By Jeffrey D. Roseman, executive vice president,
Newmark Grubb Knight Frank Retail
I am sure we all remember the classic fable of Chicken Little, who believed that the world was coming to an end and ran around uttering the famous line “the sky is falling, the sky is falling.”
As that story unfolds, we learn a valuable lesson, and discover the moral of the story is not to believe everything we hear. The sky obviously wasn’t falling, and in fact, things were just fine.
Well, I am here to say the sky is not falling in the retail world either.
Everywhere one turns today, you can find a story about the impending death of retail stores as we know them.
If it’s not the internet that is driving out retailers, then it is the decay of the shopping malls and the demise of the department stores. Sprinkle in the growing rents on high streets throughout the country, and chain stores filing bankruptcy, and you get the appearance of a full blown retail apocalypse!
Ever since the inception of the internet, there has been speculation that it would destroy the retail business as we knew it, and would keep customers on their couches to click on and purchase their favorite items and never take off their bathrobe and slippers to set foot in a bricks and mortar location again.
The reality is that while online shopping has taken a huge chunk of consumer spending, people still do want to have the social experience of shopping and human interaction.
You cannot feel a fabric, smell a cologne, squeeze an avocado or swing a golf club online. These all are experiences that shoppers will not be giving up any time soon.
What the internet has done for shopping is hold retailers to a much higher standard of operation and limit the amount of expansion they are doing.
Many chains have cut back on their reckless growth, which has, of course, sunk more than a few companies. But just like the progress that has occurred in every walk of our life, retailers have learned a quick lesson: that in order to survive, they must provide an experience that not only offers great merchandise at a fair price, but creates excitement and energy in the consumer, who is expecting to be entertained while shopping.
Want an example? Walk into the new Nike store in SoHo or the Kith in NoHo. Between the merchandise, the music and the energy in those stores, you will be hard pressed to find people with their faces buried in their iPhone.
Smart retailers realize that their customer is always changing, whether it be the millennial customer who is constantly Snapchatting and posting photos, or the seasoned shopper who is hunting for those hard-to-find items.
Retailers have learned how to better focus on the happening they are providing, and that expansion for expansion’s sake is not the answer any more, but a well curated experience is.
The funny thing about online merchants is that the really successful ones now provide a balance of both an online platform as well as bricks and mortar stores.
Think of Amazon, Warby Parker, Rent the Runway, BonoBos and so many others. The bricks and mortar locations allow their customers to come in and experience the brand, try things on, and equally as important, exchange or return those purchases made under the influence at 2 a.m., which seemed like a good idea at the time.
With regard to the death of the malls, it’s not a secret that for over the past decade, there has been an abundance of brand new retail structures built.
Whether it is called a Mall, a Power Center, or a Lifestyle Center, there quite frankly were not enough tenants to go around and fill all these locations. Properties got watered down, retailers spread themselves too thin and voila! Some of them could not sustain themselves when the going got tough.
Additionally, many of the older, established malls never re-invented themselves and still looked like they did when they were the centerpiece of a John Hughes movie.
Department stores and chain stores going of business is not a new concept, the retail graveyards are full of names we never thought would leave us: Gimbels, Bonwit Teller, Alexander’s, Circuit City, H&M Records, Merry-Go-Round, and the list goes on and on and on.
Like any other business, if a retailer does not stay current and up-to-date, they eventually go under. More times than not, it is not about rents, or the internet, or any other factors; plain and simple — it’s about execution.
So, the next time you are watching a retail pundit discuss the dismal state of retail, do yourself a favor and walk into an Apple store or a Sephora, or the NBA store, and decide for yourself, and then remember the story of Chicken Little.