A new report by commercial real estate firm Colliers says tenant mix has long been a consideration when assessing the vitality of a retail asset.
The Tenant Mix Blueprint found that almost six in 10 consumers visit multiple stores on a single outing, and their primary visit influences their likelihood to combine trips.
The report found that consumers visiting grocery stores and apparel stores as their primary destination are the most likely to combine trips, with 66 per cent and 63 per cent adding additional retailers to their outing respectfully. Meanwhile, over half of consumers visiting health and beauty, electronics, and home goods stores are likely to combine trips.
“Understanding how the primary visit influences the likelihood and location of a secondary visit will add significant value to our tenant mix blueprint, and in turn, support additional foot traffic and increased sales across the retail property,” said Stephanie Hannon, Senior Vice President and National Lead, Retail Services, Colliers.
Colliers said consumers’ primary visit influences what additional retailers they visit. For the top three categories of retail where consumers combine trips (grocery, apparel, and health and beauty), the report identified the secondary retailers they are most likely to visit. For those visiting a grocery store, 54 per cent will also visit a dollar store, 53 per cent will visit a coffee shop, 52 per cent will visit a fast-food restaurant, and 45 per cent will visit a second grocery store.
Hannon said the purpose of the report was to quantify the impact of consumer shopping patterns on not only the retailers but to the property’s performance and the patterns of behaviour are discovered.
“We like to demonstrate to owners that there is data available for them to best lease, manage and market their property,” she said.
“Ultimately convenience is a huge factor in this . . . If you can capture a consumer’s entire wish list and make things convenient for them where they don’t need to go anywhere else, you’ve really maximized your market share for that asset.”
Cross-shopping
“Cross-shopping occurs when consumers visit more than one store in the same retail category. Certain categories of retail see this practice more frequently than others,” said the report.
“Those who visit an apparel retailer first are likely to visit a second apparel retailer. Similarly, consumers are likely to visit multiple health and beauty stores in the same trip. There is value for owners and managers to create cross-shopping opportunities on site, particularly within these categories of retail.
“Notably, of the top three consumers most likely to combine trips – those visiting grocery, apparel, and health and beauty stores as their primary destination – all three listed coffee shops as a top secondary destination.”
Colliers said most retailers believe consumers combine trips, indicating that 48 per cent of them follow this practice. Interestingly, however, when consumers were asked directly, 57 per cent said they combine trips, suggesting that retailers are underestimating the prevalence of this behaviour.
It said an optimal tenant mix had retailers 25 per cent more likely to be profitable in 2023.
Also, 83 per cent of tenants who said there was an optimal tenant mix at their property were profitable in 2023, whereas only 67 per cent for those who said there was a suboptimal tenant mix.
“Our job isn’t simply to fill space. Knowing that retailers view their co-tenants as a predictor of profitability, it’s about finding the right tenant to fill the space, so the existing retailer, prospective retailer, and retail property are set up for financial success,” said Tina Williams, Vice President, National Leasing, Colliers.
The report said retailers who are satisfied with the tenant mix at their property are almost twice as likely to renew their lease.
Retailers were asked to rank their likelihood to renew their lease upon expiry, on a scale of 1-10. Retailers who say there is an optimal tenant mix at their property have an 85 per cent chance of renewing their lease, compared to only 45 per cent those who are not satisfied with the tenant mix, added Colliers.
Optimal tenant mix leads to lower vacancy
“On average, properties with an optimal tenant mix have three per cent lower vacancy than those with a suboptimal tenant mix. While the average difference in vacancy between properties with an optimal and suboptimal tenant mix is three per cent, an optimal tenant mix has the potential to sway vacancy by as much as 30 per cent. Peak vacancy for properties with an optimal tenant mix has reached as high as 27 per cent, whereas peak vacancy for those with a suboptimal tenant mix has reached as high as 54 per cent,” explained the report.
The report also found that the likelihood of a consumer to visit more than one retail location in a single outing is heavily dependent on the demographic.
And when comparing shopper patterns to income, the data shows that lower income consumers are less likely to combine trips. It becomes more common to combine trips as income rises, peaking at $100k-149k, and then dropping as incomes rises above $150k.
Taken together, age, geography, and income differences can be useful for retailers in tailoring their marketing strategies to different demographic groups, optimizing store locations, and improving overall shopping experiences, said Colliers.
It said younger consumers (aged 18-34) were more than twice as likely to combine trips than those 60 and older. Meanwhile, the further you move from urban to rural, consumers are less likely to combine trips, as downtown consumers are 36 per cent more likely to combine trips than those in rural areas.
“If we know that urban consumers are most likely to combine trips, for example, we will work with urban retail properties to prioritize convenience to increase dwell time. Our recommendations to clients will reflect the latest data and insights,” said Bri-Ann Stuart, Vice President, Portfolio Management and National Retail, Colliers.
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An interesting topic that you don’t hear much about with some surprising results.
I’ve always combined trips, often doing shopping on the way home. Places close to public transit where I transferred or on commercial strips near where I lived that I walked by on my way home got most of my business, as did places located near stops on the rapid bus line with frequent service where I could get on and off quickly without waiting too long for the next bus. This applied to destinations like gyms and yoga studios as well. On weekends, the deciding factors that drew me into a store were nearby coffee shops or brunch places, the variety of businesses, especially those that specialised, and whether my dog was welcome.
Combining trips was particularly important when I lived in a semi-rural area because of the time and expense it took going back and forth into town. I didn’t just mindlessly jump into the car because I’d forgotten to buy something, particularly in winter.
I don’t shop at malls much because I don’t care for their retail selection in general, but was in one fairly large one recently with a friend. The place we’d planned to have brunch at was closed because of a staffing issue. It was slim pickings in the food court and we ended up eating at Starbucks. I’m not interested in going returning. I can visit the same chains in other malls or on the high street downtown.