The Mighty Dollars: A Bricks and Mortar Success Story

Retail Real Estate Trend: Will Good Times Be Bad for Bargain

You might call them the mice that roared. They’re the dollar stores – now almost 30,000 nationwide and growing. These price point retailers not only weathered the economic recession but they triumphed, growing their annual sales by 50 percent from 2010-15, compared to the 17 percent notched by retail overall in the same period. And while every week seems to bring news of closing doors and downsizing among bricks and mortars, the dollar niche remains in expansion mode. Dollar General, the top player in this category, is set to open 1,000 new stores this year (that’s 3 per day)! (Read more: http://www.retaildive.com/news/why-dollar-general-will-keep-its-promise-to-build-1k-stores-this-year/434044/)

Demographics Plus Location Equals Dollars for the Dollar Niche
Low- and middle-income shoppers have been these stores’ sweet spot since the first Dollar General opened in 1955 with a variety of wares, all below a $1 price point. As more retailers joined the bargain bandwagon, a location strategy emerged: cluster the stores within a small range for maximum ease of access. It was the reverse of Walmart’s centralization strategy. Consumers who must economize on gas or who rely on public transportation can always find a dollar store close to home or work. The convenience factor also proved a powerful draw for time-starved shoppers at higher income levels.

Not Your Grandpa’s Dollar Store
The crash of 2008 that brought misery to merchants nationwide was a boon to the category. The newly price-conscious turned to the dollars and the stores responded to that rush by pushing their inventories beyond novelties, out-of-date seasonal decorations, discontinued brands and basic staples. To meet the needs of a new class of bargain hunters, they improved their product mix, while retaining their original “treasure hunt” appeal. Consumables – food, household paper goods and cleaning products, health and beauty aids and tobacco products – now comprise three-quarters of the average dollar store’s inventory. Some dollars have added frozen meals, and prepared sandwiches. And 99 Cents Only’s website promises “Fresh produce daily.”

Bargain-priced consumables have drawn another new demographic to the dollars: Millennials. Known for their thriftiness and their preference for experiences over possessions, these sought-after consumers are among the dollar stores’ most loyal customers. In fact, NPD Group reports that at the three biggest dollar chains, 25 percent of purchases were made by Millennials from $100,000-plus households.

Dollar Stores Continue to Boost Commercial Real Estate
Shopping centers shared in the success of the dollar store niche during the recession and that positive connection continues. We are pleased to have 16 dollar stores in our portfolio, all representatives of the major chains. Dollar stores typically seek ten-year leases on 8,000-12,000 SF spaces in properties with strong anchors and high traffic counts. Their solid financial positions and brand names plus their ability to pull in shoppers make them ideal tenants.

Retail Real Estate Trend: The Growth Pace of Dollar Stores May Ease
As the economy strengthens, retail trend watchers predict that in the dollar store category new challenges may cool the growth of dollar stores. Will consumers become less interested in bargain hunting? Will the reduction in SNAP benefits curb less affluent shoppers? Will some stores fall victim to the saturation of these retailers in certain areas and end up cannibalizing each other? What about competition from drug stores who now compete with the dollars in the food and beverage categories? Will Amazon finally chip away at the dollars’ convenience appeal with its same-day delivery of low-priced consumables? (Read more: http://www.cnbc.com/2016/03/21/when-1-can-be-much-more-the-dollar-store-divide.html)

On the positive side, the dollar stores stand to remain immune to the threat of online among their original sweet spot – the less affluent household who does not typically shop online. Their low overhead and the minimal investment required to open a new store are also strengths. And then there’s the loyal Millennial consumer segment. Dollar General, the category leader, just launched a new smaller-store concept catering to the taste and needs of urban Millennials.

We’re keeping an eye on this category. These were the big bricks and mortar bright spot of the last decade and we’re not likely to bet against the dollars.

Shopping Centers: Not What They Used to Be (But That’s Not a Bad Thing)

Tale of Survival and Adaptation Unfolding for Retail Tenants and Properties

Your neighborhood shopping center isn’t what it used to be. While some say the Great Recession and the e-commerce phenomenon impacted the bricks-and-mortar landscape in a negative way, in reality, we are seeing an interesting – and encouraging – tale of endurance and progress, illustrated by the ongoing transformation of the tenant mixes of retail real estate companies.

The changes are not singular – or linear. These retail real estate trends involve new types of retail tenants and the evolution of those in our industry adapting to new settings shaped by socio-economic shifts and public policy. The bottom line: fresh opportunities are emerging in an industry where change remains one of the only sure things.

Non-Traditional is the New Normal
Not long ago, the presence of a gym at a shopping center was unusual. However, when the recession hit and many stores went dark, retail real estate companies found fitness tenants eager to step into the vacancies. At first, co-tenants were concerned about their new neighbors monopolizing parking or watering down the property’s range of products for sale. But soon, they recognized that the gym brought increased traffic their way.

Today, fitness tenants are shopping center staples, positioned as first-tier targets for retail leasing professionals. And they come in a range of price points and sizes, from Crunch Fitness and 24-hour Fitness to mid-size Retro Fitness to boutiques like Orangetheory Fitness.

The rise of the gym at retail properties was a precursor to a larger retail real estate trend. Today, many shopping centers are transitioning from places where consumers buy goods and services to places where they enjoy recreational opportunities and engage in their community.

To this end, restaurants – especially fast-casual concepts like Panera Bread and Chipotle – are comprising a larger percentage of tenant mix than in the past. This is by design, as landlords work to reintroduce shopping as a recreational pastime. Entertainment tenants are leasing spaces of all sizes, from big-box anchors like Dave & Busters to small paint-and-sip boutiques. Their success speaks to the viability of “retailtainment.”

That Which Does Not Bend May Break
At the same time, traditional bricks-and-mortar retailers – such as grocery and apparel, to name just two – remain alive and well. However they, too, look a bit different.

Following the recent A&P bankruptcy and liquidation, a growing diversification in grocery tenants has taken place in the Northeast. After several years with only a handful of expanding operators, we are seeing significant growth among chains including ShopRite, Acme, Trader Joe’s, and other specialty and ethnic grocers. Additionally, many non-grocery retailers like dollar stores and pharmacies are expanding their food inventories (although lease clauses may limit their amount of grocery-dedicated space).

In the apparel sector, a number of mid-price retailers, such as Mandee and Fashion Bug, have gone out of business over the years. However, bigger national department store players, like Nordstrom and Saks, are generating healthy sales from off-price concepts like Rack and Backstage. Discount brands such as Kohl’s, T.J.Maxx, SteinMart and Ross also remain favorites among today’s cost-conscious consumers.

Yet there’s no denying that e-commerce has made a significant impact on traditional bricks-and-mortar stores. The conversation has shifted, however, from “survival” to “opportunity,” and physical-store retailers are rethinking their approaches. They are capitalizing on opportunities to meet changing consumer needs and desires by giving customers a good reason to visit their stores.

The trends go beyond the grocery and apparel categories. Retailers across a wide range of specialties are finding new ways to engage shoppers. In Levin Management Corporation’s most recent tenant survey, nearly 40 percent of participants indicated they have adapted their business model in response to e-commerce growth. Among those respondents, many are adding in-store services and incentives, incorporating in-store pickup and return options for purchases made online, and increasing coordination with their online operations. Others are altering store inventory, introducing experience draws and/or changing their store prototypes.

Now Batting: The Healthcare Revolution
In addition to the shopping habits of Millennials and Baby Boomers, one significant driver in shifting tenant mixes ties directly to public policy. Changing healthcare laws are incentivizing people to choose walk-in clinics over trips to the ER. At the same time, hospital systems are decreasing operating costs and improving customer service by establishing outpatient services in non-medical satellite locations. The resulting boost in space demand has come at a time when retail supply has been plentiful, giving rise to a new breed of non-traditional tenants.

Urgent-care, imaging centers, doctor’s offices and dentistry chains in retail settings have something in common with their non-traditional predecessor, the fitness tenant. A shopping center-based trip to the doctor, like a workout at a gym, evolves into a visit to the grocery store or a lunch at a nearby restaurant. In this regard, healthcare tenants are queued up to become the next “normal” retail space users.

The bottom line is that shopping center tenant mixes and tenants themselves, have always evolved to accommodate social trends. The retail industry will continue to re-invent itself to survive – and thrive. And so will retail real estate.

Twelve Trends Will Shape The Year in Retail

Ahead: Smaller Stores, Personalization, Experience, and Tech Everywhere
Last month – January – is always “Predictions Month,” with pundits in every industry scanning the horizon for what’s ahead. We’ve reviewed most of the 2017 retail and retail real estate outlooks and wanted to share what we think is the best of the bunch. The comprehensive list that follows is from the Vend blog and includes observations from experts worldwide. Keep an eye on these twelve as the year rolls forward.

Shoppers Will Seek Retailers Who Deliver a Good In-Store Experience
1. Stores offering unique shopping experiences will thrive. “Experience” includes special additions like food services, but also the delivery of a seamless shopping experience, reflecting the online world. Crate + Barrel’s “Mobile Tote” is a good example. Shoppers use store-provided tablets to browse and note their favorites, while sales associates ready their orders.

2. Smaller stores will win out over their super-sized counterparts. Time-starved shoppers have less tolerance for navigating big spaces and look for easy-to-access inventory. Target, Best Buy and Ikea have jumped in with junior box stores. Expect more to follow.

3. Specialty stores will perform better than department stores. Building on #2 above, smaller venues with well-curated inventory and a knowledgable staff will beat the traditional department store concept. Note: those Millennials everyone is chasing are specialty store fans.

4. “Retailment” (the fusion of retail and entertainment) is the new game in town. To entice shoppers to leave their screens for an out-of-home experience, retailers will deliver everything from virtual reality to pop-ups. Note the rise of theaters that serve dinner and cocktails along with the movie.

 

Services Will Be Expected

5. Shoppers will expect same-day shipping. Consumers want the traditional gratification of having their purchase on the day they make it.

6. Personalization will be more important than ever. Shoppers want to be recognized and rewarded. Loyalty programs will step up their game with more customized offers based on buying history and other data.

 

The Reign of Tech Will Continue
7. Mobile will be the way to pay. TechCrunch predicts that there will be 447.9 million mobile payment users this year. Purchases in this mode will total $60 billion in 2017 and $503 billion in 2020. Savvy retailers will adopt whatever system fits them best, choosing from custom apps or third-party options like Apple Pay.

8. Omnichannel growth will continue. Effective omnichannel strategies will separate the winners from the losers in 2017. Vend’s retail trend watchers expect to see retailers push omnichannel in bold, new directions to deliver that seamless experience.

9. Data will continue to drive retail success. Data will be a force in every aspect of the retail process from supply chain to purchase. Collection and analysis of information will be a top focus, with social shopping making a major contribution.

10. Retail and tech will unite to deliver new ways to bring shoppers into bricks and mortar stores. Science fiction will come to shopping: the Internet of Things, virtual reality, artificial intelligence and robots.

11. Apps, services and third parties will help bricks and mortars compete with online. But there’s one caveat: retailers will need to be selective about the tech products and platforms that serve their particular needs. There will be many to choose from. The best options are the ones that free the user to focus on the customer.

 

Transparency and Sustainability: Must Haves for Success in 2017
12. It’s no longer enough just to sell quality products at good prices. The Internet has created a hunger for information. Shoppers want to know what goes into a product. They’re driven by both ethics and a commitment to sustainability. This trend will continue into 2017 and beyond. (Think Millennials).

If you’ve enjoyed these highlights, read the complete Vend report at:

https://www.vendhq.com/university/retail-trends-and-predictions-2017 and watch these predictions become reality.

 

 

 

 

Can Pokémon Go Keep Retail Sales Hot Through the Holidays?

Retail Trend Watchers Are Eyeing the Staying Power of Pikachu and Friends
This was the Summer of Pokémon. Within days of its debut last July, Pokémon GO, the augmented reality game was breaking records and setting new ones. In just five days, it became the most popular game in mobile history, with its free downloads eventually reaching 500 million. While the action was concentrated among Millennials (who grew up with Pokémon), teen users were spending more time hunting Pokémon characters than posting on Twitter and Instagram combined. Females, traditionally a smaller segment of gamers, stepped up to Pokémon GO, becoming 40 percent of the user population. Since the game forced players off the couch and into the outside world, there were unintended consequences. Some, engrossed in the hunt, were robbed. A number were arrested for trespassing. Many got traffic tickets, and a few even fell off cliffs.

Pokémon GO Fans Have a Hearty Appetite for Branded Merchandise
When fans weren’t catching and training the elusive pocket monsters, they were shopping for merchandise that reflected their passion. Online sales of Pokémon merchandise were nothing short of spectacular. According to the Adobe Digital Price Index, sales of Pokémon-branded items rose 105 percent in July, compared to the previous year, with the hottest items being video games, toys and t-shirts. But what’s next? Can the frenzy continue into the holiday season? Will bricks-and-mortar stores reap the same success as online purveyors of Pokémon merchandise? Retailers have their fingers crossed and retail trend watchers are optimistic.

The Summer’s Frenzy is Cooling, but the Holiday Season Still Looks Strong
Pokémon GO was too hot not to cool down, but even as usage ebbs, the franchise itself remains a powerhouse. Gina Collins, CMO at Build-A-Bear, one of the stores licensed to sell Pokémon merchandise, is bullish on the coming season. “Sales have continued to gain momentum,” she reported. The chain’s inventory of 20th Anniversary Pokémon Pikachu plush dolls has sold out and there are wait lists for the next shipment.

Anthony Morales, assistant manager at Build-A-Bear in Fairfax, VA, reported that more and more customers are hunting Pokémon-themed items. “It feels like the 90’s all over again. We just had a group of kids that got a lot of Pikachu dolls and they were playing and talking in little Pikachu voices,” he told Ad Age.

Pokémon Items are Headed for the Kids’ 2016 Holiday Wish List
Pokémon fans can choose from an abundance of branded merchandise in the coming season: plush toys, clothing, accessories, and action figures, along with the Pokémon card game. Late November will see the launch of two new video games, Pokémon Sun and Pokémon Moon, likely to be best-sellers in that category this holiday.

Toy Insider predicts that “the Pokémon GO craze will command a lot of space on kids’ wish lists.” Their own Hot 20 List for 2016 includes two Pokémon-themed products. At the number nine position is Pokémon My Friend Pikachu (from Tomy) a plush toy that speaks, lights up and wiggles its ears. At position 20 are the soon-to-be-released Nintendo video games Pokémon Sun and Pokémon Moon.

If predictors of retail trends are right, 2016 holiday sales are in for a big boost, thanks to Nintendo’s crew of irresistible pocket monsters.

Study Finds That the Vast Majority of Americans Shop Online

But…Bricks-and-Mortar Stores Are Still Dominant by a Wide Margin
Online shopping is no longer a trend. It’s now a way of life in America, with 96 percent of the respondents in a recent study saying they shop online. All demographic groups – from Millennials to Seniors – are turning to their various screens for making a purchase. And, they’re loving the experience, ranking it ahead of smartphone GPS and streaming media as “something they can’t live without.” Big Commerce, an e-commerce platform, and Kelton Global, research consultants, discovered these facts and more in a March 2016 study of 1,000 shoppers. Their findings have been reported by Chain Store Age (see article) and other retail industry media.

The massive report is also well worth a read for leaders in retail real estate. But before you dive into all the findings, check out these ten highlights.

1.Good News for Retail Real Estate
Shoppers love online, but 64 percent of those surveyed still buy in bricks-and-mortars. This includes Millennials – 44 percent said they shop in stores. Women make more shopping trips than men. Men buy more online.

2.More Good News for Retail Real Estate
Survey respondents said their least favorite aspects of online shopping were: inability to touch and feel merchandise, shipping charges, exchanges, and waiting for delivery.

3.Brick-and-Mortar Websites are Online Shopping Hubs
Twenty-five percent of respondents in the Big Commerce study had shopped at the website of a brick-and-mortar store.

 4.Favorite Features of Online Shopping
No surprises here. Shoppers choose online for convenience and speed of sale.

 5.Most Online Dollars Go to E-Commerce Marketplaces
Big Commerce’s respondents spent an average of $488 last year on sites like Amazon and eBay. Their second highest spending level was on the sites of major online/offline brands ($409).

6.What Do Online Shoppers Want on Websites?
Online shoppers want images, video demonstrations, customer reviews, and product comparison – all the things that bring an item to life.

 7.How Do Shoppers Choose an E-Commerce Site?
Price is the main driver (87 percent), followed closely by free shipping and speed (80 percent).

8.Shipping Costs are a Major Stumbling Block to Online Sales
Online shoppers are super-resistant to paying for shipping. Two-thirds of those in the Big Commerce study said they had abandoned their shopping carts when they saw the shipping charges.

9.Social Commerce is on the Rise

Thirty percent of the respondents said they were open to buying through a social media network. More than half the Millennials were ready to shop on social. Facebook and Pinterest were the social platforms of choice.

10.Online Shopping is Everywhere and Round the Clock
In retail stores, in the car, in the office – 24/7 – people are shopping online. Forty-three percent shop in bed and 20 percent shop while in the bathroom. Ten percent admit to shopping under the influence of alcohol (13 percent of them Millennials and 17 percent Gen-Xers). Maybe this is why 42 percent of Big Commerce’s respondents admitted regretting an online purchase, and 21 percent said they had bought something online “by accident.”

It’s an Omnichannel World but Retail Stores Continue to Rule

Consumers Love Online but Still Prefer Shopping at Bricks and Mortar

You know there’s a big retail real estate trend brewing when Amazon, the premier pure play online retailer, announces a plan to open 300-plus book stores. Yes, that’s stores, as in bricks-and-mortar establishments. Market tests of on-campus locations and pop-ups in major cities preceded their February 4 announcement. Amazon’s move is an important indicator of the increasing success of omnichannel and an acknowledgment of the role of the physical store in branding and building sales in concert with online and social media. But the successful bricks-and-mortar establishments of the new omnichannel era we’re doing business in are not your grandpa’s retail store. Read on for a quick glimpse of what’s happening and what’s ahead.

The Traditional Store is Morphing into an Omnichannel Hub

As a leading retail real estate company and one of the top construction management firms in the Northeast, Levin is excited about the coming changes in store design. And, of course, we’re pleased that bricks-and-mortar establishments continue to be favored by America’s shoppers. (Over 90 percent of the transactions in December 2015, in fact, took place in a store, according to the ICSC). http://www.chainstoreage.com/article/icsc-omnichannel-wins-physical-stores-epicenter

As one ingredient in the omnichannel mix, stores now and in the future will have to offer more than just physical access to merchandise. Today’s consumers tend to have pre-shopped online and expect the store to be just one element in a seamless purchasing experience. Store design and construction will have to accommodate “click and collect” purchases made online and picked up in-store, plus returns and exchanges – that means easy in-and-out and space to hold pre-ordered merchandise. The demand for same-day delivery will have implications for parking and loading vehicles.

Information-on-Demand and an “Entertaining” Environment: Retail Real Estate Trends to Watch

Omnichannel shoppers expect web-supported shopping. That means kiosks and touch screens that let them check product availability and place orders, plus store associates with tablets to provide up-to-the-minute information and hassle-free checkouts. As a model store environment, think Apple.
Virtual fitting rooms and same-day delivery are predicted to shrink the selling floor, with more space going to lounges for food and beverage services that rank high, especially with Millennial shoppers. Since omnichannel shoppers prize the VIP treatment, expect to see more sensors, beacons and other electronics that will allow a retailer to deliver coupons and points to mobile phones and direct shoppers to merchandise based on their purchasing profiles. Retailers on the leading edge of omnichannel have already introduced these in-store features. Take a look at Crate & Barrel, NordstromStarbucks, and Top Shop to name a few. Expect more to come. https://erply.com/case-study-how-you-can-copy-nordstroms-secrets-to-massive-retail-success/ and http://insider-trends.com/why-omnichannel-is-the-elusive-holy-grail-of-retail-and-three-retailers-who-have-found-it/

No Longer a Secondary Player, Logistics are Now Key to Omnichannel Retailing

Click and collect and in-store online ordering, both with demand for same-day delivery, have placed new importance on logistics. Warehouses and distribution centers will need to be in closer proximity to stores. Some retail real estate trend watchers predict that large warehouses will become the hub, with smaller centers near stores serving as the spokes in the delivery wheel. The possibility that retailers may supplement their flagships with pop-ups or small specialized boutiques will mean further logistical challenges. http://www.inboundlogistics.com/cms/article/new-retail-strategies-its-a-store-its-a-site-its-a-warehouse/
Warehouses, whatever their size or location, are facing changes driven by the fulfillment of small individual orders with quick turnaround. The impact on IT, employee levels, building design and configuration, and transport are massive, along with the need for acreage in densely populated areas. Retail real estate and construction management are certain to feel the effect of these changes in logistics.

Every Step in Omnichannel Leads to Another Step

The convergence of the virtual and the physical in retailing is just the beginning. As that blend is achieved, new doors are opening. Retailers and the businesses that service them will have to walk through those to succeed in the evolving and complex world of multichannel.