Five retail trends to watch in 2014

Courtesy of Simon Property Group - Retail experts predict a continued rise in the number of local outlet malls. Here, a rendering of Simon Property Group’s upcoming Clarksburg Premium Outlets at Cabin Branch.

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More than 2,000 local retailers, developers and franchisees gathered at the Gaylord National last week to discuss the changing retail industry as part of the International Council of Shopping Centers’ annual Mid-Atlantic Conference. Here are five trends to watch in the coming year.

(Courtesy of ZenGo Fitness) - Fitness centers have become coveted tenants in area shopping centers. ZenGo Fitness, which has a location in Bethesda, recently expanded to the District.

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1.

Outlet malls

Outlet malls have expanded rapidly in recent years, making them the fastest-growing segment in retail, and that’s not about to change, according to Jay Klug, principal of the JBG Cos., a Chevy Chase-based real estate developer.

“Outlets clearly are the darlings of retail right now,” Klug said.

There are currently more than 225 outlet centers in the United States, with at least 40 new openings since 2006, according to ICSC.

Long built on the outskirts of town, outlet centers are moving closer to major cities.

Tanger Outlets opened in National Harbor — just four miles from downtown Alexandria — in November. Simon Property Group, the largest outlet mall developer, is in the process of building an outlet mall in upper Montgomery County. Clarksburg Premium Outlets at Cabin Branch is scheduled to open as early as 2015.

2.

More fitness centers as retail anchors

Big-box retailers and grocery stores have long been among the most sought-after anchors for shopping centers. But that is quickly changing, as developers look to large gyms and fitness centers to help draw a stream of regular customers.

“It used to be that [fitness centers] were thought to be an ugly use of space,” Klug said. But now “fitness is a huge category.”

Gyms such as Equinox, which has locations in Tysons Corner and Bethesda, and L.A. Fitness have become coveted mainstays. As more and more consumers shop online for clothing and other household needs, fitness centers are one of the last remaining businesses that can draw regular crowds on a daily — or perhaps, weekly — basis, industry insiders said.

3.

Mobile capabilities being used in new ways, not just by retailers, but also by entire shopping centers

A number of brands, from Aston Martin to Zara, have their own apps. Now shopping centers and malls are joining the fray.

“This is the year of the mobile phone,” said Michael Kercheval, president and chief executive officer of the International Council of Shopping Centers. “It is the new gatekeeper.”

A mobile app by Simon Property Group, for example, reminds customers where their cars are parked, provides a mall directory and alerts them to discounts at nearby stores. Westfield’s app, meanwhile, directs shoppers to the closest bathroom or food court.

“Shopping center managers now have the opportunity to speak directly to shoppers as they walk in,” Kercheval said, adding that smaller developments should create similar apps to help guide customers.

4.

Same-day delivery services

Verizon this month announced that it would provide same-day delivery to Washington area residents. A number of other companies, from grocery stores to florists, have taken similar measures, and Kercheval said he expects delivery services to grow steadily this year, even among smaller retailers.

Mobile apps such as Deliv, which pairs nearby vetted drivers with stores, have made it possible for mom-and-pop shops to provide same-day deliveries without hiring new staffers.

“What this means is that stores now double as distribution centers,” Kercheval said. “It is very likely that the shopping centers and retailers [will provide] the fastest distribution of goods to consumers in the future.”

5.

More attractions and service-oriented businesses

It increasingly takes “an experience” — not just run-of-the-mill retail — to draw customers, said Kent Digby, senior vice president of operations for National Harbor.

To that end, National Harbor is adding a 175-foot tall Ferris wheel to lure new visitors. When it opens in May, the Capital Wheel is expected to bring in approximately 600,000 people annually to the sprawling development.

“The time was right to add this component to our project,” Digby said in an interview. “We wanted to create something unique and eclectic for the whole family.”

The National Children’s Museum and a carousel also serve to draw families who are looking to spend time together, he added.

On a smaller scale, many developers are looking to add hair salons, specialty restaurants and other businesses that cannot be easily replaced by the Internet. The popular Union Market in Northeast Washington, for example, has carved out a destination with its collection of gourmet food stands.

“In Washington, nothing is single-story anymore,” said Robert Bach, director of research for Newmark Grubb Knight Frank, a commercial real estate firm based in New York. “We’re always mixing retail in with something else.”

 
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