get chilly, and we would shop underground all year round. Before the pandemic, the downtown core’s subterranean PATH retail district attracted 200,000 people every workday. The pandemic led to a 90 percent decline in foot traffic, causing many independent shops and restaurants to close for good.

Having an e-commerce presence could help retailers connect with consumers and recapture lost sales. Adding curbside pickup and delivery meets consumers’ expectations of convenience. Tenants could pool their marketing efforts as a local network to attract their community.

Selling products in popular categories like home, fitness and comfortable apparel can keep retailers relevant. Rethinking the retail space, such as adding fun in-store events like live fashion shows and services like Champagne bars can ease shoppers back into stores.

Gary Sankary
BrainTrust
There has a been a massive shift in traffic away from traditional downtown hubs. I don’t believe it’s going to ever go back to the way things were in the “before times.” This doesn’t mean that the business went away, it means it moved, the market changed. The speed of the change may be unprecedented but the result is the same from a retail perspective — loss of business. I would argue that these sorts of changes happen all the time, only at a much slower pace. I would also suggest that when they do happen slowly, they are often even more difficult for retailers to track and react too. A neighborhood may change over the course of years and if a retailer isn’t able to understand and adapt, they won’t survive. This really speaks to the importance of being able to track and analyze the variables in a market that drive changes in consumer behaviors and traffic at a precise local level. Change in a market is a continuous process. The lesson from the… Read more »
Jeff Sward
BrainTrust

First it was the diminishing level of foot traffic in malls that was forcing a re-rationalization of that space. And that was pre-pandemic. Now it is entire sections of cities that face the same dilemma. The bottom line is that there are locations that will experience a permanent drop in the level of foot traffic. So I guess the definition of resilient is not so much being strong enough to wait out the disruption until normal bounces back, as being smart enough to know the past is gone forever and flexible enough (both emotionally and financially) to form and evolve to a new model.

Rich Kizer
BrainTrust

It will come back. But it will be a slow, metamorphic movement. Workers will come back and footprints will appear on sidewalks and store floors. People have to get acclimated to new feelings of less fear and more safe freedom. It will come, just not fast enough for the business districts’ comfort. Chicago has announced that mid summer will really start to open the traditional events and businesses; and you can feel the release of stress and escalation of peace and celebration here. So hold on!

Mark Price
BrainTrust

The rapid shifts of consumer behavior due to the pandemic have left certain segments of retailers behind — particularly the retailers that cater to commuter traffic. Many consumers will return to offices sporadically, but will likely not return with the consistency of the pre-COVID-19 days.

As a result, revenue that came from the impulse-driven customer segment is unlikely to return. The alternative approach facing retailers in this situation is to drive more revenue from the best customers, who will come to their locations for a specific purchase, and also to find new customers.

Leveraging customer email and text, retailers can identify when customers will be coming to the office and put aside products specifically for them, as well as suggest custom orders. For new customers, retailers should target consumers who live in the urban market, with special events and promotional marketing. In both cases, digital “connections” to these customers will be critical to survival and success.

Doug Garnett
BrainTrust

Here in Portland, the pandemic has been brutal for our downtown retailers and other retail dependent on foot traffic. Much of the hoopla from conservatives about Portland is not related to unrest — but primarily due to the pandemic clearing out downtown. Unfortunately, what kind of traffic returns as restrictions ease depends on how the WFH experiment turns out. My suspicion is that the desire for human company will override many of the big claims we’re hearing about WFH.

RandyDandy
Guest
1 month 17 days ago

This is as tough as it is an obvious double-edged problem, with only one two-sided sure solution. Of reinstating a sizable and consistent population by which your retail business can work with. Sorry but no pop-up, one-off, “bring in the author” event will do. Yes it may make a momentary dent on that day. But these inner-core CBD operations were/are, by and large, regarded as casual and convenient by their used-to-be nearby office worker customers. Very little, if any “see it now” will get them to come in (from their comfy homes). Further, a great many urban core areas have seen an uptick of unsavory activity in their absence. Which only exacerbates things, making the visit even less compelling. It will take large corporations insisting that workers, in greater than two-days-a-week numbers, head back into the office. At the same, time civic leaders will have to successfully reckon with the sinister undercurrents that rose up in the wake of this great workers’ exodus. Again, this is the only way to bring things back.

coreyhammond
Guest

Don’t wait around for employees to return to the office; it may never reach the levels we saw pre-pandemic. Looking solely at NYC, outer boroughs provide an opportunity for Manhattan-based retailers to meet customers where they are, while renting space at a fraction of Manhattan retail rent. I can’t say the same strategy will work for other urban spaces, but it’s worth considering a retail presence on “Main Street” suburbia.