Looking at a Transformed Industry

by Nate Hunter

Post-recession, the omnichannel environment is changing the retail industry.


Six years have gone by since we began hearing the alarm bells that heralded the seismic shifts in the retail real estate landscape. Thousands of stores shuttered and entire silos of concepts died. The resulting environment is now populated by smarter, stronger retailers who have used the recession to curate their brands.

As 2013 winds down and we sit at the cusp of inaugurating another New Year, it is safe to say — from the perspective of the retail real estate industry — that we are standing balanced on terra firma with a view toward an altered horizon that the consumer has helped reshape.

I recently attended a conference of approximately 1,400 shopping center attorneys. The energy was electrifying, with everyone at this annual meeting — mostly in-house counsel of retailers and developers and real estate lawyers — reporting that they were busier than they have been in the past five years, and possibly at their busiest ever. The industry has emerged honed, productive and smarter.

Apparently this is not only true in the U.S. In mid-November, I attended MAPIC, the largest shopping center event in Europe, where the outlook was similarly positive and the pulse vibrant. The halls were packed with a spirited attitude that was all about building success for the future.

Peering through the rearview mirror now affixed to the forward-looking retailer, the recession was good for the state of retail. It weeded out the weak performers and forced brands to focus on their core merchandise and listen to the customer. The retailers that learned this lesson quickly — those who nimbly shed underperforming locations, shelved obsolete concepts, and shrank real estate footprints — are still alive and mostly thriving and expanding again. Chasing square footage to keep Wall Street happy proved cannibalistic and fatal for other retailers.

Online shopping continues to grow exponentially, fueled by mobile apps and technology that continue to render certain physical establishments irrelevant. As a result, the size and the number of retail real estate brick-and-mortar establishments will continue downsizing through 2014 and beyond. The survivors will be the retailers who embrace the new omnichannel universe.

The interplay between Internet and storefront sales, when properly crafted, creates a synergy that results in a sum greater than its separate parts. A synthesized understanding of the offline and online customer delivers a seamless omnichannel experience that reinforces customer loyalty and motivates the consumer to shop. Great brands figure this out: No one wants to enter a retail space and be accosted by register sheriffs. The roaring success of Apple’s retail stores demonstrates that an interactive, open environment without the irritants results in increased sales. Instant gratification and paperless tracking are now expected.

In fact, omnichannel may be the new driver of bricks and mortar, not its death knell. Witness the recent introduction of innovative bricks-and-mortar retail concepts from Warby Parker and Bonobos. Both began as a fresh way for consumers to order solid products online, creating markets that previously did not exist. In the case of Warby Parker, it was trendy, price-accessible eyewear. Bonobos was created to manufacture stylized men’s trousers. Both transformed into bricks-and-mortar establishments by understanding their customers’ needs for real space to try on and experiment. Blink, an instant photo gratification shop in the Bay Area, opened just before Thanksgiving. It’s another example of the convergence of Internet media and physical space, delivering Vogue quality images with H&M prices and Apple usability.

While retail CFOs and general counsels will be left to confront and grapple with issues like when the sale is recognized, where the revenue is recorded, what the best return policies and procedures are, and, of course, who gets credit for the sale, the very existence of these issues means that the wise company has embraced omnichannel retailing. Whether bricks-and-mortar is a store or a showroom may be irrelevant when four-wall profit is no longer the barometer of retail success and percentage rent calculations are rendered moot with a new business model.

The revitalized retailer is dealing with an altered reality. We no longer need video stores, bookstores, large office supply stores, and duplicative linen and towel boxes. Consumers prefer fewer and better choices and focused merchandising. The increasingly urbanized American customer wants to explore and shop wherever they are comfortable. But we have voted that we are reluctant to part with our money for something unless it delivers a true value or a transcending experience. The smart retailer completely understands that, and is ready for the future that is now.


— Nina L. Kampler is president of Kampler Advisory Group LLC, providing value-add advisory services to the retail real estate industry. She can be reached via email at [email protected].

You may also like