Positioning Retail Real Estate for a New Generation

June 25, 2018

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Levin Management Mid-Year Retailer Survey Brings Strongest Results in Poll History

Shopping Center Tenants Weigh in on Year-to-date Store Performance and Technology Trends

NORTH PLAINFIELD, N.J., Jun. 25, 2018 – Levin Management Corporation’s (LMC’s) annual Mid-Year Retail Sentiment Survey, gauging year-to-date store performance and checking in on the latest technology trends, reveals that the first half of 2018 was a healthy period for shopping center tenants. In fact, the June poll by the North Plainfield-based commercial real estate services firm generated the strongest numbers in its seven-year history.

Consider sales and traffic. A full 71.0 percent of survey respondents report sales at or above the same level as last year. This compares to a trailing six-year average of 54.2 percent. Additionally, 64.0 percent report shopper traffic at the same or a higher level year-over-year (compared to a 52.8 percent trailing average).

“It comes as no surprise that this robust start to the year has retailers confident about the coming months,” noted Matthew K. Harding, LMC president “Nearly three-quarters [73.5 percent] of our survey participants expect July to December performance to match or exceed the first half of the year.” Industry organizations mirror this positive outlook; Kiplinger recently reported that retail sales, excluding gasoline and autos, will grow 4.8 percent in 2018, following a healthy 4.2 percent in 2017. Already, total retail sales in March, April and May were up 5.2 percent from the same period in 2017, according to the U.S. Census Bureau.

TECHNOLOGY USAGE: SCOPE AND DIVERSITY

LMC’s mid-year survey traditionally explores technology issues impacting the retail industry. The current results reflect forward movement in the ways tenants are responding to e-commerce influences, and leveraging tech advancements to serve and engage customers. “The latest findings are highly encouraging,” Harding noted. “Our retail tenants are using technology to their advantage at an increasing rate and in a variety of manners.”

More than half (51.8 percent) of LMC survey respondents reported that e-commerce has prompted their companies to adapt their business model in some way – or ways. Most notably, 72.7 percent of those respondents cited increased training and focus on customer service. This emphasis on enhancing the bricks-and-mortar shopping experience through employees also is reflected in the National Retail Federation/Forrester “State of Retailing Online” study, which shows that 61.0 percent of retailers plan to spend more on supporting their store associates’ ability to service clients.

“Personal touch and human interaction will always distinguish physical store retail from online shopping,” Harding noted. “The retailers that recognize this will be best positioned to compete moving forward. It appears that LMC tenants are embracing change wholeheartedly and in several important ways.” Specifically:

  • 68.0 percent – of respondents who have made adaptations – have added in-store services and/or incentives.
  • 39.1 percent of adaptors have added in-store pickup and returns options for purchases made online.
  • 37.5 percent of adaptors have altered their store prototype (i.e. smaller store size or increased focus on showrooming).
  • 35.2 percent of adaptors have incorporated “experience” draws such as demonstrations, classes, performances or other in-store events.
  • 33.6 percent of adaptors have increased coordination between online and bricks-and-mortar operations.
  • 31.3 percent of adaptors have adjusted store inventory (i.e. fewer in-stock SKUs, larger quantities of popular items).

Is it working? Yes, according to 60.1 percent of LMC survey respondents. This statistic marks a significant jump in affirmative responses; the trailing three-year average shows 47.2 percent reporting measurable positive results from e-commerce-influenced adaptations.

The LMC survey also points to increasing connections between traditional and online retailing. Sixty-eight percent of survey participants noted they currently offer an online option for purchasing goods, scheduling appointments for services or placing orders for pick-up – up from 49.8 percent of respondents last year.

THE INTERSECTION OF TECHNOLOGY AND MARKETING

Retailers continue to leverage technology to offer incentives and conveniences for shoppers, both in-store and externally, according to the LMC survey.

Four on-site technology tools ranked high, used by more than one-third of the respondents that embrace tech-based marketing. They include digital coupons, discounts and/or loyalty points (73.9 percent); free Wi-Fi (43.5 percent); the option to pre-order items online/pick up in store (43.0 percent); and in-store, online ordering with free shipping for out-of-stock items: (34.8 percent). Popular external tech-based marketing tools include Email (80.3 percent); social media/social marketing (73.9 percent), banner ads or other internet advertising (42.7 percent), and text messaging (40.8 percent).

“Social remains an interesting – and evolving – platform for retail,” noted Melissa Sievwright, LMC vice president of marketing. “Facebook and Instagram are the clear leaders for our tenants; 91.1 percent and 55.1 percent of mid-year survey respondents that use social media leverage these platforms, respectively. About one-third use Google+ and Twitter. Ultimately, social media has become an active channel for commerce and will continue to play a significant role moving forward.”

Additionally, 43.5 percent of tech marketing-focused LMC survey participants are enhancing their social media presence with paid options, such as Facebook sponsored content or ads. Many are also leveraging social marketing platforms; Yelp is the most popular, used by 65.1 percent of respondents, followed by Groupon/Living Social, and Waze and other GPS programs.

Overall, technology-based marketing continues to grow as a priority for retailers, with 44.4 percent of LMC survey respondents who employ tech-based marketing saying they have increased their volume in 2018. Multiple survey participants noted they have new tech-based initiatives in the works.

For the first time, the LMC survey asked participants whether they are actively employing technology to analyze customer and/or sales data for the purpose of merchandising, creating services and menu options, planning in-store events, or creating individualized special offers.

“An impressive 64.7 percent of our respondents indicated they are using the information being captured via technology outlets to influence their business,” Sievwright noted. “Our tenants are getting to know their clients’ habits and preferences, and are applying this insight to enhance and personalize their shopping experiences.In that sense, data is driving retail strategy, presenting one more way that technology is helping companies better serve customers and ensure future success.”

LMC’s next Retail Sentiment surveys will be conducted in October/November, gauging expectations and plans for the holiday season, and in January, exploring outlooks for the coming year. For more than 65 years, LMC has served as a trusted single-source commercial real estate services provider for institutional and private owners. LMC today maintains a diversified, retail-focused portfolio of approximately 100 properties totaling 14 million square feet and in the Northeast and Mid-Atlantic states. The firm’s capabilities continue to evolve with new technologies, efficiencies and sustainability-focused initiatives to serve a new generation of properties, investors and tenants.

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