Retail’s Radical Transformation – Seven Mega-Trends Colliding
In 1988, I was in the process of leaving my technology career and moving into the commercial real estate industry. Before making the transition, I took a month-long sabbatical, visiting Europe with the hope of a refresh. While on a train in Switzerland I was thinking about how my old (technology) would intersect with my new (real estate) industry. All at once the ideas started flowing and I wrote furiously. Four years later I published, “The Information Age and the Potential Impacts on Commercial Real Estate.”
In this article, I speculated that Amazon would replace bookstores, digital photography would make Kodak obsolete, Netflix would destroy Blockbuster, software would be downloaded and that RETAIL, because of technology, would change forever. It took longer than I thought, but today’s headlines are a reminder that this transformation is taking place and the momentum is increasing every day.
The premise of the article was that as technology got stronger, more and more services would be delivered online – and that would invalidate or change the way we used physical real estate.
Fast-forward to 2017 and news about the radical changes that are negatively impacting the retail industry continue to mount. According to some sources, the struggles of retail stalwarts such as Sears, Macy’s and J.C. Penney are just the tip of the iceberg. Some reports speculate that 2017 will see the highest number of retail bankruptcies since 2007. While there have been many articles written recently on this topic, each report seems to address only one or two of the issues. We believe that you need to perceive all the forces to get a better understanding of the current retail transformation. The following represent our comprehensive perspective on the topic:
- (1) OVERBUILT – Recent reports indicate that the United States has significantly overbuilt retail in the last decade. Some estimate we have as much as seven times retail per square foot as the next closest country.
(2) OBSOLETE – Some feel that the size, format and experience of department stores are outdated and that more unique and custom shopping experiences are the new norm.
(3) SOCIAL INTERACTION – In the old days, teens went to the mall to socialize and hopefully, shop. Today’s new technology and social media platforms such as Facebook, Instagram and Snapchat are the new ‘places’ where youths interact.
(4) BAD CUSTOMER SERVICE – Retailers are struggling to find and train employees who have the right attitude and skills to deliver a positive customer experience at scale.
(5) OMNI CHANNEL CHALLENGE – Most, if not all, retailers are struggling to deliver a seamless and engaging omni channel experience. The cost of delivering a strong bricks and mortar enterprise while cultivating an online channel is costly.
(6) INVENTORY MISMANAGEMENT – Despite the tremendous infrastructure investment required to deliver a mall or retail experience, you still can’t easily find particular products in an efficient manner; for example, all the stores that have ‘brown shoes in a size 8’.
(7) THE ONLINE MOVEMENT – It is not just Amazon, but online in general, that is delivering a more efficient and engaging shopping experience. With little legacy required by the online community, traditional retailers are struggling to keep up. Just last week, Amazon introduced a 'Fashion-Bot' that uses a smart camera to snap photos of wardrobe choices and apply artificial intelligence to assist in the selection process.
Watching the retail – and therefore industrial – supply chain change before our very eyes is fascinating. This transformation is filled with major risk as well as unforeseen opportunities.
We will be attacking this issue head-on at the upcoming Realcomm | IBcon 2017 on June 14-15 in San Diego. Leaders from both the retail and industrial real estate industry will offer their insights into the future of malls, power centers and industrial distribution facilities.
This Week’s Sponsor
Corning® Optical Network Evolution (ONE™) solutions provide fiber optic infrastructure to satisfy the application and bandwidth requirements in demand today, and tomorrow. Be it multi-family, commercial, retail, or mixed use, the real estate market requires connectivity to support the “live, work, and play” lifestyle embraced by tenants and buyers. www.corning.com.
For more information about the event, course and its design: Realcomm | IBcon Golf Outing
The golf outing is open to all registered Realcomm | IBcon attendees. Advance reservation is required.
Contact information: Alicia Riddle | 757-333-2332
UPCOMING REALCOMM WEBINARS
Commercial Real Estate Information Management - Best Practice Showcase - 5/10/2018
Years ago, the choices were much simpler. Property Management, Accounting and Email were all you needed to run a Commercial Real Estate organization. Fast forward to today and the complexity of the industry’s information management requirements have grown exponentially. Single stack, integrated best-of-breed, and open ecosystems are all options under consideration. Databases, warehouses and now lakes, as well as new technologies such as AI, Machine Learning and Blockchain all add to the growing complexity of real estate information management strategy. Additionally, there are thousands of new companies that want to be part of the solution. Join the debate as best practices are uncovered.
Founder of Realcomm Conference Group, an education organization that produces Realcomm, IBcon and CoRE Tech, the world's leading conferences on technology, automated business solutions, intelligent buildings and energy efficiency for the commercial and corporate real estate industry. As CEO, Jim interacts with some of the largest companies globally pertaining to some of the most advanced and progressive next generation real estate projects under development.
Sam Wong is Head of Analytics and Data Science at QuadReal. He has over 15 years of experience in Analytics and has worked within numerous industries with a wide range in technologies. Sam is a featured speaker on Data Science and Analytics, most recently he spoke at the 2018 Gartner Data and Analytics Summit and at IBM THINK 2018.
Chong P. Huan is Executive Vice President and Chief Information Officer at Inland Real Estate Group. Chong has over 22 years experience and a Proven track record in aligning business with vision and IT strategies to achieve efficient and cost-effective IT organizations. Diverse expertise in financial products and services, order and portfolio management, risk management, securities trading, processing, research and operations with IT acumen to achieve growth and enhance shareholder value.
Brian Zrimsek is Industry Principal at MRI Software. Brian brings 25 years of large scale enterprise software experience to MRI, most recently as an IT Vice President at the Irvine Company. With over a decade of experience in real estate technology he has become a well-known subject matter expert, industry panelist, and trusted advisor, especially within the multifamily real estate market.
Abhinav (Abe) is an experienced investment, financial, technology, business development and operations strategist. He is currently the Chief Revenue Officer for LEVERTON. Abe has worked with many law firms and institutions over the years and has a deep understanding of the real estate technology / CREtech / PropTech space. With LEVERTON, Abe is revolutionizing how corporations use artificial intelligence based machine and deep learning algorithms for data extraction.
Alex Stanton has over 20 years working with in the real estate application space. Currently as VP of Solution Consulting for Yardi Systems, he leads the solution presales team, who work with customers and prospects to explore how to address business needs. Alex’s recent areas of focus has been to work with clients on the real estate specific applications of cloud, mobile, 'big data' and energy.
Jeff Thompson is co-founder and CEO of AwareManager. He leads the company's commercial and corporate real estate clients’ most complex projects. By combining his industry and IT expertise, Jeff helps organizations get data models set up correctly from the very start and helps them overcome major hurdles to user adoption, data-driven decision-making and stakeholder engagement.