Retail expert: The store of the future is not a store

In a CCAD virtual event, Lee Peterson will discuss the rise of ‘dark’ stores, plus some good news for indie retailers and farmers markets

Joel Oliphint
Columbus Alive
Is this the future of shopping? Lee Peterson of WD Partners says "dark stores," with no shopping and pick-up/delivery services only, are on the rise.

When Lee Peterson speaks about the advent of online shopping, he likens it to the first time he tried a single-malt Scotch. It’s a before-and-after moment. Those blended Scotch varieties that seemed just fine when he was in his 20s? They all pale in comparison to this delicious new option.

“Internet sales are like that to me. In my family, I'd go, ‘Man, I got to run over to Giant Eagle because we need TP and stuff.’ And then after a while, I was like, ‘No, we don't have to do that,’ and the next thing you know, it’s all showing up on the porch because I just got that done during a commercial for a basketball game,” said Peterson, a retail expert and executive vice president at WD Partners, adding that even more people have entered the single-malt phase of e-commerce during the pandemic. “They’re like, ‘What was I thinking?’ You have to get in a car, pack the kids, go to a parking lot, it's really cold out, maybe they don't have the product, and on and on and on. It just doesn't make sense.” 

In that way, COVID-19 didn’t introduce brand new challenges for retailers. It merely accelerated things that were already happening. “What would normally have taken five, sometimes 10 years, it happened in three months,” said Peterson, who will give a virtual presentation titled “The store of the future is not a store” at noon on Thursday, March 18, via the Columbus College of Art & Design’s “CCAD Knows Retail" series (register here).

Even before the pandemic, Peterson said America was over-stored. Columbus, for example, used to have several large malls, most have which are now gone or in decline. The shopping habits of the younger, digital-native generations — Gen Y and Z — have changed the retail landscape. “By the time they were 12 years old, they had a phone in their hand, and there's so many possibilities of shopping that way,” he said. “They don't see the need for going to the store. So you could see a long time ago that this was what the light would be at the end of the tunnel. It’s going to be a lot less physical retail.” 

Peterson spent 11 years working for the Limited before getting into retail consultancy. At WD Partners, he now leads consumer studies with thousands of participants, and in a recent study, he polled respondents about “dark” or “cloud” stores, which require no shopping and offer pickup and delivery services only.   

“We listed eight different types of retail verticals — big box stores, specialty stores, convenience stores, drug stores, grocery stores, even restaurants — and we said, ‘If these dark or cloud stores ... were in your neighborhood, would you shop there?' It’s a scale of one to seven, and we only look at the percentage of six and seven; we call that the ‘top two boxes,’” he said. “And every one of them, from every retail vertical, including restaurants, was anywhere between 35 and 50 percent, which, from studying top two boxes, is pretty stunning. … If you get a 40 percent in any top two box score, that means you should test it. If you get 50 percent in top two boxes, that means it's going to work. You're already a little bit slow.” 

“The idea of dark stores,” Peterson continued, “is beyond testing for almost every retail vertical, to the point where, for restaurants, big box stores and grocery stores, it's going to work. The consumer is ready for it.” 

Another recent study yielded a surprising amount of support for farmers markets. “We asked, ‘What would get you to shop [at a mall] more often? And farmers markets were No. 1 across the board,” Peterson said. “We did that study three times to back it up. … Farmers market was No. 1 across age groups, income groups, regionality, everything.” 

While Peterson said some reports are stating that 100,000 brick-and-mortar retail locations could close permanently by 2025, he said some of the big box stores could pivot to a different, small-box model for physical stores. “I’m hearing the small store strategy coming into neighborhoods,” he said. “Potentially, Best Buy could have a store in a little strip center, but it could be a showroom store where you walk in and go, ‘Oh, that's really great. Just ship it to my house.’” 

With all the shopping upheaval of the past 10 years, and even more so in the last 12 months, Peterson said local, walkable, independent retailers could end up coming out of the COVID era on top, especially as more and more people are working from home. First, though, they have to make it to the other side. “I think this whole pandemic should be a boon for neighborhood retail,” he said. “If you made it, this is going to be really good for you later on.”