The retail sector is one of the most dynamic segments of commercial real estate, constantly evolving to meet the preferences and expectations of consumers. Nowadays, consumers are increasingly opting for online shopping over in-store purchases, and this trend is expected to continue.

However, the role of physical stores will not disappear. Despite the changes, hybrid shopping, or Phygital Retail, which combines online and in-store shopping experiences, has emerged as a prominent trend in 2024. This trend caters to everything from the virtual shopping experiences of Gen Z to the Baby Boomers who still appreciate the convenience of in-store shopping.

Seamless Phygital Retail allows customers to search for products online, check availability in-store, and purchase through their preferred channels. This integrated approach enhances the traditional shopping experience, making it more tailored and appealing to individual customer preferences. Additionally, with personalized shopping data, brands can develop services and create shopping experiences that resonate with consumers across all age groups.

By incorporating technologies such as interactive displays and augmented reality (AR) try-ons, retailers can create memorable shopping experiences for customers. Moreover, QR codes, mobile applications, and real-time data collection enable brands to understand the behaviors and preferences of individual customers, allowing them to optimize their Phygital Retail strategies. A study by McKinsey in March 2024 indicated that customizing shopping experiences to customer preferences could increase revenue by 15% and reduce customer acquisition costs by 50%. This also leads to higher customer repeat purchase rates, brand awareness, and increased sales.

Understanding the preferences of different generations is crucial for real estate developers and retailers transitioning to Phygital Retail. Older generations tend to prefer tactile in-store shopping experiences but are becoming more familiar and willing to shop online. Meanwhile, younger customers use digital platforms to research products, compare prices, and create personalized shopping experiences, yet they still enjoy in-store shopping. Therefore, the future of the retail industry relies on blending online and offline shopping methods. Brands that can integrate online shopping experiences with in-store purchases will be best positioned to attract and retain customers of all ages.

CBRE believes that seamless shopping experiences will become increasingly important, especially among younger customers. A recent report from the CBRE Research Department (Global Retail Market Trends, August 2024) highlights that online commerce continues to grow among customers of all ages in major markets, with China, the United States, Australia, and South Korea leading the way in adapting to online commerce. Additionally, the report emphasizes the growth of social media commerce among younger generations, particularly Gen Z, which Morning Star predicts will become the largest customer group by 2035.

“While online shopping shows no signs of slowing down, physical stores are not being neglected; they remain a part of the shopping experience. Despite predictions of the end of in-store shopping, a survey by eMarketer in February 2024 found that younger customers, especially Gen Z, still prefer in-store shopping, particularly for their first purchase of a product. This indicates that even with technological advancements, younger consumers still value the tactile shopping experience in malls,” Chotika Thangsirithap, Head of Research and Project Development Consulting at CBRE Thailand stated.

We believe that in the era of Phygital Retail, where online and offline worlds merge, retail space developers must innovate to ensure that shopping centers remain competitive in the market.

Key strategies for retail businesses include:

1) Focus on creating experiences: Organize unique events, workshops, and pop-up shops to create memorable experiences that attract diverse customer groups.

2) Promote collaboration among tenants: Encourage collaboration among retail tenants to offer complementary products and services, thereby attracting a broader range of new customers.

3) Adapt to changing tenant needs: Offer flexible leasing terms, such as short-term leases for temporary sales spaces (pop-ups), and provide shared services to help reduce operational costs for retailers.

Implementing these strategies will help retail space developers transform shopping centers into vibrant destinations that meet the evolving demands and preferences of consumers across all age groups today.

In the future, retail space developers are expected to prioritize engaging shopping experiences that integrate retail, food, entertainment, and services. Strategic partnerships among retailers from diverse sectors will be crucial in creating a cohesive and attractive shopping atmosphere. Additionally, increased investment in developing online channels, particularly technologies for mobile devices, as well as technologies that blend the physical and virtual worlds (AR) and artificial intelligence (AI), will be essential for success in the evolving retail landscape.