REAL ESTATE

Technology will dictate the shape of retail to come

Given the extraordinary pace of change in retail these days, it’s reasonable to look beyond the current circumstances and think more critically about what the future holds. There is concern as to when the current turbulence will settle, but we prefer to think less about the bumps in the road and more about the destination.

The consumer marketplace is evolving, and that evolution is taking us to some fascinating places. From changing consumer preferences to fundamental shifts in the ways we think about and use spaces, the retail is taking on a markedly different look. What are those differences?

The industry is currently on the far side of a not-unfamiliar cycle, where rents get too high before correcting and starting to come back down. But the Amazon’s role in this retail evolution makes what comes next uncharted territory. The rapid growth of mobile and online retail has been a wake-up call for retailers. As it became clear to several national brands that they needed to adjust their balance of brick-and-mortar with online, many put the brakes on expansion. Others realized they simply didn’t need as many stores as they once did.

By far the biggest challenge for retailers today is adapting to and making choices from a wide range of new technologies. The cost can be significant. Technological disruption can make optimization difficult, and the unfortunate result is wasted dollars and disgruntled customers. Retailers need to think strategically about what technological advances are right for them, and they need to do so with context in mind at all times. They need to consider how people shop, use, and experience physical stores. More importantly, they need to explore what role experience plays in a brand’s retail formula.

Sephora’s digital mirrors are merely the beginnings of a burgeoning presence of augmented and virtual reality in retail. It won’t be long before people can “walk” through a digital mall together without leaving their homes. 3D scanners and x-rays that send people their measurements and allow for precise and convenient customization will soon become standard. Digital payment apps like Apple Pay and Venmo will soon be ubiquitous. Big data algorithms will track customer spending habits and preferences with increasing precision, and artificial intelligence and GPS data will target and merchandise with remarkable sophistication.

Delivery is a brave new world for retailers. Online innovators have a significant head start, and their work has raised the bar and changed consumer expectations. Delivery by drone is not science fiction; it’s inevitable. Homes will soon be designed with integrated new technology that “knows” when you are running low on consumables and will auto-order it for you.

Physical stores will increasingly be focused on convenience, service, and streamlined experiences. Automated valet parking will use vehicle “vending machines” that save space by stacking and double parking cars. Existing parking technology to make deck parking easier (vacancy indicators, advanced wayfinding, parking apps) will continue to become more widespread. Some companies are eliminating parking altogether, paying for their employees to use Uber to get to work.

Speaking of Uber, Walmart has experimented with using ride-sharing programs like Uber and Lyft to deliver groceries. It seems clear that transit innovation will figure prominently in the future of retail. Think-tanker Tony Seba and tech investor James Arbib undertook a study on the changing transportation paradigm and predicted that the number of passenger vehicles on American roads will plummet from 247 million in 2020 to 44 million by 2030. Designs will change accordingly (fewer parking decks, more pick-up/drop-off areas), as will services (shoppers can choose to have their selections delivered, for example).

At the same time, online-only retailers are recognizing that establishing brick-and-mortar presences is a prerequisite for growth. The mattress brand Casper, for one, recently announced it will open 200 new stores. Online brands “going analog” is a great way to connect with consumers and expand a brand’s footprint. Brands with a following and a strong online presence can hit the ground running. Pop-up shops have also proven to be a great way to test new concepts, and will almost certainly become more popular and prevalent.

The clawing and scratching to get to the future first will be fierce among retailers, and we’ll likely see a shakeout going forward. But let’s sit back for a second and embrace the fact that these are exciting times, filled with so many new experiential concepts, ideas, and technologies. Brick-and-mortar retailers are no longer panicking about online competition. Instead, they are turning to innovation and creative new ways to pave the way forward.

Theresa Johnson, Jedd Nero, and Stephanie Skrbin are all senior executives in Avison Young’s retail sector. They can be reached at [email protected], [email protected], and [email protected]

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5Qs on global expansion for Brandon Famous

BY Al Urbanski

Real estate services giant CBRE recently formed a committee of the leaders of its worldwide retailer representation operations to ensure consistent decision-making for chains expanding globally. Named as chairman of the committee was Americas retail leader Brandon Famous, a 30-year veteran whose insights regularly inform Chain Store Age’s real estate coverage. Our five questions for Famous had to do with U.S. chains expanding abroad.

Visit Canada and you see popular retail chains that you never see in the States. What are the three chief reasons retail chains keep it close to home?

Familiarity, manageability, and cost. You’re familiar with who your customer is. You have the experience to capably manage a store. It’s no coincidence that many retailers’ best-performing locations are in the towns where their headquarters are located. And a lot of this is a function of cost. Once retailers venture outside of their comfort zones, things get complex. Try to enter Brazil. It has double taxation—for importing goods and then for selling them. Argentina has some of the stiffest laws against retailers coming into that country.

Why are more U.S. retailers now looking farther afield?
The big difference is the data that’s available. Retailers can use data to see who the customers are in a foreign city and know that they already have a following there. The digital world has no boundaries. That’s why you have so many e-tailers finding success with brick and mortar stores.

Name two traits retail brands must possess to make it abroad?
You need to stay true to who you are, true to your DNA. And you need to understand the consumer and the culture of the market you are entering. If you don’t understand the local customer and culture, it can be devastating.

Large, enclosed malls seem to still find favor in Asia. Can you explain the phenomenon?
I give Asia credit in that the malls there are much more experiential than the malls are here today. There, when people go to the mall, it’s an all-day event. Most malls in Asia have 35 to 45 percent food and beverage, movie theaters, bowling alleys, children’s play areas. People come from long distances and plan to stay a while.

What will be very different in some of the shopping centers they encounter abroad and what will be the same?
European and Australian malls are very similar to U.S. malls. Asian malls have significantly greater food and beverage components. You’re going to find more luxury brands in the larger Asian malls, whereas in Europe you’re going to find more luxury on high street locations and not in centers. We see more international brands coming into the U.S., though, than U.S. brands going out internationally. But there is great opportunity for American brands to do so, because there is a large demand for American brands abroad.

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Velocity launches asset management unit; names its chief

BY Al Urbanski

Velocity Retail Group, a Phoenix-based member of the X Team Retail consortium, has formed an asset management division called Velocity Management Services. It will be headed by prominent local attorney and businessman Mark Villalpando.

For the past 16 years, Villalpando has led Good Oak Management, a full-service asset and property management, and for the past five years he has served as VP of ARES Retail Solutions. A graduate of Harvard Law School, he helped found the First Arizona Savings Bank and served as its chairman until 2010.

As a senior VP, Villalpando will also direct development for Accelerated Development Services, an affiliate of Velocity Retail that aids clients in build-to-suit expansions and construction management.

Mark’s background, experience and industry knowledge are a perfect complement to our organization,” said Velocity president Dave Cheatham. “Our clients require solutions that provide a consistent service delivery level regardless of whether its brokerage, development services, consulting, or asset management.”

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