IDC Retail Insights: Top 10 retail predictions for 2015
Framingham, Mass. —By 2017, three times as many retailers as now will explicitly underpin their customer and operations strategies on 3rd platform technologies. That’s one of IDC Retail Insights’ top 10 worldwide retail predictions for 2015. IDC revealed the predictions during a Web conference, IDC FutureScape: Worldwide Retail Agenda 2015 Predictions.
The top 10 predictions from the IDC FutureScape for Worldwide Retail FutureScape are:
1. By 2017, three times as many retailers as now will explicitly pin their customer and operations strategies on 3rd platform technologies.
2. In 2015, CIOs will invest in omni-channel integration technologies as a top priority to support growth in the omni-channel shopper sales premium of 30%.
3. Over the next three years, half of CIOs across the top 250 retailers will adopt omni-channel IT governance fit for a 3rd platform era to combat shadow IT.
4. By 2016, the top 150 retailers will improve their return on investment (ROI) on hyper-personal loyalty based on unified customer engagement.
5. By 2018, 60% of omni-channel retailers will have launched customer mobile payment initiatives to enhance existing ecommerce, loyalty, and in-store mobile point of sale (MPOS) investments.
6. As cyber attacks increase, 50% of the top 250 retailers will have reduced exposure and loss by more than 50% by the end of 2016 with intelligent sense and respond security strategies.
7. By the end 2016, product intelligence (PI) will inform 80% of the top ten e-commerce retailers' pricing decisions and drive mainstream adoption of high-velocity pricing.
8. By 2018, on demand socially networked delivery services (including Uber, EBay Now, Shutl, Deliv, Postmates, Instacart, Amazon, and Alibaba) will perform 90% of all intra-day direct-to-consumer deliveries.
9. By the end of 2015, at least 25 retailers with location-based services will increase same shopper sales impacted by location-based services (LBS) by 5% via analytics-driven agile engagement and operations.
10. By 2016, even as private brand growth flattens in the U.S., consumer driven private brand product innovation will drive a 10% improvement in customer visit frequency.
"Relentless technology innovation underpins consumers' participatory behavior and expectations," said Leslie Hand, VP of IDC Retail Insights. “The most successful retailers will find opportunities by putting mobility, analytics, cloud, and social to work in their customer and operations strategies, adopting omni-channel integration technologies and IT governance, unifying customer engagement for hyper-personalized loyalty, adopting product intelligence for marketing and competitive insight, employing location-based services via analytics driven agile engagement and operations, utilize socially-networked on-demand delivery services, and gain share with private label merchandise.”
To access an audio replay of the Web conference, please click here.
America’s Top Redevelopers
In its 10th year, the Top Redevelopers survey continues to underscore the industry sea change from ground-up new-builds to redeveloping existing assets. Each year, the names of our Top Redevelopers may change, but their goals remain the same: maximize shopping center portfolios by keeping each asset current, vibrant and viable.
Just like last year, the 2014 survey analyzed redevelopment work from midyear to mid-year — in this case, the 12-month period from June 2013 through June 2014 — to ensure the most current results possible. Survey participants submitted total square footage redeveloped during that period, the number of projects undertaken and, when available, the financial investment for each project. As always, the Chain Store Age judging committee attempted to make the selection process as objective as possible. No easy task. Not enough information is available to develop a foolproof ranking system. Only a few developers report redevelopment financial investments, and many account for redeveloped square footage in differing ways.
This year, we chose a dozen developers based on the number of properties redeveloped, total square feet affected and significant projects. We have summarized the results for each of the 12 developers below in alphabetical order because it is literally impossible to rank one above the other.
Brixmor Property Group
New York City
Brixmor Property Group, a regular on the CSA Top Redevelopers list, redeveloped nearly 6 million sq. ft. in the survey time frame, encompassing some 21 projects in 12 states. The company counts as its most significant redevelopment the Florence Plaza-Florence Square project in Cincinnati, located across from the Florence Mall.
Brixmor leveraged the relocation of a 39,000-sq.-ft. movie theater to enable the expansion of an existing Kroger anchor into a Kroger Marketplace concept. The project encompassed redeveloping the former movie theater and adjacent small-shop space into the 124,000-sq.-ft. Kroger Marketplace, as well as adding a fuel center. Redevelopment was completed in June 2014 for a total cost of approximately $7 million.
Another Top Redeveloper mainstay, Cafaro redeveloped 969,066 sq. ft. in the 2013/2014 judging period. The largest project was a top-to-bottom renovation of the 859,475-sq.-ft. Meadowbrook Mall in Bridgeport, West Virginia, accomplished for approximately $5 million. At Eastwood Mall in Niles, Ohio, a $14 million investment redeveloped a former maintenance/storage facility into an 85,305-sq.-ft. Residence Inn by Marriott. Also on the Eastwood Mall Complex, a 24,286-sq.-ft. former Borders Books was redeveloped into two spaces for ULTA and Five Below stores.
Perhaps the most significant project, according to Cafaro, was the Residence Inn by Marriott. Certainly, it was the most costly but, more importantly, it added a whole new dynamic to the shopping complex. By providing direct access from the hotel lobby to the mall concourse, it is helping the Eastwood Mall center evolve into more than just a retail facility and providing a new clientele for the entire complex.
CBL & Associates Properties
CBL redeveloped a whopping 5,427,448 sq. ft., which encompassed nine projects over six states. The most significant was its redevelopment of Friendly Center in Greensboro, North Carolina. CBL invested $10 million in the renovation, creating a more cohesive look between the 50-plus-year-old property and the newer Shops at Friendly Center down the street.
Renovations included a storefront facade overhaul, updated lighting, landscaping and new signage across the center. The renovations come on the heels of a year that brought several new tenants to the Friendly Center complex, including Whole Foods Market, Wolfgang Puck Pizza | Bar, Sephora and Altar’d State.
DDR’s 2.2 million sq. ft. of redevelopments included 51 projects and a total outlay of $220 million.
In 2012, DDR acquired Brookside Marketplace, a 602,000-sq.-ft. power center in the Chicago MSA, with an eye toward redevelopment. The company believed that the shopping center’s underutilized parking fields and chronically vacant small-shop space represented a great opportunity to increase the asset’s value. In June 2012, DDR launched a $11.6 million redevelopment project that encompassed 78,000 sq. ft., and consolidated six vacant small-shop spaces into one pad space accommodating Ross Dress for Less and T.J. Maxx.
In addition, the development of two new outparcel buildings allowed DDR to monetize underutilized parking space and further enhance Brookside Marketplace’s tenant mix through the addition of Pier 1 Imports and Panera Bread. The addition of these category-leading national tenants allowed DDR to strengthen the shopping center’s cash flow profile and generate an additional $1.2 million of net operating income, for an incremental unlevered cash-on-cost return of 10.3%.
Costa Mesa, California
Of Donahue Schriber’s 277,000 sq. ft. of redeveloped space during the judging time frame, it counts a Sacramento, California, project as its most significant. Located at the northeast corner of Fulton and Marconi Avenues, Town & Country Village underwent a $16 million renovation in 2013 that encompassed over 378,000 sq. ft. (99,000 sq. ft. counted toward the redeveloped square footage). After listening closely to the feedback of area consumers, Donahue Schriber demolished 103,000 sq. ft. of obsolete space and created three big-box spaces that became home to Bed Bath & Beyond, T.J. Maxx and Ross Dress for Less.
Other redevelopment projects that Donahue Schriber completed in 2013/2014 include Mandalay Village Marketplace in Port Hueneme, California (23,000 sq. ft.); Keizer Station in Keizer, Oregon (20,000 sq. ft.); Bonita Centre in Bonita, California (99,000 sq. ft.); and Laguna Crossroads in Elk Grove, California (36,000 sq. ft.).
Palm Beach, Florida
A newcomer to the CSA Top Redevelopers list, Menin Development redeveloped three projects in South Carolina and Florida in 2013/2014, encompassing nearly 900,000 sq. ft. Of the three — Magnolia Park, in Greenville, South Carolina; Shoppes at St. Lucie West, in Port St. Lucie, Florida; and PGA Plaza, in Palm Beach Gardens, Florida — Menin highlights the Magnolia Park redevelopment as its most significant.
In 2007, Menin acquired what was then called Greenville Mall, a failed and mostly razed center. The vision was clear: Leverage a bustling location at the confluence of two interstates and a major commercial corridor and create a retail destination unlike any other in South Carolina. Despite a schedule slowed by the economic downturn, Menin has turned its vision into reality with the newly named, 500,000-sq.-ft. Magnolia Park, featuring the first Cabela’s in the southeastern United States, as well as South Carolina debuts for Nordstrom Rack, Dave & Buster’s, Yard House, Tucanos Brazilian Grill, Firebirds, Cheddar’s, Pier 1, Destination XL, Bad Daddy’s Burger Bar, Toby Keith’s and Fresh 2 Order.
National Realty & Development Corp.
Purchase, New York
Of the five projects and 274,129 total sq. ft. redeveloped in the survey time frame, NRDC’s hallmark redevelopment project was Pohatcong Plaza, in Phillipsburg, New Jersey. The much-publicized Pohatcong Plaza redevelopment involved reconfiguring a former Walmart building into three separate spaces to accommodate new tenants Hobby Lobby, Marshalls and HomeGoods. In addition, a final remaining pad was constructed and leased to motor sports-themed restaurant Quaker Steak & Lube.
Today, the 562,000-sq.-ft. center, located at the intersection of Route 22 and Greenwich Road, is a vibrant addition to the New Jersey community it serves. Anchors and junior anchors include a broad spectrum of uses, including Walmart Supercenter, Super Stop & Shop, Regal Cinemas, Toys R Us/Babies R Us, Club Metro USA and Party City.
Other NRDC redevelopment projects in 2013/2014 include: Liberty Square Center, in Burlington, New Jersey; Kohl’s Plaza, in Wallingford, Connecticut; Washington Plaza, in Turnersville, New Jersey; and Hadley Center, in South Plainfield, New Jersey.
Pennsylvania Real Estate Investment Trust
PREIT redeveloped 232,653 sq. ft., encompassing some 10 projects in four states — but the most significant redevelopment in the survey time frame was the work completed at the company’s Moorestown Mall, in Moorestown, New Jersey.
In 2013/2014, Moorestown Mall saw over 81,000 sq. ft. of game-changing redeveloped space open. The ongoing redevelopment included an expansion and renovation of an outdated theater to make way for the region’s first Regal Premium Experience Theater, two celebrity-chef owned restaurants (Osteria by Marc Vetri and Distrito by Jose Garces), Firebirds Wood Fired Grill and Corner Bakery. These openings were key in PREIT’s strategy to upgrade the tenancy in the center to provide shoppers in the southern New Jersey market with a new, unparalleled shopping experience to include fine dining, topnotch entertainment and services, and best-of-breed differentiated retail on top of the usual shopping mall offerings.
The Sembler Co.
St. Petersburg, Florida
Sembler redeveloped 264,604 sq. ft. in 2013/2014, which included its Nokomis Village project (139,604 sq. ft.) in Nokomis, Florida, and the redevelopment of Crossroads Largo (125,000 sq. ft.) in St. Petersburg, Florida.
Sembler points to Crossroads as its most significant, as the redevelopment greatly impacted the trade area by reinventing a former enclosed mall into a mixed-use project that includes retail and multi-family and features a public transit transfer station.
The site had been an eyesore and vacant for years after the previous enclosed mall shut down. The impact of its closure left a retail void at one of Pinellas County’s busiest intersections. The new project generated resurgence in commercial interests and has promoted additional investment in the area.
Simon Property Group
Always a major player in the redevelopment space, the country’s largest mall owner Simon Property Group redeveloped nearly 20 million sq. ft. of retail space in 2013/2014 — which encompassed 34 projects in 20 states and Puerto Rico.
Of those 34 redevelopments, Simon counts its overhaul of The Shops at Nanuet as its most significant. Originally a regional enclosed mall, the revamped The Shops at Nanuet in Rockland County, New York, opened on Oct. 10, 2013 — reborn as a 750,000-sq.-ft. open-air Main Street center. Anchors Macy’s and Sears remained open for business during the transformation, and new anchor tenants include upscale grocer Fairway Market, Regal Cinemas and 24-Hour Fitness. Restaurants include Bonefish Grill, Zinburger, P.F. Chang’s and BJ’s Restaurant & Brewhouse. Other popular brands at the center include Apple Store, Brighton Collectibles, Coach, lululemon athletica, Sephora, Michael Kors and Sur La Table.
Vestar redeveloped 865,000 sq. ft. during the survey time frame, which included two western U.S. projects: The District at Green Valley Ranch, in Henderson, Nevada (390,000 sq. ft.), and Riverside Plaza, in Riverside, California (475,000 sq. ft.).
Vestar invested $5.2 million in The District at Green Valley redevelopment, which involved taking a declining property — acquired by Vestar from the lender in 2011 — and repositioning it from both a merchandising and an aesthetic standpoint.
An existing pedestrian plaza was converted into a two-way street with angled parking, enabling customers to drive through the project and giving retailers enhanced visibility. Vestar added all new landscaping and palm trees to create a soft and lush feel, as well as plugged in a kids’ splash pad and all new furniture in the common areas. Since the redevelopment to date, tenant sales have increased 20% — and Vestar has launched another redevelopment phase that will bring in fresh retailers to provide even better shopping alternatives.
Top Redevelopers stalwart Westfield redeveloped 1.12 million sq. ft. in 2013/2014, spanning 13 Westfield properties in five states and a $658 million investment.
For Westfield at Los Angeles International Airport, located within the Tom Bradley International Terminal, Westfield created a 25,000-sq.-ft. retail collection that provides a world-class traveler experience with 58 premier dining and luxury retail shops, sensational amenities and cutting-edge design. Among the retailers and restaurants Westfield brought to the new terminal, 20 are local L.A. brands, 40 are new to LAX, and 19 are airport firsts anywhere.
The new Tom Bradley International Terminal debuted to the public in September 2013 and is the centerpiece of Los Angeles International Airport’s multibillion dollar modernization program. As master developer of the new international terminal’s dining and retail collection, Westfield unveiled a traveler experience punctuated by 360-degree views, inviting storefronts and sustainable elements. With 23 new cuisine options, ranging from luxury dining to healthy-and-fresh sit-down as well as grab-and-go, Westfield’s dining collection celebrates local chefs whose cuisine reflects L.A.’s culture, diversity and taste trends.
Boost Holiday Sales With a Strong Supply Chain: Last-Minute Tips
Last year, 37.3% of “Black Friday” consumers began shopping between 8 p.m. and 11:59 p.m. on Thanksgiving Day. Shopper traffic over the two-day Thanksgiving Day and Black Friday period at retail outlets totaled more than 1.07 billion store visits. Sales during the two-day period were $12.3 billion, and online sales grew an explosive 18.5%.
After seeing the financial benefits of opening earlier, more retailers are expected to open their doors on Thanksgiving Day to get a jump on their holiday sales. This year, forecasters expect sales over the two-day period to grow 3.9% over last year.
With millions of people lining up — or logging on — for deals, retailers know the success of Black Friday rests on a strong supply chain. Preparations for Black Friday begin long before customers get in line, with supply chain managers putting their strategies in motion more than a month before the “biggest shopping day of the year.”
With the start of the holiday shopping season kicking off Thanksgiving Day and lasting through Cyber Monday, a weak supply chain could spell disaster for a retailer’s sales. The effects of the extended beginning to the holiday shopping season can be seen in the plans each supply chain manager has formed.
So how can you tell if you have a supply chain that’s ready?
Peak planning is one of the most critical components to a strong supply chain. Managers begin their preparations by assembling and training a team that is focused on preparing for holiday demand and capacity. Cross-training new team members on multiple skill sets give managers the ability to position new people based on seasonal shifts.
With the team in place, managers need to make sure the distribution center is set up for productivity as inventory volumes surge. Fast-moving products should be stocked closer to operating areas to reduce travel distance. For products with different order velocities, a slotting plan should be developed to help ramp up fulfillment for seasonal products.
As volume spikes, supply chains will see more full-pallet or full-case replenishment orders. Setting up the distribution center to support cross-docking will save time, allowing the workforce to move the products through the facility and build orders faster. Too many operations continue receiving, putting away and picking orders the same way they do during non-peak periods.
One of the big trends we’ve seen over the last three years is the ability to have flexible order-processing capabilities. This ties to packing products in different ways and having a build-to-order supply chain, which is one of the key capabilities in consumer goods and consumer electronics. A build-to-order supply chain allows retailers to adjust order patterns quickly to capitalize on changing trends.
Managers also have to plan around the driver shortage and capacity constraints in the trucking industry. Just as distribution center teams are being built, drivers must be in place to haul the products to the storefronts. This highlights one of the benefits of having a dedicated fleet, as it ensures drivers and capacity are available during peak periods.
As the holiday shopping season begins, there are some last-minute tips managers need to remember.
Right now, one of the biggest challenges across all operations — drivers, warehouses and packing — is the labor shortage. Having a pool of talent at the ready in case a surge in demand occurs is critical.
If there is a surge in demand, managers need to plan for distribution from multiple places. If product supply is low at one center, don’t get caught with empty shelves. A multi-center distribution plan will keep fast-selling products in stores and customers happy.
Now is also time for managers to begin preparing for returns. A reverse logistics plan with the right provider and network will make sure everything runs smoothly.
Managers also need to be ready to document everything that is done from now until the end of the holiday shopping season. This will give you a chance to see your successes and areas where you can improve for 2015.
A strong supply chain has the flexibility to handle all of these items. Having a successful Black Friday and holiday shopping season begins with having the end-to-end capabilities to adjust and deliver results.
With a strong plan and team in place, supply chains can be ready for the demands that come with the extended beginning of the holiday shopping season. Retailers hope these plans can kick off their holiday season and carry strong sales through the end of the year.
Steve Sensing is VP at Ryder System ([email protected]).