Brick-and-Mortar Retail Isn’t Dying, It’s Evolving, New NLC Report Finds

NLC’s analysis in “The Future of Cities: Reenvisioning Retail” finds that the U.S. retail sector lost more jobs over a shorter period of time than during the Great Recession, but also witnessed a quicker recovery.

Washington, D.C. – COVID-19 accelerated pre-existing trends in the retail industry, prompting changes in the way cities govern that will last far beyond the pandemic, according to the National League of Cities’ (NLC) new report, The Future of Cities: Reenvisioning Retail. The report’s analysis finds that retail industry jobs declined more rapidly than during the Great Recession, but also experienced a faster recovery due in part to the nimble adaptations of local businesses and governments. The report identifies several key trends in the future of the retail industry and provides a path forward for cities seeking to enhance the future resiliency of the retail industry in their communities.

“Retail forms the foundation of our local economies, our workforce and main streets across the country. As cities adapt to a new retail environment, it is important for local leaders to gain clarity on who may be impacted, what tools are available to facilitate the meaningful evolution of retail spaces, and what voices need to be at the decision-making table,” NLC CEO and Executive Director Clarence Anthony said upon the report’s release. “Local leaders everywhere have the power to facilitate a more inclusive and equitable recovery for the small businesses, entrepreneurs and workers who are the beating heart of our economy.”

Lockdowns and major changes in consumer behavior throughout the COVID-19 pandemic threatened the survival of many retailers. More than 12,200 major retail chain store locations permanently closed in 2020 alone, translating to 159 million square feet of emptied retail space. By April 2021, the number of open small businesses decreased by 33.6 percent compared to January 2020.

Despite many business closures, retailers across the country are planning to open more stores than they are closing in 2021, with a nearly 40 percent increase in year-over-year store opening announcements. This is due in part to businesses’ ability to pivot at least a percentage of their business to online sales to enhance their overall resiliency, with e-commerce growing from 11 percent of retail sales in 2019 to 14 percent in 2020. To meet rising demands and the change in operations, employment in the warehousing and storage sector grew eight percent from January 2020 to January 2021, as businesses shifted from storefronts to increase their warehousing capacities and facilitate online orders. NLC’s analysis shows that retail job losses due to COVID-19 were heavily concentrated in sectors already on the decline prior to the pandemic, with clothing, sporting goods, hobby, book and music and electronic stories experiencing between 15 and 25 percent drop in employment over the past year. Although traditional retail mainstay positions such as cashiers are on the decline, retail employment is rebounding due to increased employment of stockers, order fillers, and service drivers to meet rising demands for convenient online shopping.

In light of these rapid developments, the report identifies several key trends that will undoubtedly shape the future of the U.S. retail industry:

1. Experience-based retail is the future. Consumer trends show a preference in spending for experiences more so than physical goods themselves. This also means that the types of retail jobs will change as successful retailers proactively plan for a shift in their business model and workforce.
2. Emerging technologies are revolutionizing the retail industry. As retailers embrace these new technologies, there will be a continued need to work hand-in-hand with local governments to determine their proper use and benefits to the broader community.
3. Mixed-use retail spaces are on the rise in U.S. metro regions. As retailers integrate more into decentralized, neighborhood-based locations to meet customers where they are, the demand for mixed-use commercial spaces for retailers large and small will continue to grow.

To facilitate these major shifts in retail consumer and business patterns throughout the pandemic and to continue supporting retailers as the economy reopens, local leaders also adapted to better serve the evolving needs of their residents and local businesses. City leaders implemented new policies allowing for curbside pickup and outdoor dining with unprecedented speed, engaged marginalized community members and business owners to identify the most effective ways to support them, and city administrations expedited the shifting of government operations online. The report includes detailed case studies examining how Los Angeles, California launched a program to streamline the permitting process for restaurants to create new outdoor dining spaces, how Rochester, New York expanded its local microlending program to help small businesses and entrepreneurs gain access to capital during the pandemic, and how Charlotte, North Carolina devoted CARES Act funding to help more than 3,000 local businesses operate in a COVID-19 conscious manner.

Nonetheless, there are still long-term changes that city leaders must consider in order to support local retailers amid the growth of online retail sales, pop-up vendors, mixed-use commercial spaces, and experience-based retail and discount stores. The report includes eight key recommendations for city leaders to facilitate an inclusive recovery from COVID-19 across the retail sector:

• Focus on flexible land use codes in order to enable quick changes to meet evolving needs;
• Anticipate a blend of brick-and-mortar and online retail to meet communities’ differing needs regarding the type and amount of physical space required to run both physical and virtual businesses;
• Create community hubs to provide residents the things they need to live, work, and play outside of the business center of their cities;
• Ensure wage and workplace fairness by supporting living wages and increasing benefits so that cities can future-proof retail sector employment and ensure it is supportive of worker livelihood;
• Prioritize workforce development programs to proactively address anticipated changes in labor demand and upskill workers, focusing on the soft skills that are less likely to become automated;
• Promote a diverse local business economy by fostering independent retail growth that will create strong and more equitable economic engines;
• Accelerate solutions for digital access by mapping the digital divide across the community and prioritizing the expansion of affordable broadband access.
• Embrace the use of technology and data to serve the needs of the residents by engaging in a thoughtful public process to determine what emerging technologies are right for communities and how they should be used.

To read the full Future of Cities: Reenvisioning Retail report, click here.

To view data visualizations from the report, click here.