Blog
You’ll find the latest news, opinions, market analysis and company updates here. We update the blog on a weekly basis and you can use the navigation on the right hand side to discover new and related blog posts

Guest Post: US Retail Staying Alive!

29 October 2015 by Local Data Company

At the recent ULI Fall Meeting in San Francisco, retail was a hot topic as it was one of the first main real estate sectors to feel the impact of technology. One could argue that it is further down the road in embracing the subsequent disruption and assessing the implications for the physical property side.

Certain themes kept resonating such as:

  • Layers of experience; community, culture and consciousness
  • Culture as the new currency which has value
  • Personalisation/customisation
  • Localisation as people want content in their lives which contributes to a sense of place.

These then can be further distilled to the following:

  • Brand
  • Human aspect
  • Experience based business model
  • Use of data
  • Building the platform

With regard to the occupation of retail space, the first thing to remember is that ALL retailers fail, so it is just a case of when and where. 

Store Experience

However in the meantime, the physical store has its role. The store experience is important as shopping is part of linked activities such as art, entertainment and eating. The retail space needs to be made comfortable, engaging and safe whether it is big or small. There also needs to be a mix of local and multiple retailers in a locality.

Commodity shopping has been migrating to the internet which then places emphasis on good execution of the above for the remaining retailers.


Malls in the US are experiencing problems – of the 1165 malls in the US, 700 were quoted as not working. The big box space (ie like UK retail warehousing) is now considered dead as they are selling mostly commodity goods which are internet based.

Retailer footprints are becoming smaller. Retailers do like frontage and not much depth. Some department stores have not survived and are seeing a change of use to hospitals, community colleges, high schools and other community type uses.

In some locations the acres of grey asphalt is also challenging with a change of use to urban farms, open spaces or residential. Due to density requirements in some locations, there is the push for more vertical than horizontal product. So more upsize than urban sprawl. 

Changing business environments dictate that the retailer container be generic as the internal dimension requires flexibility. The space outside is also an important dimension as it is part of the environment the retailer inhabits. 


Using data

On the data side, both retailers and landlord/developers have their own set of data with minimal crossover and sharing between the two. For the retailer, it taps into the customer from Facebook and other sources. How the transaction is completed provides retailers with an insight into the customer. This data is mined and processed.

Yes, there are privacy issues and the retailer has to be careful; it does not overstep the mark in being creepy. The definition of being creepy or cool is heavily dependent on the demographic.

Retailers who have staff walking around with tablets have been seen as enhancing the customer experience due to the combination of the physical (ie staff) and the digital. Retailers now have to offer the different forms of delivery – in store, home, train stations, community space etc.

Metrics of success

The assessment of sales per square foot was the metric of success for retailers. This was because retailers based their operating costs as a percentage of sales. However as more sales are going online, this metric has become devalued. Should it be perhaps 'experience per square foot' and if so, how would this be conceptualized?

Landlords/developers spend time and money in order to understand where the customer is going. Wi-Fi is standard. This is the digital junction where landlords/developers and retailers can work together to connect and capture that customer. Landlords/developers also need to be mindful of technological change and what will replace Wi-Fi.

This costs time, money and people. It is all part of the business development model and how to make that experience profitable for the customer, retail and landlord/developer. It is likely that operating margins for both the retailer and landlord/developer will shrink, but it could be the issue of survival.

Yes, it does sound a bit grim but if the parties get it right, it can be very profitable as these new success metrics develop.

This post was written by Dr Karen Sieracki MRICS who has been actively involved in property research and investment management for the past 25 years. Dr Sieracki has her own research company, KASPAR Associates Limited, working with a number of leading institutional clients and the property industry at large.

Share this post

    
Subscribe to our Weekly Newsletter
(preferably please enter your work email)

New Call-to-action

Recent Posts

Categories

see all