Product Managers Are Changing Retail Stores Into Warehouses

As customer's needs change, product managers have to adjust
As customer’s needs change, product managers have to adjust
Image Credit: Seika

So here’s a quiz for you: if you were going to buy a TV, how would you go about doing it? If you are like most of us, you’d go look online, find the model that you wanted, and then order it online. The idea of going to a store and picking one out is something that a lot of us no longer consider. Product managers for stores are starting to realize this and they are starting to look at their product development definition and make adjustments to meet the new world that they find themselves living in. What’s happening is that stores are now being transformed into warehouses.

Say Hello To Your New Warehouse

The arrival of online shopping has caused a virtual “retail apocalypse.” Existing stores are being converted into warehouses that are then used to service ecommerce shoppers. This is part of a burgeoning trend in which retail spaces of all sizes are being converted into e-commerce fulfillment centers. The global pandemic may have turbocharged the shift from bricks-and-mortar retail to online shopping, but the rate of conversion of retail into industrial spaces had been accelerating for years.

An analysis found that since 2017, 60 new retail-to-industrial conversion projects have entered at least the preplanning stage, out of a total of 94 such projects completed or in progress in the past decade. Projects begun or completed since 2017 transformed 14 million square feet of former retail space into 15.2 million square feet of industrial space, most of it for e-commerce distribution. Product managers need to keep in mind that it’s still a relatively small proportion of the 14.5 billion square feet of industrial real estate in the U.S. but if we want to add this to our product manager resume we may want to get involved now. What product managers need to realize is that this is a trend that has legs and we’re should expect to see this expand into the foreseeable future.

Product managers at medium-size retailers who are catering to middle-income Americans are looking to add e-commerce fulfillment to their existing stores. A number of big grocery chains across the globe, including Albertsons Cos., Wakefern Food Corp. and France’s Carrefour SA, fall into this category. They are using or planning to use almost fully automated micro-fulfillment warehouses either within existing stores or in adjacent retail spaces.

Warehouses Represent The Next Step In Retail

Many big retailers, including Walmart, Target Corp. and, Wholefoods, are taking a related but distinct approach: shipping directly from stores. Even stores that have begun offering curbside pickup amid the pandemic are, in a way, becoming part of the trend. Each business that decides retail space might be better used for filling e-commerce orders does so for its own reasons, but two intersecting trends play a big role. Retail stores and shopping centers were closing on account of declining foot traffic even before the pandemic, as e-commerce continued gobbling bricks-and-mortar retail market share.

Meanwhile, rents for e-commerce fulfillment and other industrial spaces are climbing due to that surging demand. The gap between higher retail rent and lower warehousing rent is closing. Office space can also be converted into micro-fulfillment centers, and firms have set up small fulfillment warehouses in what was once office space. As companies reconsider whether they ever want their employees to return to offices, more of this kind of real estate could also be available. As Americans shift from buying things in-store to buying them online, all of those goods have to be shipped from somewhere. The faster we demand they get to us, the closer they have to be stored, which necessitates more e-commerce warehouses than ever, and in places they’ve rarely been seen before, such as city centers.

The good news for product managers is that even as things change in our world, their customers are still shopping. However, what product managers need to realize is that like so many of us, they’re now doing it from home. If trends continue, then in terms of jobs, real estate, consumption patterns, supply chains and land use, warehouses are going to be playing a big role in how we get the things that we buy.

What All Of This Means For You

Product managers who have been responsible for retail stores have been facing challenges for quite some time. The number of customers coming to their stores has been falling even as the volume of ecommerce purchases has been rising. The Covid-19 virus just served to make a confusing situation even more chaotic. What is the best way to deal with a situation like this?

It turns out that the answer may be sitting right in front of product managers. Converting their retail stores into warehouses that can be used to serve ecommerce customers, although not in anyone’s product manager job description, might be the right way to make their business successful once again. More and more firms are starting to decide that the space that they have been using for retail operations may be better used as a warehouse. As firms try to decide if they want to return to their offices after the pandemic, these spaces are opening up for use as warehouse space. As more and more purchases are being made online, the need to be able to deliver goods to customers faster and faster is becoming critical. Having warehouses that are located close to your customers is something that all product managers now want.

The trend for customers to purchase more and more goods online will probably only continue into the future. Retail product managers need to find ways to deal with their deceasing foot traffic and increasing ecommerce sales. Considering transforming some retail space into warehouse space and using that to support ecommerce operations sounds like an interesting plan. We’ll have to take a careful look at what our markets are asking of us in order to determine what the right answer is for us.

– Dr. Jim Anderson Blue Elephant Consulting –
Your Source For Real World Product Management Skills™

Question For You: Do you think a product manager should ever shut down all retail operations and just start to run warehouses?

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What We’ll Be Talking About Next Time

I can only speak for myself, but it seems as though anytime I walk into a store that sells food, there is some sort of sticker on the door that proclaims that if I’d prefer to have my food brought to me, there is a service that will do it. What a fantastic age we now live in! The product managers at these food delivery services are working hard to try to establish their new market while fending off all of the other companies that are doing the same thing that they are. However, there is a fundamental problem that they are all dealing with: their customers are not turning into repeat customers.