Think Tank: Taking the Temperature of Retail in 2018

Think Tank: Taking the Temperature of Retail in 2018
From WWD - February 9, 2018

In light of recent headlines and store closing realities, it is not hard to surmise that retail is in many ways under the weather and in dire need of a strong dose of direction and creativity. Credit Suisse predicts, in fact, that 25 percent of the 1,100 enclosed malls currently operating in the U.S. will shutter in the next five years. Though I dont quite agree with that prognosticating and certainly not for luxury A malls in urban areas, there is a cautionary tale to heedone that must entail a proper balancing act between three primary elements: Bricks-and-mortar, e-commerce and delivery.

Still Strong Foundations

But arent bricks-and-mortar on the way out, you might say? Isnt the Amazon factor destroying the traditional retail model? Not exactly. Currently, only around 9 percent of retail sales are conducted online. This is roughly the same percentage of nontraditional sales as took place through catalogues in their heyday. That said, online retail is sure to continue to rise; most likely into the 20-to-25 percent range over the next few years.

Invention and Reinvention

To battle such dark days, mall owners are, in many cases, reinventing their approaches and their holdings. They are realizing that they need to be more experiential in their thinking and choice of tenants. Millennials want experiences in order to get them offline and into the mall.

This is best accomplished by striking a proper balance of retail and entertainment: Multiplex movie theaters with concierge food and drinks delivered to patrons lounging in recliner chairs. Fun restaurant concepts. Nontraditional mall offerings that include swim schools and gyms. At the same time, mall owners are leasing space to more recession-proof medical clinics, schools and office users as complementary tenants and sources of income.

Special Delivery

The real game changer in all of this, though, is delivery. Amazon Prime continues to lead the way and set the standard. E-commerce is all about convenience and is only going to get more competitive. Grocery chains continue to test same-day delivery as Amazon experiments with 30-minute drone drop-offs. Reinvention of approach and reach is benefiting the industrial real estate sector as retailers scramble to acquire geographically desirable and prevalent distribution centers. That was the gambit behind Amazons purchase of Whole Foods and its 460 stores. More locations, and in desirable ZIP codes, provides the opportunity to deliver fresh and fast. And, to remain competitive today, also means offering shipping options that are fast and free (or as close to it as possible).


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