Outlook for Retail and Retail Real Estate Is Bullish
The results of our annual mid-year Retail Sentiment Survey are in and theres positive activity on virtually every front. The survey queries managers within our 95-property, 13 million-square-foot shopping center portfolio regarding key performance indicators.
Solid Growth in Sales Reported Is Mirrored by U.S. Commerce Department Stats
More than half (52.9 percent) of our respondents reported sales at equal or higher levels than at the same point last year. This percentage is notably higher than both the mid-year 2014 and 2013 polls, in which 42.9 and 43.7 percent of participants, respectively, reported the same or higher year-over-year sales. This increase aligns with U.S. Commerce Department numbers that put May 2015 retail sales 2.7 percent higher than the previous year. Taking a longer view, the National Retail Federation, predicts industry growth reaching 4.1 percent in 2015.
Heres more good news. Retailers are in expansion mode. Nearly one third (31.1 percent) of our survey respondents reported that their companies have or will open new stores this year. This is the highest mid-year percentage in the four years for which comparative Levin survey data is available. And it looks like a retail real estate trend in the making. National Real Estate Investor this month reported that U.S. chain retailers nationwide have stepped up plans for new locations over the next 12 months, citing an RBC Capital Markets study.
Our Survey Show Retail Marketers Growing More Tech-Centric
Matthew K. Harding, our president, calls the survey results great news for both retail and retail real estate. He notes that the feedback provides some interesting insights related to retailers use of technology in marketing, and their ongoing adaptation to consumer shifts driven by e-commerce.
Not surprisingly, a majority (78.4 percent) of our respondents work for companies that are actively using technology in marketing. More than half of these (53.9 percent) said they have upped their technology-centered strategy year over year.
We asked about specific technology being employed in-store to provide incentives or conveniences for shoppers. The most popular tech tools reported included mobile apps for discounts, loyalty points and/or rapid payment (used by 61.2 percent); post-sale online surveys (used by 47.8 percent); and free Wi-Fi (offered by 41.8 percent). The use of mobile by shoppers has been a rising retail trend for some time. A recent McKinsey & Company study confirmed just how pervasive the practice is. McKinseys report indicates that of the 60 percent of Americans with smartphones, 80 percent use them when shopping in a store, to check product reviews and specifications, and to compare pricing.
Queries about tech in marketing were a big part of our survey and the responses indicated that omnichannel marketing is here to stay. More than three quarters (76.4 percent) of respondents say they incorporate social media into their marketing mix. Nearly as many (72.3 percent) use email. Other popular tactics include Internet advertising (41.9 percent), text messaging (27.7 percent), and SEO optimization like Google AdWords (11.5 percent).
Social Media Is the Dominant Force in Retail Marketing Today
Social media has moved rapidly from a retail trend to an almost universal practice. With that in mind, we drilled down into specific platforms being used by our tenants. Heres what we found:
- 91.9 percent use Facebook.
- 39.7 percent use Twitter.
- 33.1 percent use Instagram.
- 27.9 percent use Google+.
- 17.7 percent use Pinterest.
- 10.3 percent use Groupon/Living Social.
- 9.6 percent use Foursquare.
Facebook, Twitter and Instagram have remained the top three platforms across a full year of surveys. And it appears our tenants are not alone on the social media bandwagon. A CNBC article noted the trumpeting of social media triumphs appears to be a growing trend among retail companies. The author notes that in recent earnings calls, Dollar Trees CEO reported connecting with 2 million customers via Facebook, YouTube, Twitter and Pinterest during the first quarter, while Whole Foods co-CEO announced his company has surpassed 4 million followers on Twitter.
Retailers Are Finding Opportunities in New World Shaped by E-Commerce
The growing popularity of e-commerce has made an undeniable and significant impact on bricks-and-mortar stores, Harding noted. Yet the conversation has shifted from survival to opportunity, and our survey results indicate that retailers with physical stores are rethinking their approaches and capitalizing on opportunities to meet changing consumer needs and desires.
In fact, more than one third (37.3 percent) of our survey respondents reported adapting their business model in response to the growth of e-commerce. Of these participants:
- 61.3 percent have added in-store services and/or incentives.
- 46.7 percent have incorporated in-store pickup and returns options for purchases made online.
- 42.7 percent have altered store inventory (fewer in-stock SKUs, larger quantities of popular items, etc.).
- 41.3 percent have increased collaboration between online and bricks-and-mortar operations.
- 17.3 percent have altered their store prototype (i.e. smaller store size or increased focus on showrooming, etc.).
Are these adaptations working? Of the respondents who have made operational adjustments, 52.1 percent have seen a benefit in terms of sales and/or in-store traffic. At the same time, 30.9 percent said they dont know yet.
The fact that more than half of these retailers have seen positive results is encouraging and may tie directly to the reports of increased year-to-date sales and expansion plans, Harding said. It also seems there are some unknowns as retailers continue to blaze this new path. This makes sense, and it will be interesting to see how the numbers shift in future surveys.
Our next Retail Sentiment Surveys will be conducted in early November, gauging pre-holiday optimism, and in January, measuring new year expectations, and of course, spotting retail real estate trends. Look for those results here.