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Busting the Myth of the Retail Apocalypse

Posted by Sam Lowder on Jun 27, 2018 4:30:00 AM

shutterstock_732393541We’ve said it before and we’ll say it again: brick-and-mortar retail isn’t dying, it’s evolving.  Yet, browse the latest articles on retail development and it might not seem so certain. SiteSeer’s team just returned from the International Council of Shopping Centers RECon show in Las Vegas, where attendance was down from years past. It caused us all to wonder: is the market slowing? Are deals still getting done? Is the so-called retail apocalypse actually upon us?

Real Estate Is More Competitive Than Ever

The good news: anecdotal evidence tells us that across the country, retail and commercial real estate is in demand. It’s competitive building stores, yes, but what we and our colleagues from around the country see is that the industry is more omni-channeled than ever before.

If you’re a brick-and-mortar store, it’s important that you augment with an online strategy. If you’re fully online, in some cases, customers demand a digital presence as well.

Here’s What We’re Hearing About Retail Real Estate

At ICSC and throughout all of 2018, this is what we’ve been hearing from our retail, broker, franchise, and community clients:

  • It’s a white-hot real estate market. Competition for good retail real estate is as intense as it was in the early 2000’s.
  • Brokers, developers and retailers in the industry today are focused and consolidated, having weathered the storm of the recession.
  • To remain competitive, your business must stay relevant to your customers. If you don’t, another competitor will.
  • The closing of stores might very well be a natural correction in the aftermath of the real estate market’s oversaturation.

Need More Evidence? Here’s Plenty.

  • This week, Amazon is rolling out Prime member discounts at Whole Foods’ 466 U.S. stores. Amazon Prime members can earn savings on Whole Foods’ items by using their Whole Foods app at checkout or typing in their Amazon-linked mobile number.
  • Amazon and Best Buy announced a partnership in April 2018 to sell smart televisions in Best Buy stores that run on Amazon’s Fire TV operating system. Here’s a quote from CNN Money’s article on the topic: “The move is also just the latest example of how Amazon recognizes that many consumers still prefer to buy things like big TVs -- not to mention kale -- in physical stores.”
  • Even mom-and-pop stores are adapting to the change in the industry. This Westfair article talks about examples of smaller businesses that are the backbones of their local business community. Many also maintain both e-commerce sites and traditional brick-and-mortar outlets.
  • Small Business Trends is with us on this one too. Their April 2018 piece on the changing retail landscape says that overall retail sales increased 3.5 percent in 2017 and that 91 percent of retail sales still take place in brick-and-mortar stores. Shoppers are indeed changing, though, and businesses must adapt by making sure they have a digital strategy and try hone their focus.
  • Lastly, it’s worthwhile to read through IHL Group’s 2017 report, titled “Debunking the Retail Apocalypse.” The study reviewed over 1,800 retail chains with more than 50 U.S. stores in 10 retail vertical segments. The research group found that:
    • For every chain with a net closing of stores, 2.7 companies showed a net increase in store locations for 2017.
    • The total net increase of stores for 2017 is 4,080, including retail and restaurants. Core retail segments saw a net gain of 1,326 stores, while table-service and fast-food restaurants added a net of 2,754 locations.
    • In total, a net 14,239 stores opened and 10,123 stores closed.
    • 42% of retailers have a net increase in stores, only 15% have a net decrease, and 43% report no change.
    • Only 16 chains account for 48.5% of total number of stores closing. And five of those chains (Radio Shack, Payless Shoesource, Rue21, Ascena Retail and Sears Holdings) represent 28% of the total stores closing.

Bottom Line: Things Are Evolving, Not Imploding

Retail is different than it was 10 or 20 years ago, without question. But as always, retailers that pay attention to their customers’ needs and desires and remain committed to delivering the best customer experience stand to thrive.

 

Topics: retail apocalypse