Shopping Center Business

MAY 2018

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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RETAILING May 2018 • SHOPPING CENTER BUSINESS • 263 spending behavior among consumers of all classes. As online shopping grows, both the size and the sheer number of retail real estate brick-and-mortar establishments will con- tinue to contract. The retailer positioned to survive and thrive is one who embraces the new omni-channel universe. THE HUMAN TOUCH OF IN-STORE For some retailers, the best use of brick- and-mortar space is as a showroom: a space to see, touch, and try products and services. The store may also be a space to return goods ordered on an iPad on the couch and delivered by FedEx that the consumer can't bear to rebox. It can give the retailer the old fashioned chance to capture the customer's fancy and transact a serendipitous sale. Savvy retailers know that no merchandise, no matter how spectacularly displayed, can be truly Amazon-proofed. Yet, certain classifications require a store setting — a computer can never hand you a glass of wine — and our technology does not yet allow a prospective purchaser to feel the soft fibers of cashmere through a screen. What has emerged is the world of om- ni-channel, where the silos of bricks and clicks sit not side by side, but integrated as an organic whole. The interplay between internet and storefront sales, when properly crafted, creates a synergy that results in a sum greater than its separate parts. A synthe- sized understanding of the offline and on- line customer delivers a seamless layered multi-channel experience that reinforces loyalty and motivates the consumer to shop. Great brands have figured this out and are working very hard to produce an accessible and compelling shopping ex- perience that anticipates our needs and whims as a consuming public. An excel- lent merchant must do much more than curate goods to display; he or she must now also deliver them into the palms of our hands wherever we may be. Retail is not dead, it has been reshuffled and reorganized. So, why the meltdown of stores and proliferation of "for rent" signs? Because the landlords and lawyers and dealmakers are not keeping up with the changes. VACANCY THREATENS YOUNG BRANDS Brands collapsing because consumers' tastes are changing is hardly new; it is how the world evolves. But today, the owners, investors and managers of the next gener- ation of retail tenants are no longer willing to be handcuffed to leases with unsustain- able economics. The rent barrier to en- try in many markets is insurmountable. Retailers are opting to stay local instead of growing their brand or they are limit- ing themselves to e-commerce instead of following the Warby Parker or Bonobos omni-channel models simply because the rent numbers threaten to kill their start- ups. One international brand, with thou- sands of stores across the globe, has just shelved its planned rollout in the U.S., un- nerved by the failures and resulting store- front vacancies. The solution to the prob- lem thus disappears in this vicious cycle: the potential future occupants can't make these numbers work either. Retail real es- tate values have gone down: the store is no longer the entire source of sales, so its value has been diminished. Amazon is not erasing traditional retail, suffocating lease economics is the true culprit. The families and corporations who con- trol our nation's retail space need to work with their partners, bankers and investors to reshape the rents that are poisoning our retail future. Fifty cents on the dollar might sound low today, but it is fifty cents more than zero. Landlords are holding the golden goose in their hands: fantastic properties across our country, on small main streets and dazzling high streets, in lifestyle centers and luxury malls, in enclosed and open spaces around the country, but they are perched to kill the goose eggs because they want more gold than they can access. Landlords need to confront and accept this new reality. Eco- CLASSIFIED MALL COMPACTORS ARCHITECTURE/DESIGN PROFESSIONAL SERVICES ACCOUNTING, AUDITS Retail Tenant Sales • Compliance • Restaurant • Specialty Examinations United States • Canada • Caribbean Phone 985.626.9979 • 800.999.LAMY • Fax 985.626.9943 E-mail: kslamy@thelamygroup.com For classified advertising information, please contact Barbara Sherer (404) 832-8262 bsherer@francemediainc.com NO COST TO MALL DEVELOPERS FAIR SHARE DIRECT TENANT BILLING For Rubbish Removal A 20 year history of serving • • • • • • • • MALLS• • • • • • • • OLYMPIC MALL SERVICES A division of Olympic Compactor Rentals, Inc. Chip Panciocco 1-800-722-5371

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