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The refrain of doomsday headlines are endless: “Retail Is Dead,” “Inside The Retail Apocalypse,” “Is Retail Coming Back From The Dead?” “The Retail Bloodbath Continues” and our favorite, “Retail Is F*cked.” To be sure, brick-and-mortar retail is in the throes of a seismic shift fueled by the rise of e-commerce and the changing needs of modern shoppers who demand a fresh experience — and need a very good reason to power down their computers.
There have been winners and losers during the sea change, as evidenced by the 300-plus retail bankruptcies filed this year. The Limited’s stores are gone. Payless is closing hundreds of locations. HhGregg is gone. RadioShack may take its final breath this year. But is retail dead? Dying? Doomed? It depends on how you look at it. We spoke to 28 commercial real estate leaders across North America to ask them a simple question: Is retail really f*cked? Here are their answers:
NAME: Gar Herring
TITLE: President and CEO
COMPANY: The MGHerring Group
“Is Retail Doomed?” articles are primarily click-bait used by media to virally circulate sensational negative headlines that are based on lazy math and ignorance to claim that the internet is killing all retail. Retail is being transformed by multiple and complex issues that are causing the regular, annual demise of many retailers. These issues are also creating incredible new opportunities for operators and developers. Change can be expensive and painful, but the adaptors will survive and thrive. The shopping center industry will always have the entrepreneurs that will persevere through change to provide shopping experiences that are engaging to consumers. Just because that experience will be much different than what is has been in the past in no way means that “retail is doomed.”
NAME: Greg Maloney
TITLE: CEO of Retail in the Americas
A lot of ink has been spilled (or I guess server space taken) about the fate of physical retail — or more accurately, its demise. In my perspective, the majority of it is grossly overstated. It is clear that physical retail is in a state of flux — but this is the natural progression of the industry. Physical retail is evolving to meet the demands of a new, and dynamic, on-demand consumer paradigm — and evolution can be painful, but calling it doomed is a bridge too far. For those of us who have been in this industry for some time, we have seen other cycles where physical retail was supposedly “dead.” While today’s marketplace is like nothing we have witnessed before, neither were those of the past at the time — and when the dust settled physical retail had evolved and came out stronger. So, if you want to say the retail landscape of the 1980s, 1990s and early 2000s is dead, you will get no argument from me. That landscape is changing based on myriad external pressures and influences, but it is rising to meet the challenges those influences have presented. That is something that should be celebrated, not feared.
NAME: Sean Selby
TITLE: Principal Architect
Automobiles were the technological “disrupter” of the 1950s and 1960s as they facilitated a shift in population centers from the inner cities to the suburbs. While downtowns across the country suffered, larger living spaces and backyards transformed American life in more ways than could ever have been imagined. The retail landscape transformed in lockstep with this shift, with the invention of regional malls and neighborhood retail centers to accommodate it. Retail didn’t die; it transformed. Today, online shopping is the agent of change, and it is disrupting retail with as much (or more) force as the car did. The key is not to give into the misplaced headline that retail is dying. Outdated retail concepts are dying, but innovative retail is thriving and expanding. Think of newer concepts like Warby Parker, Bonobos or other digitally native brands. Even Amazon is building stores. We’re not buying less stuff but we are changing where we shop to include the virtual, online world. Back on Earth, we’re building retail with more choices and more experiences than ever before, with food, activities, sports and countless other uses.
NAME: Melina Cordero
TITLE: Head of Retail Research in the Americas
CITY: Washington, D.C.
There is definitely a big disconnect between what headlines are saying and what’s happening on the ground. It’s been a challenge for a lot of people working day-to-day in the industry because they’re having to say, “no, it’s not the end, it’s not death.” The narrative that it’s the apocalypse or the end of the world or that e-commerce is taking over brick-and-mortar, that’s not really what’s happening. But what’s interesting is everyone thinks that the e-commerce sales are all going to pure-play internet players and that they’re stealing shares from brick-and-mortar. What’s actually happening is that a big majority, over 50%, of online sales are actually going to brick-and-mortar brands. When you shop online at a brick-and-mortar store that’s technically an online purchase going to a brick-and-mortar brand. E-commerce is taking over brick-and-mortar, but increasingly brick-and-mortar is also taking over e-commerce because we’re seeing a growing share of brick-and-mortar revenue coming from online. Retailers are investing more in their online platforms, they’re becoming more omnichannel and they’re relying on e-commerce more and more. There’s this misconception that online is countering brick-and-mortar, when actually what’s happening is online is going to brick-and-mortar.
NAME: Garrick Brown
TITLE: Vice President of Retail Research for the Americas
COMPANY: Cushman & Wakefield
CITY: San Francisco
Is retail really f*cked? Well, I suppose that depends on your definition of f*cked. Seriously, though, the idea that retail itself is in jeopardy is simply a ridiculous one. Retail hasn’t gone away and it certainly isn’t going to go away in the new commerce age. But in this new era, the rules will be a little different. Mastery of omnichannel will be a given. Save for a few rare retailers and/or categories, concepts that don’t have a seamless omnichannel platform will die. The silos between retail and industrial real estate will increasingly be breaking down. Location will simultaneously be nothing (due to the seamless integration of omnichannel) and everything because fewer actual locations for the lighter footprint retailers that will dominate the future will mean that those physical locations are actually more important than ever. The old rules of consumer engagement will be updated with a digital face. It will no longer matter where you make the sale — so long as you make the sale. Of course, all of this is radically changing the way that we approach retail real estate and will continue to do so. In the new commerce era, the user segregation that has dominated retail space usage will be going away. Neighborhood/community centers will no longer be the nearly exclusive domain of grocery stores. Power centers will no longer be the nearly exclusive domain of big-box stores, discounters and off-price apparel. Regional malls will no longer be the nearly exclusive domain of apparel and department stores. All of the old rules of space usage are going to be revised as the marketplace adjusts to these evolutionary changes. And during this period of flux, there will be no room for mediocrity in American retail.
NAME: Jim Dillavou
TITLE: Co-founder and Principal
COMPANY: Paragon Commercial Group
CITY: El Segundo, California
“Retail is dead!” Sure, this is a compelling sound bite. And sound bites are alive and well. They generate clicks. They generate revenue. They are easy to recall. They are easy to repeat. But they are typically generalizations that create misconceptions. For retail investors willing to be granular, today’s retail environment is an opportunity. The last century of retail adapted to consumer demands through the advent (and demise) of departments stores, mail-order catalogues and the “Walmart effect.” Now e-commerce will force further evolution. This is healthy. This is not cataclysmic. There is no doubt that the United States has more retail than it needs. This market correction is overdue and it is indeed time to be vigilant. However, for the patient and well-capitalized retail investor insulated from short-term sound bites and headline risk, the fear in today’s retail marketplace has created a great opportunity to acquire quality retail assets.
NAME: Craig Patterson
COMPANY: Retail Insider
Retail certainly isn’t “dying,” at least not in Canada. Canada’s top malls continue to see exceptional productivity, and some retailers are seeing record sales in their stores. In 2017, Canada will see more international entrants than in 2016. E-commerce sales are growing faster than brick-and-mortar retail sales, but e-commerce still represents 5% to 6% of Canadian retail sales. Retail is changing, for sure, and retailers and malls that have engaging products and experiences will drive consumers — and those that are mediocre risk dying (Sears Canada). “Retailtainment” is the way of the future and I predict 2018 will be the “year of the pop-up” in Canada.
NAME: Brad Hutensky
TITLE: Founder and CEO
COMPANY: Hutensky Capital Partners
CITY: Hartford, Connecticut
Since the beginning of time retailers with flawed product offerings or capital structures have been closing their doors. That is the natural evolution of the business, and we are seeing some of that now. However, many retailers are using the internet and technological advances to better serve their customer. These retailers are showing increased sales and profitability and are opening new locations that other retailers have vacated. Retail in jeopardy? Just ask TJX, Ross Stores or Dick’s Sporting Goods, who are all going strong.
NAME: Joel Murphy
COMPANY: New Market Properties
Retail is a very short word that has a very wide spectrum of meaning. What type of retail? If it is a retailer that sells a fungible product and that isn’t investing significant capital into its omnichannel platform to make its brick-and-mortar stores work seamlessly with its online presence then, yes, that retailer is in jeopardy. But if they sell perishable items, the quality of which means something to their customers, and they are investing capital in online capabilities, or if they are healthcare, fitness, service, and restaurant operators whose internet-resistant businesses are convenient to their customers, then not only are they not in jeopardy they have an enormous opportunity.
NAME: Lindsay Bayer Shipp
TITLE: Retail Brand Strategist
COMPANY: Bayer Properties
The retail industry will continue to grow and evolve, as it always has. Store footprints will be smaller and retailers will have fewer brick-and-mortar locations, but strong retailers will continue to thrive both online and offline. The smart retailers will focus on creating experiences for shoppers, and will choose locations that are natural extensions of their brands.
NAME: Peter Borzak
TITLE: Co-founder and principal
COMPANY: Pine Tree
It is a validation of the brick-and-mortar model that companies like Amazon are launching physical grocery stores and bookstores — because they recognize that they need a presence in people’s lives beyond the virtual.
NAME: Mark Toro
TITLE: Managing Partner
COMPANY: North American Properties
There is no question that there is a sea change underway in traditional retail. B and C regional malls will soon cease to exist, leaving only the best located fortress malls. Necessity retail (grocery, services, etc.) will likely survive, as will experiential retail. Today’s consumer seeks an opportunity to add to their “Rolodex of experiences,” demanding to be entertained and served in a setting that is both remarkable and memorable. A mix of uses devised to bring human energy onto a property at all times to work, live, shop, dine, stay and play will be a significant success factor going forward. The “shopping trip” has gone the way of the Triceratops and the department store, but retail is not dead. It’s just one part of the puzzle.
NAME: Herb Weitzman
TITLE: Executive Chairman
Retail doesn’t die, it evolves. One indicator of health can be seen in actual market performance. Our major Texas markets all post healthy 90 percent-plus occupancy rates, which are at or near historic highs. We lead the nation in population and job growth, and that drives retail demand. Also, retail construction remains at near-historic lows, driving demand into existing retail centers. There are closings, no doubt, but many are concentrated in secondary and tertiary markets and centers. Grocers, restaurants, fitness, beauty, medical, services — they are all adding new stores.
NAME: Stephen Coslik
TITLE: The Woodmont Co.
CITY: Fort Worth
Are we watching retail’s wake or its rebirth? The answer depends if you believe the glass is half full or half empty. For me it is the rebirth of retail. But in order for there to be rebirth, one has to be prepared for those retailers who are not willing or able to jettison their old ways of doing to die, that in turn, gives room to those retailers who can offer the consumer three important components. First, continued innovation of design and presentation of its product or service. Second, ability to bring to the market new concepts/designs in weeks and not months or years. Third, and most importantly, creating the experience that will bring the consumers in and back. However be aware, the retailer and property owner cannot rest on their laurels — the “experience” also needs to evolve and change and not become stale. Finally, embrace change, embrace competition and know that you need not worry about today if you are prepared and have a strategy for tomorrow and the ever-changing demand needs of the consumer.
NAME: Terry Montesi
TITLE: Founder and CEO
COMPANY: Trademark Property
CITY: Fort Worth
I believe the rapid change of the past few years will likely continue for the foreseeable future. E-commerce won’t kill brick-and-mortar retail, but it will put pressure on the retailers and centers that refuse to evolve. Shopping centers must cater to the emotions and the unconscious mind of tomorrow’s customer. This will be done through focusing on the senses, delivering an authentic place that considers the community, educates and inspires, offers the unexpected, and cares more about a diversity of uses than size.
NAME: MaryAnne Gilmartin
COMPANY: Forest City Ratner
CITY: New York
The future of retail is not in jeopardy — it is in dramatic transformation. The internet, our membership economy and the advent of hospitality services in every aspect of our lives means business as usual in the retail sector won’t fly. In the end, we are all consumers. How we consume, what we consume and where we consume is a next level experience. The industry must follow!
NAME: Adelaide Polsinelli
TITLE: Senior Managing Director and Principal
COMPANY: Eastern Consolidated
CITY: New York
Retail is not fu***d, but some owners might be. We had a run up in the high street retail locations caused by inflated rents based on side deals, concession packages, free rent, upfront cash payments, etc. Some owners bought properties hoping the rent frenzy would continue. However, now that the music has stopped, those without tenants are having real problems. Retail is definitely evolving, as it always has and always will.
NAME: Bill Miller
COMPANY: Miller Walker
CITY: Washington, D.C.
Brick-and-mortar retail is changing just like almost every business sector due to the internet. No one should find that alarming or shocking. We have seen it coming for years at this point. Simply put, what people are leaving home to buy is changing, but people are certainly leaving home and spending money. They are prepared to leave home for food, grocery, fast casual and full service dining, they also are looking for experiential entertainment experiences, like Artechouse. It is a brave new world our industry is entering, but one of many that are changing so fast it is hard to fathom: self-driving cars, homes controlled by voice recognition, etc. We aren’t the only industry that has to be on its toes about what the future will bring. I believe it will be an opportunity for retailers and developers that are nimble and are smart about watching how all of our habits are changing. We will always leave home to spend money, but our industry needs to create places and reasons for people to do so.
NAME: Henry Fonvielle
CITY: McLean, Virginia
Retail is alive and kicking and occupancy is at an all-time high. At least in the Washington, D.C., area, some categories are experiencing record sales, but that does not apply to all sectors of retail. Go to Victor Albisu’s Taco Bamba if you need proof. The 1897 quote by Mark Twain, “The report of my death was an exaggeration,” is certainly applicable. Any big box that becomes available is gobbled up quickly. Retail is a fast-paced business and the public is very fickle. A store today can be a has-been next week without reinvention, so retailers need to constantly innovate. Legacy brands, like Sears, JCPenney and RadioShack, sit on their past success for years without paying attention to the changes going on around them. The CEO of a well-respected restaurant company recently told me, “It takes a long time to go out of business.” Low rental rates from old leases and squeezing expenses can go a long way in propping up a company in decline, but in the end, the inevitable will occur without revolutionary changes. The most amazing trend is the way we are eating healthy, freshly prepared food. This is common sense, but we had gotten used to crummy, unhealthy food. When was the last time you ate a can of condensed soup? Now we talk about how many Brussels sprouts, kale or quinoa salads we had last week. Online shopping will continue to change the landscape and there will be improvements to delivery systems of all kinds of goods, but there will always be traditional shopping centers and mixed-use environments that feed the need of communities to gather, socialize and enjoy life.
NAME: Faith Hope Consolo
TITLE: Chairman, The Retail Group
COMPANY: Douglas Elliman
CITY: New York
The future goes in one direction: forward. The future of brands and consumers is very strong. The future of e-commerce will be fantastic, and, I’m happy to tell you, the future of stores is actually looking better than ever. Why? Because the brands with something to say will create beautiful, exciting stores where we can experience what they dreamed up for us. Shopping is still America’s favorite pastime, and we’re hopeful that all of our favorite companies use this time to really improve how they deliver that to us and that our landlords keep a flexible mindset as to which companies can best harness the traffic at their buildings to present their wares.
NAME: Nadeem Meghji
TITLE: Head of Americas for Real Estate
COMPANY: Blackstone Group
CITY: New York
The mall sector faces serious secular headwinds because of e-commerce and the pace of change is accelerating. Retail goods are increasingly being sold through warehouses as opposed to malls. U.S. malls are too exposed to fashion, and department stores and occupancy costs are generally too high. Regional malls are also incredibly capital intensive and the market doesn’t appreciate that. Blackstone doesn’t own any regional malls in the U.S. and instead favors open air retail, in particular infill grocery-anchored centers.
Original Article: biznow.com