Digital Natives and the Jump to Brick and Mortar

July 16, 2019

With the rise and further rise of digital adoption, it’s clear to see that the rules have changed for everything retail. With the customer journey no longer being linear, many brands are beginning to think differently about how they approach their market share.

Digital Natives, or DNs, are now the most sought after tenant in the physical retail world. With this new type of tenant comes a new strategy to attract, retain, and support. We wanted to further explore the world that these brands and organizations are coming from, and how REITs and properties globally are adapting to this new avenue of partner.

Previously, the term ‘Digital Native’ referred to young people who grew up in an era of technology. However, when we talk about Digital Natives, we’re looking at the term from a retail perspective. Specifically referring to brands that began or existed entirely online.

While malls have long been the epicentre for both purchases and social interaction; REITs have seen an evolution in the spending and visiting habits of the younger generation. The large anchor brands, brands that serve as cardinal directions within a mall, are usually the most well-known brands that people gravitate towards. With the demand of online retailers and a newfound comfort in purchasing goods online, REITs identified that something else was needed to supplement the demand that anchor stores once created.

Birds-eye-view of a retail shop with wooden floor boards and shirts on a rack.

The largest new segment in the last decade is that of the Digital Natives, specifically ones that have an entirely online presence and are looking to test the waters in having a physical brick-and-mortar store. To have the most impact, they needed to be where the people were.

Historically, malls succeeded in perfecting the art of the ‘drive-by intrigue’. Customers would come to the mall to purchase something specific. In order to get to and from a store, they would have to walk through the property, passing other stores on the way to their destination. This increased the chance that they would enter and even purchase from stores that were not on their list, increasing the viewable benefit of having a physical store that someone who is not familiar with a brand could explore.

Brands are now starting online and building up their presence, a trend that has become more frequent in recent years. Having a digital presence allows these brands to focus on experiences that differ from physical stores. With all the data available to them online about their customer base, business decisions can become informed and targeted, eliminating much of the guesswork around purchasing habits and trends.

People sitting inside a shopping centre.

In a quote to the Huffington Post, Andy Dunn (CEO and founder of online retailer Bonobos) identified DNs as being “maniacally focused on the customer experience and they interact, transact, and story-tell to consumers.” Rather than focusing on a storefront design, Digital Natives focus on their website experience and customer service. They highlight the product experience and are typically quite specialized in their product offering (initially; many brands do diversify to supporting products over time).

DNs have become aware of the advantages of having a physical store, and the trend continues to grow as more jump to having one or two brick-and-mortar locations. Online retailer Bonobos, for example, now has over 30 ‘guide shops’ across the United States, and even landed recurring promotion on the Netflix reboot of the television show Queer Eye, serving as the location for many of the show’s fashion makeover montages. In their previously online exclusive presence, they may not have benefitted from a similar promotion or level of exposure.

People walking inside a shopping centre.

REITs are now looking to partner with Digital Natives to ensure they are capitalizing on the e-commerce trend, as well as helping Digital Natives with the large overhead and expertise needed to jump into physical retail. In order to further facilitate this jump, REITs are trying to ease the process for DNs.

We understand that there is an industry trend with digital brands making the jump to physical locations, and that the jump involves a significant amount of risk. For our clients, we are continually researching and investigating how we can cater not just to them, but their end users as well. Our goal is for the overall product to help REITs manage their properties and, by extension, the DNs who are popping up as well.

We'd love to hear from you!