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Merging retail with healthcare environments offers benefits for consumers and companies says David Sheldon of Perkins + Will

With e-commerce making up roughly 10% of retail sales in the US, consumers are demanding a more unique physical retail experience. As an industry, we have to offset the ease of purchasing goods online. The demand for customization actually harkens back to the early origins of retail, whereby a highly unique, tailored approach to shopping is offered by those in trade. Consumer shifts have yielded a more direct and focused approach to providing service not only at a high level – but everywhere retailers engage.

Retail is now comprised of more of a fusion of food, fitness, wellness, hospitality and co-working than ever before. Retail is not only a place of transaction, but it’s now a place of congregation, and more importantly unique, local experience.

Historically, retailers and landlords were often more interested in expanding into suburban neighborhoods where families have more disposable income, than in high-density areas. Now, with the rise of e-commerce and an increase in families living and moving into our cities, we are seeing growth in experiential retail in mixed-use environments and urban settings. As well, we see more experiential retail in environments of high-congregation. One example of this is how the future of retail can engage in health care facilities and urban campuses.

In a recent conversation Kathy Lin, managing partner of KHL Retail, noted there is a tremendous opportunity for growing retail within healthcare facilities: “People in hospital and healthcare environments are often surrounded by unfamiliar spaces. Creating spaces that are familiar and easy for someone to interpret makes these environments much more comfortable.”

She noted Northwestern Memorial Hospital in Chicago’s Streeterville neighborhood as a “prototype for successful retail integration.” The KHL team developed a merchandising strategy which targeted a hyper-local blend of tenants, instead of more typical national brands. “We punched retail into the street level spaces of the medical facilities to help soften the borders and make the campus feel more permeable,” she added “It completely changed the circulation and feel of the healthcare campus and neighborhood.”

National tenants located at Northwestern include Walgreens (though it’s a 10,000 sq ft store instead of the typical 1,000 sq ft dispensary), Dunkin Donuts, Starbucks and Subway. Beyond that, Beatrix, a neighborhood coffee shop/bakery, restaurant and meeting place, opened to great fanfare. Beatrix is operated by Lettuce Entertain You, a Chicago-based national restaurant group. Other local brands include Café L’Appetito, operated by a local Chicago family under the vision of founder Anthony Spatara, and Saigon Sisters, a Vietnamese fast casual restaurant run by a local husband and wife team.

“The biggest single change we are seeing by hospital and healthcare systems is a willingness to be open to new ideas. They’re now looking beyond the traditional gift shop and cafeteria, and embracing deeper wellness missions,” says Kathy Lin. “If you empower patients with choice – it can be incredibly successful, and more hospitals are now engaging in proactive health, wellness and successful retail practices. Providing tenants who have offerings that address special diets or niche retail providing specialty medical equipment or supplies provides some level of diversity from traditional healthcare environment options.”

Beyond the tremendous synergies, retailers also see a unique business opportunity in a hospital environment, as opposed to other retail “places”. The notion is quite simple – the captive markets create higher-than-normal utilization and volume within these environments. The average full-time staff count at hospitals with over 500 beds is more than 5,000. That’s an incredible regular, consistent catchment, in addition to patients, visitors and guests.

Beyond the tenant mix, there’s also a movement towards creating more enjoyable spaces in hospital environments. The populations within hospitals can oftentimes be going through challenging circumstances. “We looked at ways to create more thoughtful common seating areas at NMH,” said Lin.  “Instead of traditional four-top tables, where a single diner may occupy an entire table, we added counter seating, in combination with private spaces and communal tables.” Taking lessons from successful co-working and dining establishments can help establish a more welcoming ‘social design’.

We're in the middle of a metamorphosis. Retail and commercial tenants have to broaden how they engage their consumers, and what their guest experience is. The mall of the mid-20th century is a typology that, while not gone, is certainly shifting. The best brands are striving for success in places of high foot-traffic, and in places where loyalty and service can trump all. Landlords, healthcare facilities and hospitals now have the distinct opportunity of aligning places to heal with brands that can facilitate and support those goals.

David Sheldon is corporate/commercial practice leader at Perkins+Will