Retail represents $1.5 billion of GDP for the District, and provides 23,000 jobs.1 The DC retail sector is diverse, consisting of 12 subsectors, including: motor vehicles and parts; home furnishings; electronics; building materials; food and beverage; health and personal care; gas; clothing; general merchandise; and specialty retailers. While food and beverage stores remain the largest retail employers in the District, accounting for 7,700 jobs, general merchandise stores – a category that includes big-box retailers such as Target and Wal-Mart – have grown to become the second-largest employers in the retail sector. Fueled by strong demand from population and income growth, as well as the rise of ride-sharing apps that make it easy for people to reach areas without extensive public transportation, new retail centers of gravity have been created in DC, such as the Bloomingdale neighborhood. Since 2001, over seven million square feet of retail space have been built in the District and another 1.5 million square feet are currently under construction.2 Many of these new retail areas have been industrial redevelopment projects, such as Union Market, renewed in 2012 as a restaurant, retail space and incubator. As of the end of 2015, shopping center vacancy throughout the greater DC metropolitan area was fifth-lowest in the United States at 4.8%.3 These retail districts also have a positive effect on quality of life, by providing amenities for residents, as well as new job opportunities. However, while certain submarkets appear to be doing well with new retailers/restaurants, other areas (particularly Wards 7 & 8) are still in need of basic retail such as grocery stores.
Major Trends Affecting the Sector and Implications
Increased interest in localization
Trends: In urban retail, people are showing more interest in niche independent or smaller-chain options.4 Nationally, the consumer culture is turning toward supporting locally owned, independent retailers who contribute to the community, as well as businesses that make their products within the local community.5 Retail stakeholders in DC have reflected that there is strong pride in the DC brand, local retailers need support in adjusting to selling to the city’s changing demographics. There are also barriers to entry for local retailers, including licensing and certification processes, lack of cash flow and access to capital, affordable commercial space and affordable housing for employees.
Implications: By marketing the local economy, including through its “Made in DC” campaign, DC can increase DC’s brand as a retail and restaurant hub. There could also be opportunities to improve the ease of doing business through regulatory process reforms. Local small businesses, particularly longstanding businesses, also need support accessing information about available resources and finding mentors.
Food has been central to retail growth
Trends: With several large-format retailers right-sizing to account for changing demographics and shopping patterns landlords and developers are turning toward “experiential retail” (e.g. restaurants, entertainment, health & fitness) to anchor their retail projects. Restaurants (including the rise of “fast casual” eating places such as Sweetgreen and &pizza) have driven much of national growth in retail real estate development. In DC, restaurants often serve as anchors or first adopters for new retail space, attracting visitors to the neighborhood and creating additional foot traffic, which can help prove the market and attract other retailers such as those in the clothing & accessories subsector.6 Grocery stores have also accounted for a significant share of retail growth. Of the 51 existing grocery stores the Washington, DC Economic Partnership tracks, 33 are either new or undergone significant expansion since 2000. The centrality of food to retail growth is driven in part by the fact that Americans are eating out more (2015 was the first time Americans spent more on restaurants and bars than on groceries)7, and also because food-related retail is inherently shielded from online competition.
Implications: Stakeholders in the District have expressed that the permitting process for restaurants and bars could be streamlined. In addition, the ability to sell and serve alcohol is a major revenue source for food-related businesses. Moratoriums on alcohol-related licenses can hinder growth of these types of businesses.
Blending technology and a personalized retail experience
Trends: Shopping at physical locations still makes up 90-95% of all retail sales, but e-commerce is growing rapidly at an estimated 17% annually.8 To compete with e-commerce, retailers nationwide such as Burberry and H&M have been using technology and physical space enhancements to create environments that invite consumers to enjoy omnichannel experiences. Conversely, online retailers have increasingly pursued a “clicks-to-bricks” strategy of opening physical locations to offer a more compelling brand experience directly to consumers.9 For instance, the District alone has Bonobos, Rent the Runway, and Warby Parker stores. Matching the demographics of their consumers, these “clicks-to-bricks” stores tend to locate in traditional shopping areas, such as Georgetown, and areas with high concentration of young professionals, such as Shaw.
Implications: These trends should inform business development strategy and marketing efforts to retailers, and economic development professionals should be aware that the “clicks-to-bricks” trend might make it harder to attract retailers to areas with lower incomes and lower access to the Internet that need retail services. DC will also need to adapt its business environment to make sure existing regulations do not hinder new retail ideas from starting or expanding into DC, even if they do not conform to traditional retail concepts (e.g. concepts that blend wholesale and retail or manufacturing and retail).
- Data analyzed from Bureau of Economic Analysis and Bureau of Labor Statistics.
- Washington DC Economic Partnership. DC Development Report. Accessed 21 December 2016. <http://wdcep.com/resource/dc-development-report/>
- Cushman & Wakefield. Washington DC: The Capitol of Retail Trends. March 2016
- Rothstein, Ethan. “What you need to know about the DC retail market.” Bisnow. 23 October 2015. < https://www.bisnow.com/washington-dc/news/retail/citycenter-sweetgreen-vornado-crystal-city-noma-retail-boom-51477 >.
- Danziger, Pam. “Small is the Next Big Story in Retail.” The Robin Report. 14 July 2015. <http://www.therobinreport.com/small-is-the-next-big-story-in-retail/>
- “Washington DC: The Capitol of Retail Trends”. Cushman & Wakefield, March 2016. <http://www.cushmanwakefield.com/~/media/reports/washington-dc-metro/DC%20Retail%20Business%20Briefing%20Report.pdf>
- Perry, Mark. “Chart of the Day: Retail sales at grocery stores vs. restaurants.” Washington, DC: AEI, 5 March 2015. <https://www.aei.org/publication/chart-day-retail-sales-grocery-stores-vs-restaurants/>
- Retail Touchpoints, “Retail vs. E-Commerce Trends: A Match Made In Heaven”. Retail Touchpoints. Accessed 21 December 2016. <http://www.retailtouchpoints.com/resources/type/infographics/retail-vs-e-commerce-trends-a-match-made-in-heaven>.
- McKeough, Tim. “Clicks to Bricks: Online Retailers Find the Lure of a Store.” New York Times, 10 November 2016. < http://www.nytimes.com/2016/11/11/style/clicks-to-bricks-online-retailers-find-the-lure-of-a-store.html>.