Why it matters:
- Work from home is here to stay, with a large portion of the workforce planning to permanently work remotely at least part of the time.
- Spending more time close to home has made Americans rethink what stores and services they want in their neighborhoods.
- The shift to local commerce will make neighborhood shopping districts and walkable residential developments more valuable.
The start of the pandemic in early 2020 caused millions of Americans to begin working from home. Now two years later, a lot of those people plan to continue to work from home for most, if not all, of the work week.
The remote work trend has fueled one of the pivotal shifts in spending habits since the pandemic: The drift toward local shopping. Indeed, 75% of consumers plan to shop more locally over the next year, according to a study by digital operations platform Brightpearl.
The Pew Research Center reported in February that 59% of employees with jobs that can be done at home are still working from home all or most of the time. Most of those workers said they are doing it by choice, not because their offices are closed.
Lee Peterson, Executive Vice President of Thought Leadership at retail consulting firm WD Partners compares the mindset shift that has occurred to letting the genie out of the bottle.
The pandemic accelerated trends that were already in play, “but the real disruptor was work from home,” Peterson told CO—.
“It created a sort of learned behavior,” and showed remote workers they could save time, and live better, by not having to commute to the office, he said.
WD Partners surveyed consumers last year and found the mindset shift that occurred during the pandemic has created opportunities for small merchants and big brands to meet this new demand.
The International Council of Shopping Centers in May released a study showing that 94% of adults shop or use the services of small businesses. Over half of those consumers spend at small businesses at least once a week, and 42% said they are shopping local more often since the pandemic.
Here are some of the ways the work-from-home revolution will reshape neighborhoods:
A ‘gold mine’ opportunity for locally owned stores
The pandemic heightened awareness of the importance of local stores and services and made consumers more eager to support them, Stephanie Ciegelski, Vice President, Research and Public Relations at ICSC told CO—.
The ICSC survey “found an appreciation for local shops, with 81% of consumers saying the mix of small businesses increases the vibrancy of their community, and 78% stating that marketplaces greatly benefit from the presence of small businesses,” Ciegelski said.
The pandemic, according to Peterson, accelerated a split in shopping habits. Consumers will still do much of their shopping online, but when they go to stores, they will seek out “these local, small, really cool stores that you absolutely love going to,” he said.
For local stores that “had the skills to survive the last two years, it’s going to be a veritable gold mine from here on out,” he said.
[Read: How 3 Tech Startups Are Monetizing the Pandemic-Fueled ‘Buy Local’ Movement]
Direct-to-consumer brands are seeing the value of local stores, creating new partnerships
Jonathan Persofsky, founder of Green Gruff, a pet supplement startup, had expected when he launched the brand that mass merchants and online giants would be his primary growth drivers. But he’s been happily surprised to see the success his products are having in local, independent shops.
The brand, which is on track to earn $6 million this year, is seeing 80% of its revenue generated by sales at independent retailers.
“We’re opening up like 200 accounts with independents a month,” Persofsky told CO—.
The supplements, designed to address pet wellness issues like anxiety, allergies, itching, or mobility, are sold in local pet stores as well as independent health food stores and groceries and independent pharmacies. Because some of the supplements feature cannabidiol, or CBD, an extract from hemp, it is also sold in a growing number of cannabis dispensaries.
“With a product and a category that’s relatively new and that people have a lot of questions about, having that direct connection makes a difference,” Persofsky said. Store owners and employees try the supplements with their own pets and talk about their experiences with customers, creating an invaluable interaction, he said.
Local independent stores also can move faster than big chains to bring in new products. “They can get a sample and decide they want something on the shelves and put it there a few weeks after that,” Persofsky said.
After seeing sales growth in independent stores, Green Gruff has been investing in relationships with local retailers by creating product displays for small stores and sponsoring in-store events like pet safety and pet photography sessions.
The pandemic, according to Peterson, accelerated a split in shopping habits. Consumers will still do much of their shopping online, but when they go to stores, they will seek out “these local, small, really cool stores that you absolutely love going to,” he said.
Big brands go local with small-format stores
Nordstrom, Target, Best Buy, IKEA, and Whole Foods are jumping on the local trend by opening small neighborhood stores to get closer to customers.
Nordstrom has opened five Nordstrom Local stores in Los Angeles and two in New York City and uses them as hubs for online pickup and returns, and services like express alterations.
Target began testing smaller-format stores in urban areas in 2012, and they have become a key part of the retailer’s growth strategy. The stores typically are about one-third the size of a full-scale Target but can be as small as one-tenth the size of a typical Target, or under 13,000 square feet.
Target’s newest small format store opened in April in a 30,000 square-foot space in New York’s Times Square.
IKEA, the furniture chain known for giant stores that were the polar opposite of local retailing, drawing shoppers from hundreds of miles away, recently announced that it will be opening smaller, city center stores, and will use some of its existing mega-stores more like distribution hubs to serve the smaller stores.
[Read: 5 Consumer Trends Businesses Should Know in 2022]
‘Dark stores,’ distribution hubs, and parking lot pickup locations expand to serve local communities
More chains are expected to follow the IKEA model and use existing large stores more as distribution hubs. In some cases, stores have gone “dark” – or closed to in-person shopping, converting to pickup and delivery-only hubs.
The demand for localized pickup and delivery is leading to more partnerships between national and local businesses. Walmart last year launched Walmart GoLocal as a delivery service for local businesses. It expanded it this year by partnering with last-mile delivery service provider Delivery Solutions.
While Walmart is offering to sell its delivery and logistics services to local businesses, Amazon is looking to hire local businesses in rural areas to deliver packages. The e-commerce giant’s program seeks to harness local store employees to receive and deliver packages in parts of the country that are out of the reach of Amazon warehouses.
Reef Technology, a nine-year-old startup that began as a tech and management provider for parking lots, is turning parking lots and other urban spaces into hubs for ghost kitchens, a commissary-like facility where restaurant items are made, for food deliveries. The startup is also using these spaces for pop-up health clinics and micro-fulfillment centers for online purchases.
[Read: Delivery-Only Model Drives Newfound Business for Restaurant Brands]
The 15-minute-city trend spells opportunity for small, local businesses
The concept of the 15-minute city, where everything a consumer wants and needs is available within a short walk or bicycle ride, has become a hot real estate development trend, with new residential projects being designed around the 15-minute model, and older cities seeking to carve-out 15-minute neighborhoods through redevelopment projects. The trend has growth implications for local, small businesses to serve these communities.
The 15-minute city concept was first promoted in Paris by Sorbonne professor Carlos Moreno as places where residents can walk or bike to everywhere they need to go – stores, healthcare facilities, recreation and entertainment venues.
The pandemic has led municipalities around the world to look at the 15-minute concept for new developments and urban redevelopments.
Fifteen-minute cities are under construction in suburban Phoenix and in a suburb of Salt Lake City.
Detroit is looking to move beyond its Motor City nickname with proposals for redeveloped neighborhoods where walking and bicycling would replace the automobile for errands.
Meanwhile, Seattle and Portland and a number of international cities also are exploring 15-minute city initiatives.
The challenges of going local
Retailers now find themselves in a world where they must learn to navigate demand for both online, remote shopping, and in-person, local, physical shopping.
That could prove costly, Mark Landini, Creative Director of Landini Associates, a global design and brand consulting agency that counts companies from McDonald’s to lip balm brand Burt’s Bees among its clients, told CO—.
Because Amazon and other e-commerce leaders have created virtual worlds with so many digital services replacing physical interactions, building new in-person, brick-and-mortar experiences will require investment and collaboration, he said.
Landini expects the increased local demand will lead to more cooperation between retailers and service providers that will in turn lead to shared resources, shared fixed costs, and better use of physical spaces.
“It is achievable,” he said.
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