The reinvention of retail and how to survive the transition

By Gary Tasman

CEO & Principal Broker, Cushman & Wakefield Commercial Property Southwest Florida, LLC

 

While the retail sector continues to weaken, retail giants Amazon and Walmart continue to strengthen their hold on the industry by buying, what seems like, everything in sight. The extremely competitive rivalry between the two continues to heat up with Amazon’s recent acquisition of Whole Foods. The acquisition takes aim at Walmart’s grocery business, as well as allows Amazon to establish a bigger brick-and-mortar presence.

With Amazon capitalizing on Whole Foods’ large distribution and store network, other retailers will have to step up their game to survive and remain competitive. Amazon’s entry into brick-and-mortar stores along with their ability to successfully execute online sales, give them an advantage over the competition.  In recent years, top grocery chains have made major investments in online grocery services, but most are still lagging behind.

 

Impact on Retail Industry

Although this last battle involved the grocery business, the impact of the Whole Foods acquisition impacts more than supermarkets — it impacts all of retail. Recent acquisitions by Walmart including Bonobos, Jet.com and Shoebuy prove that retailers cannot solely survive through one direct channel. A multi-channel approach is the direction moving forward, and it involves a combination of both e-commerce and brick-and-mortar. As retailers transition to this omni-channel strategy, they have an enormous task to accomplish — provide customers with a seamless experience in both.

 

Effects on Small Business

With big box retailers leading the way and setting the pace, the smaller mom and pop type businesses will find it challenging to set themselves apart from the competition. Offering an online platform is necessary to survive, as well as compete, but the cost of entry is expensive. This shift will drive smaller businesses to consolidate in order to better align their strategies, refocus efforts and stay relevant. As this trend continues, the transition will see winners and losers take shape. As winners prevail, they must continue focusing on key indicators driving success including:

  • Delivering a consistent brand promise online and in store
  • Aligning internet strategies with brick-and-mortar strategies
  • Delivering creativity and ingenuity to remain competitive

 

Impact on Commercial Real Estate Market

Within the retail market, we are seeing a shift in the footprint size of brick and mortar stores. Consumers are researching potential purchases online, prior to walking into the store. And with on-demand-type service (order in store, and it ships to your home or order online and pick up in store), physical locations are now becoming more of a showroom. Retail space is shifting to a smaller more local-style look and feel, eliminating the need for expansive amounts of warehouse space, thus dividing larger spaces into smaller segments to accommodate multiple business entities.

With retail trends and the market shift, retail developers are not taking on new retail projects without significant pre-leasing commitments, as well as a significant entertainment/social component in that decision.

 

Southwest Florida Outlook

The retail sector of the Southwest Florida Market continues to report positive growth, with increased asking rates and decreased vacancy rates. A positive trend in absorption supports a rise in demand for retail space. Growth in the retail market is expected to continue, with an increase in population, as well as baby boomers and millennials looking for more retail options. Let us also not forget the desire to support local businesses.

As this trend continues, a social component is necessary to remain competitive. Data shows that people are willing to travel to areas that provide the most enjoyment of the overall retail and entertaining experience. Fort Myers is a sought-out destination for retail and entertainment, while Cape Coral boasts numerous restaurants to satisfy any appetite.

Southwest Florida’s strong pace of population growth fuels stronger demand for housing, health care, professional services and consumer spending. The influx of tourism and seasonal residents support the increasing demand for retail trade, housing and food service. This trend is evident in the decrease in vacancy and increase in overall absorption in the market. Regionalization of the Southwest Florida community is expected to grow faster than the national rate, as more businesses experience the need to serve all of Southwest Florida.