Brick-and-mortar retailers are transforming into “brick-and-click” retailers, integrating across digital and physical channels to personalize service.
Creative businesses that embrace new technologies and service models are winning, and winning big.
Our newly created “New Money” REIT portfolio, that includes exclusively Strong Buy picks is up 5.5% over the last 30 days.
This idea was discussed in more depth with members of my private investing community, Intelligent REIT Investor.
“Retail & REITs” is a most popular topic – as Seeking Alpha followers know. It seems that every week I’m reporting and writing on the latest variation of a “REIT Apocalypse” – and, as needed, sharing my counterview of a “REIT Renaissance.” And, it was a big part of conversations at Nareit’s industry gathering, REITweek, earlier this month, in New York City.
Recently, I asked Marcus & Millichap, a leading commercial real estate brokerage, to give my newsletter readers their take on the Retail sector – and trends REIT investors need to know.
(Portions of this article first appeared in the June issue of Forbes Real Estate Investor.)
The Evolving Retail Environment: From Surviving To Thriving
Since the markets of ancient times, retail has evolved. In the 20th century, the growth of big cities and railways gave birth to the modern department store. Migration to the suburbs engendered the indoor mall, followed by discount chains, and big-box “category killers” focused on a single product segment.
The 1990s and 2000s saw the launch of the digital and mobile revolution and the rise of e-commerce, which now accounts for 10% of all retail sales. Mobile commerce – or buying products directly from a smartphone – is booming, as bigger devices, optimized apps and sites, and mobile-wallet services like Apple Pay have made the shopping experience seamless.
Meanwhile, brick-and-mortar retailers are transforming into “brick-and-click” retailers, integrating across digital and physical channels to personalize service.
The sectors’ constant reinvention carries legitimate risks and profitable rewards. Every era has seen shortsighted retailers cling to “tried-and-true” practices that ultimately fail, while others adapt and prosper. The current period is no different. Creative businesses that embrace new technologies and service models are winning, and winning big.
Finding True North
Last year, 26 major retailers with liabilities of at least $50 million filed for bankruptcy, and nearly 7,000 stores closed, prompting headlines declaring a “retail apocalypse.” No doubt, 2017 was a tough year for retailers that had too many stores, too much debt and a value proposition heavily weighted toward selection and price. That business model has been devastated by armies of consumers wielding smartphones.
Indeed, to a panicked novice in the retail forest, it might feel like the entire landscape is on fire. But smart survivalists know how to scrutinize the environment holistically and identify both hazards and advantages before making a move. Here are seven economic, industry and cultural signposts that help define the terrain.
The economy is strong, and consumers and businesses are upbeat: The U.S. economy is in its eighth year of expansion, unemployment is historically low at 3.9% and inflation is manageable. Consumer confidence rose in April to a near 18-year high, and a record 7.8% of respondents said they plan to buy a home, a harbinger of higher spending. Meanwhile, small business sentiment is hovering at record highs.
Bricks and mortar stores continue to grow: Chains operating more than 50 locations opened about 4,000 more stores than they closed in 2017, according to IHL Research. Include smaller chains, and the increase would be well over 10,000. Dozens of pure-play online retailers are opening stores, recognizing their importance in building customer relationships.