MARKETING/SOCIAL MEDIA

Target in major expansion of next-day delivery program

BY Marianne Wilson

The delivery wars continue to heat up as Target Corp. announced it was rolling out its next-day delivery service of household essentials, Target Restock, to eight new markets.

The pilot launched in June in the retailer's Minneapolis-St. Paul hometown market, and was expanded — with some tweaks — in August, to the Dallas-Fort Worth and Denver areas. On Thursday, Target said it is expanding the service to the Atlanta, Chicago, Los Angeles, New York, Philadelphia, San Francisco, St. Louis, and Washington, D.C./Baltimore areas.

"The service is now live in 10 markets and will be available to guests in the San Francisco area beginning in mid-October — meaning the service area will reach 70 million people, about one-fifth of the U.S. population," the retailer said in a blog on its website.

To date, some of the most popular items for Target Restock in the three existing markets – Dallas, Denver and Minneapolis – have been on-the-go snacks, beverages, cereal, macaroni and cheese and paper towels, according to Target.

To take advantage the Target program, shoppers go to the dedicated Target Restock online storefront where they can shop the assortment, which includes more than 15,000 items. As shoppers fill up a box, a grey bar at the top of their screen will show the percentage of space each item in the box has taken up and the percentage of space that's left. (The box is limited to 45 lbs.)

The items will be packaged at a nearby store. If the order is placed by 2 p.m. Monday through Thursday, it will arrive at the customer’s home the next business day. (The service has a flat fee of $4.99 per box).

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How retailers can recoup funds with CAM Audits

BY CSA STAFF

The continued popularity and development of town centers and lifestyle centers have made it clear that retailers can no longer go it alone. They must co-exist in a symbiotic live-work-play environment, and that means they must also co-exist with the different demands and cost structures of residential and office spaces.

It is more important than ever, therefore, for retailers to evaluate their leases in an effort to plan and implement strategies that will make the most economic sense for their individual store locations. In the past, many of the larger retailers have relied on standard templates for CAM language. They deployed them automatically across their portfolios with minor variations for specific shopping centers. But today, the cookie cutter approach is out and retail leases are being negotiated with more lease caps, fixed-fee language, and base years — strategies that have typically been the sole province of office leasing.

As more centers are repositioned and leased to unconventional tenants that function outside the retail arena, it is critical that retail tenants aggressively review their CAM expense charges to identify potential instances of overbilling. Below are two particular areas of concern in performing common area maintenance audits for mixed-use properties:

Allocation of Expenses

The allocation of costs among the various tenants and cost pools are both significant concerns for tenants at mixed-use properties. As such, it is critical that tenants have an understanding of and insight into the methodology used and the manner in which costs are allocated between the different cost pools of the property. If the property has changed its tenant mix from retail to a combination of retail and office tenants, there may be varied reimbursement agreements, such as office tenants that only pay increases over base year expenses and retailers that pay a net share of expenses.

Landlords may be incentivized to allocate different percentages to different cost centers based on the individual reimbursement methodologies in the respective leases. These types of overcharges can be difficult to discover without the benefit of a rigorous review of the invoices and contracts. It is usually a red flag when the tenant only sees an invoice for an allocated amount and is not provided the details of the methodology supporting the allocation.

Once there is a base-line understanding, the allocations should remain relatively constant, absent significant changes at the center regarding operating costs and required maintenance. To address this potential area of concern, some landlords are now writing leases and amendments that convert their retail tenants to base year leases, or, in many cases, to fixed reimbursements.

Real Estate Taxes

Many retailers use a segmented process to review real estate taxes and CAM billings, but today a more critical review is warranted. Big changes in tenant mixes mean bigger potential for errors in the calculation and allocation of real estate taxes that are billed to office, retail, and residential unit owners.

Increasingly, landlords have converted portions of retail centers to alternative uses that may further affect how real estate taxes are allocated or levied upon tenants. In many cases, properties may need to be reassessed and — where there are agreements in place with fixed percentages or allocated contributions — the allocation of property taxes needs to be reviewed to ensure unit owners pay their fair shares.

Equally important, tenants need to ensure that they understand the impact that the sale of a property can have on its assessment and resulting real estate taxes. Many leases have provisions that cap real estate tax increases related to a sale transaction. Even so, it is important to undertake a periodic review of changes to property assessments as well as understand local assessing policies.

Most retailers have increased their lease auditing capabilities in this changing landscape and continue to be diligent in their pursuit of identifying overcharges. Both landlords and tenants should be willing to discuss fixed charges and base years for retail tenants, as both parties are looking for some certainty in budgeting and store costs and are trying to reduce the expense and time involved with tenant audits. These types of negotiations will hopefully bring greater stability to each party.


Jeffrey Strauss is a managing director in the Real Estate & Infrastructure industry group at FTI Consulting, Inc. He may be reached at [email protected].

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MARKETING/SOCIAL MEDIA

ICSC: Omnichannel shoppers to rule this holiday

BY Marianne Wilson

Nearly all shoppers will be shopping a variety of channels this holiday season.

Ninety-six percent of shoppers plan to make a purchase from a retailer who has both a physical and an online presence, with 40% of them buying online and picking up in-store, according to a report by the International Council of Shopping Centers. And 81% of those shoppers plan to make additional purchases when collecting their item(s).

Consumers expect to spend on average $728.40 on gifts and other holiday related items this season, revealed ICSC's Holiday Shopping Intentions Survey. The group forecasts 3.8% year-over-year growth in retail sales for this holiday season.

"Our annual Holiday Shopping Intentions findings demonstrate that consumers are very optimistic this holiday season and that physical retail remains a cornerstone of the holiday season,” said Tom McGee, president and CEO, ICSC. “The more agile retailers are in meeting consumers’ demands for the seamless convergence of physical and digital shopping, the more success they will see.”

The ICSC report found an uptick in the number of people planning to shop before Thanksgiving at 66% — with 27% starting as early as August. The expected extension of the shopping season means the potential of more sales for retailers, as 46% of shoppers say they plan to spend more this holiday season.

In other key findings from the report:

• The top four categories for purchases this year are: Gift cards (66%), apparel/footwear (54%); toys and games (46%) and electronics/devices (34%).

• Eight-five percent of shoppers plan to research online prior to making purchases in-store. Three-quarters of holiday shoppers who have a mobile device will use it for shopping in a store to compare prices, get discounts and check availability. Nine out of 10 holiday shoppers expect to visit a retailer’s website or app to browse product information.

• Eighty-one percent of shoppers will visit a mall/shopping center to eat out (53%), catch a movie (32%) and/or participate in a philanthropic event or plan to attend a Christmas tree lighting/Menorah lighting/holiday parade (combined activities at 17%).

• Millennials will play an integral part in this holiday season with 92% planning to spend money in a physical store. On average, this demographic plans to spend $554.40 on holiday gifts and related items.

• More than any other age group, Millennials plan to take advantage of discounts on Black Friday (57%). Three-fourths of Millennials shoppers plan to spend online at retailers whose stores they also visited and 50% of them will buy online and pick up in-store.

“They [Millennials] not only want experience but they want convenience as well, which we see in their intent to utilize both online and physical,” stated McGee. “The theory that they are a digital-only generation is simply not true; they want digital to be a part of their transaction rather than the entire transaction.”

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