Retail spaces of city centres have gone through considerable changes during recent years, with the growth in the number of out-of-centre outlets and the rise of online shopping. Such changes led to a significant decline in traditional retailing. The COVID-19 pandemic has intensified this degradation in many ways, and the retailing spaces have faced new challenges to remain economically viable. Identifying these challenges and the impacts of the COVID-19 pandemic on the retailing sector will play a key role in finding effective solutions whilst supporting the move towards a sustainable and resilient future for such places. This systematic review classifies the impacts of the COVID-19 pandemic into three main categories. First, the changes in customer preferences which have significantly affected retail sectors. Second, the transformation in the role and importance of city centres which resulted in changes to retailing. Third, the pandemic and the trajectory of retail in city centres. These impacts are discussed in the following sections.
3.1. The Pandemic and the Changes in Customer Preferences
Customers’ preferences and behaviours change over time and are contextual. Sheth (2020) identified four main contexts that influence consumer habits. These contexts include life events such as marriage and moving to another city, the emergence of breakthrough technologies, rules, and regulations, and natural disasters such as earthquakes, hurricanes, and global pandemics. It is undeniable that the spread of COVID-19 has considerably affected consumer behaviour [21
], and it is highly likely that some behaviours adopted by consumers and retailers during the pandemic will turn into normal behaviours after the pandemic [23
]. As consumer behaviour has considerable impacts on the structure and features of retail [5
], exploring the changes in consumer behaviour during the pandemic provides insight into the changes in retail structure during this time.
The impact of the COVID-19 pandemic on consumer behaviour has been explored in some recent studies [14
]. Cruz-Cardenas et al. (2021) studied 70 articles that explored the impact of the COVID-19 pandemic on consumer behaviour. In this study, the factors affecting consumer behaviour during the pandemic were identified at a macro-level (macro-environmental), micro-level (micro-environmental), and internal consumer level. At the macro-level, five macro forces affecting consumer behaviour during the pandemic encompass technological, political-legal, economic, and socio-cultural environments. Macro-environmental factors dramatically affect the entire micro-environmental factors. At the micro-level, some special technological applications such as social media and business platforms, social groups such as family and friends, and marketing strategies are identified. Personal and psychological characteristics are among the most critical factors at the consumer level [25
Research on consumer behaviour suggests that regulations and technological advancement are the most important factors resulting in significant changes in consumer behaviour [13
]. Related to this, technology is recognised as an important factor which separates this pandemic from other previous disruptive events, such as natural disasters or wars. In other words, the fact that the COVID-19 pandemic occurred within the context of considerable technological advancements has resulted in significant changes in customer behaviour and preferences. Technology has provided consumers with new purchasing methods which aim to decrease physical contact and reduce the risk of infection, playing a key role in the changes to shopping and retailing. Thus, during the pandemic, people soon realised that technology provides them with opportunities of working, shopping, entertaining, getting takeaways, and even having access to public services while they are at home [13
]. Although it is worth mentioning that not everyone has reliable access to the internet and digital devices [29
]. In other words, the digital divide, which is a term used to describe uneven skills and/or access to information and communication technologies (ICTs), has an impact on the uptake of ICTs for completing different tasks in different local and national contexts [30
Seeking the most important factors influencing customer preferences, Carmona (2021) introduced the four factors of convenience, choice, certainty, and cost, which encourage consumers to prefer online shopping over in-store shopping. People with access to reliable digital resources find online shopping much more convenient than in-store shopping [32
]. Moreover, with the emergence of the COVID-19 pandemic and store closing, more people found online shopping more convenient as it provided them with the opportunity of buying products at any time, anywhere [33
]. For example, in the UK, between 27.7% and 37.8% of total retail sales each month in 2021 were internet sales [34
]. During the COVID-19 pandemic, the accessibility of e-commerce together with new policies and regulations, anxiety, uncertainty, and scarcity due to safety concerns made consumers migrate to e-commerce [35
]. Regarding the range of choices, although many physical stores provide a wide range of different products, it is undeniable that even large stores may become curbed by limited space problems. On the other hand, online stores without any space limits can provide customers with a multiplicity of choices. In this situation, customers are more likely to go for online shopping to have unlimited options [36
]. Certainty is another factor which can prompt some people to choose online shopping. While visiting physical stores has a kind of uncertainty that the products may be unavailable, online shopping makes shoppers certain that the products are available. Regarding cost, most consumers assume that online shopping is cheaper than physical shopping. It is important to point out that although online retailers are not required to pay fixed physical costs such as rent and tax, they should pay for shipping costs [37
]. Considering convenience, almost limitless choices, certainty, and the lower cost of online shopping together with the contactless experience, many consumers opted for online shopping during the pandemic.
Another considerable change in consumer behaviour during the COVID-19 pandemic is that consumers in some countries and cities did not tend to buy from large retailers and places that may have been crowded. Instead, they preferred to shop at small local stores [25
]. Studies show that during the pandemic smaller multifunctional centres were more popular than large ones [12
]. According to a study in South Korea during the pandemic, the impact of COVID-19 on commercial centres is greatly dependent on the structure and characteristics of such centres. In order to explore the effects of the pandemic on retail centres, Kim et al. (2021) categorised retailing centres into two main groups, including district-level retail areas and community-level retail areas (i.e., the local neighbourhood). The district-level retail areas refer to areas formed in city centres, whereas the community-level areas are formed in residential areas with local and pedestrian roads. The study explored 253 district-level retail areas and 1010 community-level retail areas. The results of the study show that there was a considerable decrease in sales in district-level retail areas, while community-level retail areas witnessed an increase in sales during the pandemic [24
]. In fact, the pandemic helped the districts or neighbourhood centres become more popular [12
]. Similarly, Enoch et al. (2021) studied the impacts of the COVID-19 pandemic on footfall in six town centres in England. The results show that the COVID-19 pandemic had less impact on “smaller centres” (e.g., Hereford and Loughborough) because they are much less dependent on serving long-distance commuters. In contrast, “large centres” (e.g., Stockport and Norwich) that are reliant on more discretionary shopping trips and commuters who might travel into large centres to work (and then shop at lunchtime) were considerably affected by the crisis [6
Although the recent advances in technology together with the convenience and the variety of products in online shopping put this method in the focus of attention long before the emergence of the COVID-19 pandemic, it was the outbreak of COVID-19 which increased the popularity of online shopping significantly [33
]. In other words, during the pandemic, the need for reducing social interactions made e-commerce and contactless store concepts more valuable among consumers [33
]. Considering customer behaviour after the emergence of COVID-19, it is clear that the pandemic made more people embrace online shopping as the most common way of shopping. In fact, the fear of being infected in crowded city centres together with lockdowns and social distancing rules made more people prefer online shopping over in-store experiences. The increasing use of e-commerce affects traditional retailing in many ways. According to the studies about substitution effects, when consumers adjust to one shopping channel, they may leave other channels. Thus, the growing tendency toward online shopping may lead to a migration from physical stores to those online [5
]. As e-commerce increases, the sale in city centres reduces [33
]. Under such circumstances, some traditional retail outlets, especially those that are not equipped with online services, are in danger of bankruptcy. In the long term, this trend gives rise to an increasing closure of retail activities at the high-street level [1
]. Store closure and the rapid reduction in fixed-store settings in city centres may prevent promoting an economically sustainable city centre [7
It is expected that the pandemic and the subsequent public health measures have wreaked havoc on the economic health of retail in city centres. Since the start of the pandemic, there has been a sharp decline in consumer spending in both developed and developing economies. Consumers delayed significant expenditures in developed economies, whilst consumers prioritised spending only on essential products in developing economies. Moreover, the changes in customer preferences have led to changes in the space market. First, health concerns and new regulations caused a considerable reduction in customer spending. It seems that the extent to which retail centres were challenged has not been identical among different retailers. In other words, some retailers have faced greater challenges than others. According to Cruz-Cardenas et al. (2021), lockdown and social distancing rules led to a considerable reduction in the consumption of goods and services in industries such as entertainment, dining, travelling, and tourism. Moreover, as discussed previously, there has been a considerable decline in demand for services with face-to-face interactions. As such services are usually run by small businesses, the revenue of small businesses has witnessed a decreasing trend during the pandemic [18
]. The victims of this trend are small shops throughout the city [38
], especially those located in city centres, where the costs of renting are always higher. Apart from this group, producers and their labour in developing countries which encountered a dramatic reduction in sales are other losers of the COVID-19 pandemic [39
]. Another important change occurred in businesses that did not have online services. For example, there has been a growing increase in online purchases of food, beverage, and cleaning supplies since the pandemic. Thus, many of these businesses had to provide more digital services to remain economically viable [25
3.2. The Pandemic and the Changes in the Role of City Centres
The spread of COVID-19 resulted in considerable changes to the pattern of movement in urban spaces, consumption patterns, and work–life patterns [24
]. In terms of changes to movement patterns, it is clear that during the COVID-19 pandemic, many people preferred individual modes of transport (i.e., walking, cycling, and private cars) over collective modes of transport (i.e., traditional public transport and ride sharing/hailing) in order to decrease the risk of infection [41
]. The greenspace within neighbourhoods became more important, while people avoided crowded city centres [43
]. Regarding the changes in consumption patterns, since the start of the COVID-19 pandemic, many people have opted for online shopping over in-store shopping, which has significantly affected city centres. Such changes have resulted in decreasing footfall in city centres. Enoch et al. (2021) explored the impact of the pandemic on footfall in six town centres with different characteristics in England including Hereford, Loughborough, Norwich, Nuneaton, Stockport, and Welwyn Garden City. The results were based on data collected from Wi-Fi footfall monitoring equipment. It was concluded that the pandemic led to a considerable decline in footfall in city centres [6
]. The decline of footfall in city centres poses a threat to their vitality and attractiveness in the long term. Addressing these challenges requires new policies and measures for the future of city centres. In other words, post-COVID city centres need to define urban identity [8
Since the outbreak of COVID-19 and subsequent social distancing rules, workers in many companies and organisations were forced to work from home. Many firms were exposed to the positive aspects of working from home. Even firms that were greatly dependent on face-to-face interactions started to adopt virtual interactions. Some studies predicted that many firms plan to continue remote or hybrid working even after the pandemic [8
]. This trend is likely to have long-lasting impacts on retail in city centres. The opportunity of working from home enables many employees to live and work in places that are not necessarily near to their physical workplace or office. According to Nanda et al. (2021), the pandemic has influenced all aspects of a household’s location choice. In terms of access and accessibility, the opportunity of working from home has decreased the need for living in the vicinity of working zones in city centres. For example, some skilled workers tend to live in more affordable or higher-amenity locations far from their workplace [28
]. Thus, it seems that this opportunity has accelerated a growing tendency toward leaving the densest residential areas and fleeing to the suburbs and beyond into exurban and rural settings. However, it is worth mentioning that working from home or moving out of dense residential areas is not an option for everyone due to social, economic, or personal considerations. However, it is evident that technology has posed a challenge to the contemporary role of city centres [8
] and the emergence of the COVID-19 pandemic has accelerated this situation.
The number of city centre inhabitants has decreased considerably during recent years. This reduction has occurred in the number of local users of space who visited city centres on a regular basis (daily or weekly) as well as visitors (tourists) who played a key role in shaping city centres. Departure from working in the central business districts (CBDs) or their surrounding areas deprives retail, entertainment, and subsistence functions of their customer base [44
]. Thus, this trend may exacerbate the process of declining traditional retail in city centres. This trend is likely to have long-lasting impacts on retail in city centres.
Since the outbreak of the COVID-19 pandemic, there have been uncertainties about whether cities will continue densification strategies and follow high-rise building practises or stop doing so [39
]. In some studies, it is argued that congested places increase the risk of the spread of COVID-19 [45
]. As Nanda et al. (2021) argued, the pandemic has had a negative impact on the value of density. It seems that since the start of the COVID-19 pandemic, there has been a growing tendency toward living in areas with low density to decrease the risk of getting infected with COVID-19. Thus, as we move into the post-pandemic era, there is more tendency toward living in suburbs and rural areas with less congestion, more sporadic population, and better access to greenspaces. However, seeking the impact of density on the spread of COVID-19, Hamidi et al. (2020) suggested that connectivity is more influential than density in the spread of COVID-19. According to this study, large metropolitan areas which are tightly linked together through economic, social, and commuting bonds are more susceptible to the outbreak of COVID-19.
This trend can result in considerable changes to city centre retailing since it may lead to the emergence of satellite retail centres around worker mass locations. This phenomenon has considerable effects on retail structure, making retailers follow customers based on a spatial sense. In such circumstances, traditional retailers could relocate or develop their businesses according to these new retailing centres [5
]. Regarding this trend, there has been a shift from integrated and place-dependent urbanism to separated dis-integrated and non-place urbanism during recent years [12
As changes in household’ location choice will lead to changes in retailers’ location choice, retailing in city centres is likely to go through even more changes in the future. The closure of brick-and-mortar retail spaces may lead to the disappearance of restaurants, office spaces, and public spaces. This trend may undermine the importance of traditional retailing in city centres and threaten their economic viability in the future. Although the transformation in the work–life pattern discloses the important role that city centres previously played in gathering communities and economic hubs [8
], this trend raises the question of whether city centres would be valued in the future as much as they were valued before the COVID-19 pandemic?
3.3. The Pandemic and the Trajectory of Retail in City Centres
The COVID-19 pandemic, which resulted in social distancing restrictions, has led to considerable changes in people’s shopping, working, travelling, and even entertaining. Such changes have challenged the previous role of city centres as well as traditional retailing, and it is expected that a transformation in retailing in city centres is inevitable. Under such circumstances, retailers have faced some new challenges and are starting to adopt new methods to remain economically viable. In this matter, an important measure to mitigate the challenges that city centres are facing was the integration of new technologies with traditional retailing [47
]. In fact, retailers were compelled to adopt digital technologies to remain economically viable [22
]. It is likely that such changes will lead to a transformation in the character of city centres in the near future [39
During the pandemic, many businesses adopted digital transformation strategies to tackle economic challenges. For example, some added social media sales and home delivery services to their previous services and could remain financially viable [25
]. Many businesses enhanced their online capabilities and provided new websites and online service delivery. They also offered free contactless home delivery services and click and collect [48
]. In fact, there has been an increase in the number of multiple marketing channels, hybrid companies, and click-and-mortars (i.e., a business model that has both online and offline operations). Exploring different definitions of multiple marketing channels, Stojković et al. (2016) believed that when an organisation uses more than one channel type to reach its target market segments, multiple market channels emerge. That is, multichannel marketing happens when consumers reach products through one channel while buying them through another channel and collecting them via another type of channel. Therefore, hybrid companies are multichannel companies that always provide online channels in their services. Click-and-mortars include using e-retail combined with traditional retailing [49
]. Since the emergence of the COVID-19 pandemic, many retailers have started to adopt some hybrid strategies. In this strategy, retailers incorporate both online and offline offers. For example, traditional brick-and-mortar stores developed websites that provide shoppers with online shopping opportunities or the ability to buy in store [12
]. It seems that in the future, retailers may need to integrate their services with digital transformation in order to remain economically viable.
Furthermore, during recent years, there have been significant changes in the demand for retail space, which has been accelerated during and after the pandemic. Since the outbreak of COVID-19, there has been increasing demand for flexibility among tenants. Traditionally, long-term leases have been the most common way, especially in developed real estate markets, owing to the fact that this approach brings a greater stability of cash flow across economic cycles for landlords. However, since the pandemic, businesses have realised that staff are productive when they work from home, and employees appreciate the time saved by eliminating commuting to work. These changes made many office space tenants seek short-term leases or long-term leases with a break clause to be able to adjust as their space needs evolve [50
3.4. Policy Recommendations for the Future of Retailing in City Centres
As the COVID-19 pandemic has led to the transformation of retailing in city centres, there is an urgent need for policies to support better decision making about the future of retailing in city centres. Similarly, the increase in the number of people who choose more flexible working arrangements (e.g., working from home) has led to a reduced demand for office spaces. As a result, city centres are facing more vacant office spaces. One alternative for these unoccupied spaces is converting them into accommodation for temporary (rotating) workers and staff [8
]. Considering the process of converting shops and offices into housing units, Clifford and Manuela (2022) argued that the governance of places is of great importance. For example, in England, it needs a complicated set of codes and regulations which are not present now. They also emphasised that good regulations need to be informed by a comprehensive understanding of the social and economic context of places. Carmona (2021) argued that making city centres more residential is more complex in reality for two main reasons. First, the current market processes do not support mixed use. While most developers prefer to specialise in single forms of development, the investor seeks profitable investments. Second, when buildings are converted into residential units, it is difficult to redevelop them or convert them to something else. Since the flexibility should be two-way, this problem poses a challenge to the flexibility of place. Considering all complex aspects, Carmona (2021) believed that a “mix economy” with the right balance of residential and high-performing retail is essential.
However, Gillen et al. (2021) argued that a major part of city centres should be allocated to other uses beyond retailing. For example, entertainment spaces, galleries, music venues, community centres, and playgrounds [51
]. Since the most important advantage of traditional retailing over online shopping or out-of-town centres is providing consumers with social interaction and leisure opportunities, Carmona (2021) believed that we should try to improve the social and cultural function of city centres to help them remain economically viable. In fact, he argued that retailers should give people reasons to visit city centres which are beyond shopping. Therefore, city centres should turn into socially dynamic places in which people can engage with each other and have meaningful social interactions. Thus, enhancing the pedestrian experience and creating adequate space for walking, socialising, cycling, and peoplewatching will play a key role in bringing back life to city centres [52
]. Studies show that such improvements increases the demand for retailing in the long term, helping retail in city centres survive. In fact, allocating empty shops to leisure use such as restaurants, community spaces, pop-up markets, gyms, entertainment, art spaces, and co-working spaces plays a key role in boosting the economy of city centres [12
]. Kunzmann (2020) argued that retailers should integrate shopping with entertainment and leisure functions to survive. These findings reveal the importance of the experience economy in the post-pandemic period.
Another strategy for city centres to remain economically viable and adapt to the recent changes is to create episodic places. Following this strategy, city centres should be designed for a specific time and place that can be re-enacted and adaptive to change. Creating episodic retail spaces can be considered as providing a space stimulating unique cultural features and facilitating emotional attachments to retailer brands for customers. To this end, it is crucial to focus on environmental psychology, designing an environment that affects buyers emotionally to increase the chance that they will buy products. One of the key factors of such places is designing an environment that impresses buyers and encourages them to purchase products [7
]. Carmona (2021) suggested four key place-based factors that guarantee a future for city centres. These factors include optimising convenience, directing choice, facilitating leisure, and encouraging social interaction. Optimising convenience points to a place in which all different needs of users, from travelling to the experience, of being at the location, and finally leaving the place, are fulfilled. Directing choice concerns the uniqueness, role, and character of a place compared with that of others. Facilitating leisure requires creating a place with mixed uses that improves the experiences of users. Encouraging social interactions concerns providing places where people from all groups of society feel welcome and comfortable in a high-quality environment that supports social interactions.
Similarly, Nanda et al. (2021) introduced “repositioning strategy” as a concept which can be extended to urban places due to the fact that they need to anticipate, adapt to changes, and respond to external forces. “Repositioning strategy” is defined as “the changes of the positioning of the products and services due to the highly dynamic marketing conditions” (p. 114). This concept is closely connected with place-branding strategies. It can be considered as a mechanism to discover the distinctive characteristics of the place and promote its unique identity. Successful repositioning cases are not necessarily required to replace the existing market. Instead, they adjust to local services in order to respond to users’ interests and preferences.