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State of the Industry Discussion with Peter Linneman

By: Terry Montesi, CEO of Trademark Property Co.

November 29, 2016

Dr. Linneman discusses the consumer, e-commerce and retail real estate driven by the rise of e-commerce with Trademark CEO Terry Montesi. Linneman is principal of Linneman Associates and chief economist of NAI Global. He was named one of the “25 Most Influential People in Commercial Real Estate” by Realtor Magazine.

Terry: The rate of change in the retail side of the business because of e-commerce is extraordinary. Where do you see this going?

Peter: If I gave you a punchline on it, it would be that internet sales are very real and they’re very much growing. But they’re growing from an incredibly small base. So what’s missed in the headlines is what I would refer to as the Bill Gates phenomenon. Would you rather have 1% of Bill Gates’ net worth, or 100% of mine, right? There is a sense in that, if traditional retail is only growing at 1 or 2%, that’s huge compared to internet growing at 10%, because the base is so large. By the way, that’s not to say it’s not a very real phenomenon, and as you know, the problem in retail is it’s a thin-margin business and anything you lose goes come from the bottom line, right?

Terry: I believe we shouldn’t diminish the power and importance of e-commerce. Let’s look at GAFO sales for a minute…General merchandise, apparel and accessories, furniture and furnishings, and O is other merchandise. For Trademark and your retail operator clients, it’s what is bought at shopping centers. It’s retail product, not services or food and beverage. It’s other merchandise. Peter, guess what percentage of GAFO sales are now e-commerce?

Peter: I would guess 6-8%.

Terry: 28%

Terry: That is why e-commerce, even though it may be relatively small, has had a big impact on the shopping center industry.

Peter: That’s a big category. That’s exactly right. I know that, it’s the same exact size as Amazon.

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