CREJ - Retail Properties Quarterly - August 2016
Retail is the most dynamic of all the asset classes and constantly is reinventing itself. Ben Franklin’s words, “When you’re finished changing, you’re finished,” have never been truer. On the heels of the Sports Authority bankruptcy, it seems appropriate to pause and take a look at where retail is and where it may be going. In looking back at Sports Authority, where was the experience? Sports Authority appealed to the novice shopper at a novice price point, which put it at a severe disadvantage compared with Amazon and other online retailers that lack the overhead costs associated with bricks and sticks and that seemingly always can win on price. It also operated like a traditional retailer focused on merchandising and running the occasional sale to drive traffic. Outside of trying to compete with price, what was its differentiator? Where was its experience? Compare that to REI, which is the same retail sector at a higher price point, and commands higher demographics. It offers a far greater experience. Go in for a GPS watch and you likely are met by an expert in his field who is experienced, knowledgeable and ready to deliver real value to you by advising, guiding and informing you on how to make the best decision that fits you and in a faster manner than the internet currently can provide. Not to mention – once the experiential retail purchase is complete – you find yourself inspired by your new purchase, the brand and the experience the store delivers. You then are compelled to book an excursion through REI to put your new purchase to use and create a lifetime experience of your own. This, to me, is the current dichotomy in retail today: purchasing vs. experiencing. Reflecting on the retail bankruptcies since January 2015, there is a distinct trend of where retail is going. In addition to Sports Authority, there have been a dozen bankruptcy filings since January 2015 with seven uses being apparel, two soft goods, two sporting goods and one electronics. They include: • Body Central (apparel) • Cache Inc. (apparel) • RadioShack (electronics) • Fredrick’s of Hollywood (apparel ... sort of) • Anna’s Linens (soft goods) • Quicksilver (apparel) • American (apparel) • WetSeal (apparel) • Hancock Fabrics (soft goods) • Sports Authority (sporting goods) • Pacific Sunwear (apparel) • Vestis Retail Group (sporting goods) • Aeropostale (apparel) How many of these would you say offered an experience? Strategies Here are some strategies to look for – not only in your projects, but also in your retailers – to ensure you are delivering a long-standing product to your customers. 1. Experience. When was the last time you had an experience buying toilet paper – wait, don’t answer that. Either you offer an experience or you don’t. Commodity purchasing like office supplies, dog food and everyday toiletries are the most vulnerable. Amazon has increased its sales from $1 billion to $100 billion in only 15 years! Its technology makes it way too easy to make simple purchases, but concepts that bring an experience that cannot be duplicated by the internet are setting themselves apart. Just look at the active retailers in today’s market: food, fitness and services are dominating the market. Ask yourself: Is my business internet proof? 2. Authenticity. While there is no silver bullet to create an experience, to do it well you have to know your audience and personalize it for them. Lower Downtown is not Aurora and River North is not Longmont. Spend the time up front to know who your audience is and what it wants. RiNo is a great example. The renaissance of this once-overlooked industrial area now is one of the hottest markets in Denver because it is delivering high-quality experiences while still paying tribute to its roots. 3. Technology integration. Many of our properties are using technology to bring people in, but once we have them, we must engage with them. We can have a conversation and encourage them to make memories on our sites, which they then can post about. We want to get a pulse from our retailer’s shoppers and keep them engaged. Strong retailers are all starting to embrace the omni-channel advantages technology offers and the experience it can create. If your merchants are in the dark ages, your space may be going dark. 4. Make a difference. Incorporating nonprofits and community organizations, such as the music and arts, answers a need in the community and ensure that your project does well by doing good. In a single weekend, the Village at the Peaks project raised over $60,000 for the Longmont Humane Society and Relay for the Cure. Shopping centers are no longer just for shopping, find an authentic cause-related need in your community. By doing so, your shopping center becomes something more to the community and, thus, so do your retailers. 5. Think differently. Retail from the past 10 years is not how retail will be for the next 10 years. The absence of traditional junior anchors is making developers incorporate different uses to fill the acreage these boxes used to. Smaller pop-up stores and bazaar like concepts are opening. These projects create adaptable uses to suit community needs and drive a constantly changing experience. Common area space is no longer just used for parking and landscape islands, but rather to engage the senses and activate an area. For instance, at Village at the Peaks, we incorporate a lawn area designed to host concerts, community events and even the occasional football game. We installed a mammoth water feature to mimic what you find in a national park to create a fresh feel, soothing sounds and relaxing atmosphere. These items would not have shown up 10 years ago, but we need to be ready for the next 10 years and consumers are demanding more in order to compete for their attention and their dollars. Change is what makes retail fun and, while I may not have a crystal ball, I feel we have some pretty clear signs as to where we may be going. I am given hope by a Charles Darwin quote, “It is not the strongest or the most intelligent who will survive, but those who can best manage change.”