Shake your retail feathers


Ecommerce and changing demographics can be daunting for traditional retail, but there are opportunities for those willing to twist it up a little

With footfalls plummeting, has ecommerce killed the traditional retail asset?

Garrick Brown
Vice president for retail research for the Americas
Cushman & Wakefield


Absolutely not. While the continued acceleration of ecommerce has proven to be a major disruptor and will continue to do so in the future, it has not killed the traditional retail asset, nor will it. What it has done is expose the fact that we were heavily over-retailed in the US in terms of sheer inventory while, even more importantly, exposing some sheer weaknesses in the industry long before this current wave of closures. There is a confluence of factors driving the current wave of contraction that is primarily impacting malls, lifestyle centres, urban retail and power centres.

First, we should point out that there is just under 13 billion square feet of retail space in the US and malls (2.8 percent), lifestyle centres (1.4 percent) and power centres (7.7 percent) only account for a small part of the market. So, the closures that are happening today are not affecting most asset types significantly, though none have been spared some impact. But, this wave of closures has been driven not just by ecommerce, but also by race-to-the-bottom discounting and the rise of off-price, and by fundamental shifts in consumer tastes as millennials have emerged as the largest—85 million strong—and most influential age demographic.

Those being affected most have been large, publicly-traded retailers typically with a mid-level price point. Luxury retail has felt some negative impact from ecommerce, but these retailers generally remain in healthier positions because what they offer is, by its very nature, experiential retail. Discount and off-price have been white hot.

The challenge to the large commodity retailers in the middle is that they can’t compete with the discounters on price or with online for convenience. This means they have to offer some sort of experience to get shoppers into their stores. But, many of these mass-market brands have, over the years, eliminated local buying, moved away from commission sales models (which provided better service and greater employee retention, making for more knowledgeable staff) and moved towards centralised buying and greater homogeneity overall. This led to a bloated and boring—particularly to mllennials—wide range of mid-price point commodity concepts with little to distinguish themselves from one another. And if there is one thing that the current wave of closures has proven, it’s that there is no room for mediocrity in retail today. Not at the retailer level, nor at the property level.

Class A properties will come through this wave of closures just fine, but the challenges facing the rest of the market increase substantially moving into Class B and C product. We will probably need to repurpose a billion square feet of retail towards other uses in order to return to equilibrium by the end of this consolidation cycle.

Still, that is only about 7.7 percent of the nation’s total inventory. Challenges ahead? Yes. Armageddon or apocalypse, as many business news headlines have declared? Absolutely not. And end of the traditional retail asset? Of course not. It’s the start of opportunities for mixed-use developers to pick up properties on the cheap and to find value in reinvention.

John Ragland
Managing director and US retail sector head
TH Real Estate


I don’t believe it’s a cause-and-effect scenario. Part of the reason high streets and super-regional malls are still able to command high rents is because the stores function as marketing and branding showcases that facilitate increased online sales. Market research has shown that approximately two thirds of all online sales are impacted pre- or post-transaction by in–store engagement, and retailers admit that online sales increase materially when a store opens in a new market.

Therefore, retailers still see the value in being visible in these high-profile locations. In addition, formerly pure-play online retailers such as Amazon, Warby Parker, Bonobos and others are now opening physical stores. The fact that even Amazon is experimenting with stores is further testament to this dynamic. While it may seem like we have been talking about ecommerce for a long time, I believe we are in the early days of this trend. In the near term I don’t see ecommerce existing profitably without physical stores and I believe that high-quality retail assets in markets with strong demographics will continue to perform very well.

Dave Bujnicki
Vice president of investor relations and corporate communications
Kimco Realty Corp


There is no question that ecommerce has affected the retail sector, allowing goods to be delivered to consumers quickly and easily. However, Kimco is still seeing strong foot traffic at our open-air centres. While ecommerce has created another evolution in retail, our shopping centres are healthy due to their locations in well-populated, core major metropolitan markets that serve as hubs for consumers with high incomes.

Our tenants are necessity-based and service-oriented retailers, like grocery stores, gyms, and restaurants, whose offerings are not easily replicated by online retailers, unlike many stores that you find in enclosed malls. Discount retailers like TJX, Ross Dress for Less, and Burlington are also expanding, with 300 stores opening in 2017 in aggregate. Our centres are becoming the ‘last mile’, where brick-and-mortar stores with strong omni-channel platforms see increased foot traffic due to the click-and-collect model, which provides the ease of point-of-sale through ecommerce, with speed of delivery through brick-and-mortar fulfillment. Large retailers such as Walmart and Home Depot attest that the use of omni-channel platforms creates cross-shopping and increases sales.

Consumers who order online and pick up in store are more likely to do additional shopping. Also, statistics show that when a retailer opens a new location, their online sales go up 50 percent in that zip code and conversely, online sales go down 50 percent when a store closes—this is known as a tethering effect. Overall, well-located retail assets that have the right tenant mix in strong markets with solid trade demographics and that evolve with the times are here to stay.

Josh Rodstein
Chair of the retail council
NAI Global


Imagine the distant future.

Five to 10 years from now, you need clothes for an upcoming dinner party. It’s the usual problem that has existed since caveman times—you have nothing to wear. On the next Saturday or Sunday, you go to your favourite dress shop to pick out the style and material for your new outfit. The computer in the dressing room scans your dimensions, you order and pay for your new outfit, which will be shipped directly to you in a week. Shoes may be purchased in this store, online or at another store, and delivery will be overnight.

The most important factor for all retailers has been the same since the first open-air market in ancient times. How much is your store selling per square foot of space?

Obviously, more sales in less space is better. Limited or no inventory will be carried in many of the stores we currently shop, meaning small store sizes. The logistics of sending merchandise to you overnight has been achieved, except for custom-fitted clothing, which might take a couple more days. The store achieves higher sales volumes, needs less employees and delivers better customer service. Wow—more profit for the retailer.

It is the same story with many more of our ‘bricks and mortar’ outlets. In restaurants ordering, delivery to the table, and payment will be done through a computerised experience. Banks—no longer on every corner due to internet banking—will have smart phones and ATMs as the point of deposits, withdrawals and some money lending.

Shopping centres will become an ‘experience’, a service-oriented place for people, featuring new-release movies, trampolining, golfing, exercising, socialising at the coffee shop, hair cutting, waxing, massage therapy, stretching, eating, and grocery shopping (but, only when you want to see the fresh foods you want to choose).

Driving and parking presents another story—to be continued.
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