From clicks to bricks : the impact of digital-native consumer brands on retail real estate
Author(s)Dougherty, Jeffrey,S.M.Massachusetts Institute of Technology.
Impact of digital-native consumer brands on retail real estate
Massachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development.
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Digital-native retail brands have business models that sit at the intersection of two major narratives in retail: technology and brick-and-mortar stores. Founded online, they rely on technology to attract a Millennial customer base that gets most of their brand information over the internet. Digital-native retailers are also opening, not closing, brick-and-mortar stores at an accelerating pace. Recent studies have suggested that digital-native retail brands will grow from roughly 600 to over 1,400 brick-and-mortar locations in the coming years. However, these projections only consider existing brands, and industry trends suggest that the actual number of physical stores opened by digital-native retail brands will be significantly greater. Real estate owners that develop leasing strategies focused on the specialized needs of digital-native retail brands are positioned to benefit.The brick-and-mortar store locations of digital-native retail brands provide key insights into their site selection criteria and brand strategies. Store locations are based on customer data from their online stores. As a result, the sites brands select indicate locations with strong target consumer demand. To analyze trends, we identified 58 major digital-native retail brands that have opened a permanent physical store location in the United States. Then, we collected the addresses of the 608 individual stores that they operate. Among other insights, the store location results indicate that digital-native brands concentrate in New York, Los Angeles, and San Francisco before moving into other major metro areas. Within each metro area, digital-native brands agglomerate into both shopping centers and retail streets located within high-income neighborhoods.Retail property owners have an opportunity to leverage their expertise in physical retail to assist digital-native retail brands in successfully establishing themselves offline. A brand's first few brick-and-mortar locations are a high-stakes bet that falls outside of the company's core competency. Beyond leasing the physical space, landlords can offer support in identifying store locations, completing tenant improvements, and assisting in the store permitting process. Real estate owners and investors that provide low-capital, turnkey spaces and a streamlined leasing process will be attractive to a growing number of digital-native retail brands.
This electronic version was submitted by the student author. The certified thesis is available in the Institute Archives and Special Collections.Thesis: S.M. in Real Estate Development, Massachusetts Institute of Technology, Program in Real Estate Development in conjunction with the Center for Real Estate, 2019Cataloged from PDF version of thesis.Includes bibliographical references (pages 54-60).
DepartmentMassachusetts Institute of Technology. Center for Real Estate. Program in Real Estate Development
Massachusetts Institute of Technology
Center for Real Estate. Program in Real Estate Development.