The Changing World of Retail – A Conversation with Garrick Brown
By: Terry Montesi, CEO of Trademark Property Co.
April 12, 2017
How are retailers managing from the old paradigm to the new and who is succeeding?
Garrick Brown, Cushman & Wakefield’s Director of Retail Research for the Americas discusses this in detail with Trademark’s CEO, Terry Montesi and SVP of Development, Edward Manuel.
Terry: Knowing what our business is, what are some of the obvious, key pieces of advice that you have for someone that wants to successfully manage through this transitional period from the old paradigm to the new?
Garrick: Obviously retail has always been the most evolutionary of the commercial real estate products. I mean if you look at National Retail Federation’s Annual Stores Report, where they’ll report on the top retailers – if you look at the top 20 today versus 10 or 20 years ago – you only have to go back about 20 years and half of those retailers no longer exist today. But the evolution we’re going through now is on steroids, crack, and Amazon juice. I think we’re going to see more changes in the next 5 years than we’ve seen in the last 30. And at the heart of it, big surprise, is e-commerce – Amazon eating everyone’s lunch.
I think the fundamental shift is going to be about tenant mix – and for the winners it’ll be about quality and location. But I think within that things aren’t as bleak as they seem. The challenge is where the growth is happening. With almost every category, I’m starting to worry about their runway for growth. And certainly part of the problem has been this race to the bottom with discounting that we haven’t snapped out of, even though the consumer economics are in the best place they’ve been in the last 10 years.
I think technology plays into that, in that our smartphones have made us smarter shoppers, but it’s killed margins. And between that and e-commerce – you know, what’s happening in the apparel and department store sectors – we’re maybe just in the second or third inning of this. You know, Macy’s with their hundred store closures this year – that’s really only about half of what they’re going to end up closing. And that’s assuming that the e-commerce acceleration doesn’t get worse, and that they can actually maintain with all the pressures – especially the publicly traded guys – which leaves big questions marks. The old mall model, that’s going to be something that doesn’t just go away, but we’re so highly over-retailed in the United States to begin with. And it’s going to be a bit of a bloodbath ahead, especially for the folks that have properties in secondary or tertiary markets where there hasn’t been continual investment. And the switching out of tenants – now you’re talking about what was a low to mid-level pricepoint retailer replaced by Bargain Basement. That might be the most extreme example, but if you’re in the mall space and not at least a B+ or above, you’re most likely in trouble unless you do some radical reinvention.
Terry: I’ll ask this question in a bit of a different way: what’s some of the advice or what are some of the things you’d be watching out for?