Repositioning Retail: Innovations in Brick-and-Mortar and the Distribution Chain
October 18, 2017
By Michael Torhan, CPA
EisnerAmper, in partnership with iGlobal Forum, held the Global Leaders in Real Estate Summit on September 28, 2017 at the Lotte New York Palace in New York City. The retail panel was moderated by Sally Michael, partner at Saul Ewing Arnstein & Lehr LLP, and included the following panelists:
- Jason M. Ellis, senior company counsel at Staples, Inc.
- Sandeep Mathrani, CEO of GGP, Inc.
- Andrea Olshan, CEO of Olshan Properties
Ms. Michael began with some keywords that are commonly used currently to describe the retail space in media and throughout the industry: dead, dying, doom, etc. This introduction set the tone for the panel discussion about how the reality is that retail is still a strong sector where the environment and economic conditions warrant, as well as require, retail space.
Mr. Mathrani stated that the best retail real estate is still doing very well. The biggest source of his tenants is the ecommerce industry since online retailers are looking for a brick and mortar presence. Furthermore, while Mr. Ellis did confirm that Staples has closed stores and will continue to close stores, the remaining stores continue to be profitable. He mentioned that the key ingredient for Staples is a mix of how consumers buy vs. how they use locations.
Ms. Michael raised a question regarding the impacts of retailers downsizing and how malls are adjusting for those changes in space requirements. Mr. Mathrani emphasized that the best malls continue to receive requests from stores that want to increase their square footage. The experience that is provided to consumers in stores was noted as a driver of how retail space is configured and used. Ms. Olshan, however, emphasized that while the successful retailers are expanding, there is a risk that there are no other retailers behind them for subsequent changes in space.
The concept of online shopping and in-store pick-up was discussed in detail as well. Mr. Ellis mentioned how stores now include parking spots solely for online shoppers in an effort to spur this method of shopping, since delivery to the last mile is usually the most expensive. Mr. Mathrani agreed and provided an example of the latest trend of having online merchandise include discounts as a way to encourage online shopping and in-store pick-ups. Ms. Olshan discussed a new retailer, Happy Returns, which is now offering the convenience of returning online purchases in malls.
It was evident that there have been growing pains encountered by the retail real estate sector due to the impacts of online retailers such as Amazon. However, the gloom sometimes may be overstated. While consumers may not utilize retail space the same as they did decades ago, brick and mortar is here to stay. This is clearly evident with Amazon’s recent purchase of Whole Foods and Apple’s continuing expansion and redesign of its Apple stores.