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(2) OBSOLETE – Some feel that the size, format and experience of department stores are outdated and that more unique and custom shopping experiences are the new norm.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
CRE Tech Innovation Showcase - Uncovering the Next Generation of New Ideas - 7/12/2018
Never before in the history of the Commercial Real Estate market has technology been so prevalent. Since 2009, hundreds—if not thousands—of companies selling tech to the Commercial Real Estate Industry have emerged. Estimates now suggest there are more than 2,000 new CRE Tech companies in the space. The sheer number of new companies makes it almost impossible to keep up and organizations are struggling to establish an effective process to discover, organize, vet, test and implement new technologies. This webinar will evaluate the categories of technologies, best practice criteria, and clarify different solutions that are making their way to the top of the list.
Tom Shircliff is a co-founder and principal of Intelligent Buildings, a nationally recognized smart real estate professional services company that was started in 2004. Intelligent Buildings provides planning and implementation of next generation strategy for new buildings, existing portfolios and urban communities. Tom is a speaker and collaborator with numerous universities and national laboratories, a gubernatorial appointee for energy strategy and policy and founding Chairman of Envision Charlotte, a Clinton Global Initiative.
Chip Pierpont manages and provides expert guidance on the development and execution of requirements/solutions for building operations and technologies for General Services Administration (GSA), a Public Buildings Service (PBS) government agency tasked with managing government buildings and real estate, providing product and service procurement support, and developing policies and regulations. The landlord for the civilian federal government, PBS owns or leases 8,700 assets, maintains an inventory of more than 370 million square feet of workspace for 1.1 million federal employees, and preserves more than 481 historic properties.