Macy’s stock is up this morning. Their physical market presence is predictably down.
Do not buy their stock just yet. Wait until Macy’s closes nearly 100 stores in what is now regarded as the biggest red flag in retail merchandising since the market crash of 2008.
The retail segment of the CRE market has been flipped over and is shaking out. There’s more change coming as digital consumers and their shopping habits continue to shape the retail industry’s commitment to bricks-and-mortar operations.
Our behaviors are transforming some of the most renown retail establishments in the nation. In the end, the change will make them better because it is customer-driven.
Small is the New Big
We are going to see retailers continue to shrink their physical presence within all trade areas as small becomes the new big, where bits and bytes become modern transaction currency.
For me, the tightening of operating costs and the reduction in square footage is making a lot of sense in a world driven by Facebook, Twitter, YouTube, Google+ and the entire spectrum of millisecond communications. And, I have not even mentioned Amazon’s 30% per year growth rate each year for more than a decade straight.
Let’s remind ourselves that Apple sold a lot of iPods, iPhones and computers without a lot of retail operations.
These facts beg the question what happens to retail malls and shopping centers that have been historically dependent on a top-down marketing model that had the biggest brands drawing the traffic to the lesser known tenant mix? Hmmm?
Finally, the Customer is Right
The change we see is the result of a behavioral mandate and operating reality similar to our move from gas guzzling cars to fuel efficiency. We got rid of our eight mpg cars and trucks and replaced them with new 14, 20 and even 40 mpg automobiles. The industry retooled, we adjusted, and life went on and the industry survived.
Market realities and consumer habits are creating a fuel efficient retail industry. Market presence, innovation, and the digital economy are connecting consumers with retailers in more cost-effective and time-saving ways.
Going shopping is not what it used to be. People now live their frenzied lives on the run. We are starved for time and the efficiencies we experience by having an Amazon account are a dream come true and if you are Amazon Prime the shipping is free. Driving, walking, biking and hiking are on the increase. But our eagerness to walk the floor of 100,000 SF retail store is, well…borrrrring.
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