Every year after the holidays the same topics seem to dominate media coverage of the retail industry. The numbers are in, who’s closing stores? Who’s going out of business? Who are this year’s casualties in the great ‘Clicks vs. Bricks’ war? This focus on post-holiday attrition is part of a larger conversation about the future of retail, one often tinged by notes of panic, dire predictions, and dramatic pronouncements such as: Online retail is damaging brick-and-mortar. Malls are dead! Retailers are shuttering hundreds of stores!
While these statements may make for eye-catching headlines, they are often missing important context. Yes, Walmart is closing 154 U.S. stores (269 worldwide), but that sum total is only around 2% of the company’s 11,600 global locations. And looking beyond the seemingly alarming headlines, we see that Walmart is also planning to open approximately 300 new supercenters, and that these moves are part of a regular and healthy process of portfolio management. Walmart’s circumstances are an ideal example of why you have to look deeper than the sound bites for this topic. This isn’t always a time to panic, it’s also a time to celebrate. Here’s why.
Yes, we are seeing some fundamental structural changes in the industry. Some segments are over-retailed, and others are evolving in ways that make it tough for certain brands and businesses to thrive. Some retail stores that have continued to super-size over the last decade are finding that their optimum prototypical size better utilizes a smaller footprint. The reality is that online sales make up only around 8% of overall worldwide retail sales.
What is taking place in retail right now isn’t a crisis, it’s a revolution. The story of retail has always been one of change. Malls moved commercial energy from Main Street into the suburbs, and big-box stores took their toll on mom-and-pop operations. In recent years, we have seen a shift back toward convenience and local community-centric style projects as the population shifts and millennials search for community. What is happening now is another paradigm shift. And that shift is continuing to drive value to the customer, utilizing these delivery channels.
For some products and in some markets, brick-and-mortar can be about showcasing, where consumers get to feel and touch the product and then later make a purchase online. The Apple Store is a prime example. In other segments, it might be precisely the opposite. With that in mind, it’s not surprising to see significant numbers of store closings and significant numbers of store openings. There are always new segments ready, willing, and able to occupy spaces that come available with the decrease in large boxes and ongoing realignment. Today we are seeing many new service users such as medical office getting aggressive to move into prime retail locations from traditional office building locations. There will always be new concepts created that we haven’t even thought of today.
Some brands and businesses will adapt quickly, and others will take more time to figure things out. It’s about overcoming challenges, but it’s also about capitalizing on new opportunities, unlocking new synergies, and cross-platforming promotions. But this isn’t all about attrition, it’s about adaptation and new creation. While there is some hand-wringing; this should also be time for celebration. These are interesting times for the industry. Just because bell bottom jeans aren’t in fashion any more, it doesn’t mean pants are going away! Retail isn’t dying, it’s elevating to a new level.
Broad Reach is uniquely qualified to take advantage of this dynamic and ever-changing retail landscape.
Next Opportunity – Broad Reach Retail Partners Shopping Center Fund II
There is still the opportunity to participate in Fund II. Please let us know if you might have an interest.
Fund II Overview:
Focused exclusively on Value-Add, Necessity-Anchored Shopping Centers
Great combination of positive cash flow investments with upside potential
High Yield with Quarterly distributions
Thanks again for your interest, and please let me know if you have any questions.