Remote work is rough on big retail districts


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.
- ‘We’re Suffering’: How Remote Work Is Killing Manhattan’s Storefronts – New York Times
- How much HQ space will disappear as hybrid work becomes a retailing thing? – RetailWire
- Should retailers ask workers to return to their offices? – RetailWire
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?
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31 Comments on "Remote work is rough on big retail districts"
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Founder, CEO & Author, HeadCount Corporation
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.
Chief Strategy Officer, Hoobil8
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.
Managing Director, GlobalData
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.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
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.
Director, Retail Market Insights, Aptos
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!
Principal and Founder, Retail Strategy Group
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.
Co-founder, RSR Research
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.
Chief Strategy Officer, Hoobil8
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.
Principal, Retail Creative and Consulting Agency
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.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
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.
Sales Development Manager
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.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
New commercial and residential rents hit a 10-year low in April in NYC.
President, b2b Solutions, LLC
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.
Strategy & Operations Delivery Leader
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.
Chief Strategy Officer, Hoobil8
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.
Founder, CEO, Black Monk Consulting
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.
Vice President, Research at IDC
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.
Content Marketing Strategist
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.
Retail Industry Strategy, Esri
Founding Partner, Merchandising Metrics
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.
Principal, KIZER & BENDER Speaking
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!
Chief Data Officer, CaringBridge
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.
President, Protonik
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.
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.
Co-Founder & CEO, DotCom Partners
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.
Corey, unarguably this idea, of Main-Streeting outer city limits and suburbia, will likely work. Yes, go where the people and money are. But that does not address, and only hastens the demise of, the problems of inner city, core retail. Vacant storefronts adding up do not a great city make. So, an answer—no matter how good in theory—is a bad one, if it creates or compounds an issue.
Co-Founder & CEO, DotCom Partners
Very good point, it’s a matter of figuring out how to redefine these storefronts so as to prevent vacancy and ensure a sustainable and thriving urban environment.
CPG/Retail enthusiast, blogger and a couch potato warrior
I think we are witnessing one of the biggest macro trends that is sure to change the way things operate. Businesses need to get creative to counter the foot traffic decline. E-commerce should not be the only option to counter it. How about introducing mobile stores? How about once a week neighborhood marketplaces similar to farmers’ markets?
I think the small retailers don’t have as deep pockets as their bigger counterparts, but if they need to survive, they need to experiment with newer models of reaching customers where they are.
Product Marketing Manager, Tecsys
It might be time to consider making these stores multi-purpose locations: retail for foot traffic and micro-fulfillment for online orders. This would reduce the delivery distance, costs and time to get an order to customers living in the city (for the short to medium term) while also maintaining a physical retail presence (for the long term).
CFO, Weisner Steel
The reality of course is pre-COVID, very few major cities had “retail districts” anymore — how many downtowns have even one department store left? (Answer: you can literally count them on one hand … OK, two hands.) What they had, if they were lucky, were niche retail districts that served either tourists or specific neighborhoods, and service-oriented retail that served office districts; the middle of these is probably already recovered, and the first will recover over time; but the latter? I’m hopeful … but not overly optimistic. The businesses won’t all disappear, of course, but I think there will be many casualties.
Executive On Call - Retail Supply Chains & The Last Mile - RetailAID