When the 30,000 attendees of the International Council of Shopping Centers‘ ReCon conference convene Monday at the Las Vegas Convention Center, will they leave behind concerns about the escalating U.S.-China trade war, ongoing store closures, tepid consumer spending, and new technology-enabled players that are upending traditional retail real estate leasing long enough to make deals? ICSC president Tom McGee believes the answer is yes.
“Obviously, retail continues to evolve and meet the needs of consumers,” said McGee. “Food and beverage is taking an increasing percentage of retail real estate. Apparel continues to be important, but things like services and F&B are taking an increasing percentage of space. It has to do with the composition of the American consumer. You have Baby Boomers, who are post kids, and Millennials, who are free of kids, and Gen X raising families, so there are fewer consumers out there. The demand for traditional retail is less significant since Millennials and Baby Boomers are placing high demand on experiences.”
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McGee sees shopping centers evolving into much more diversified spaces. “I wouldn’t say there’s one answer. There may be an opportunity for doing residential, a live, work and play community in one place. We recently did a survey where 78 percent of respondents said that if they had an opportunity to balance all those things, they’d love to reside where they could also work and play. Mixed-use projects meet the needs of American consumers. The two biggest demographics are at a point in their lives when a dense, mixed-use environment makes a lot of sense. Empty nesters now have an opportunity to utilize their time for going out to eat and shopping where they live.”
Contrary to conventional wisdom that the U.S. remains over-stored, even after thousands of closures, McGee said, “I’ve never believed the U.S. is over-stored. Retail is always evolving, and we’re more department store-centric than Europe and other parts of the world. The amount of space for department stores is shrinking and retailers have to develop and offer experiences to consumers. Experience can mean wine tasting and cooking classes, it could mean a treasure hunt quality like that of T.J. Maxx, interacting with technology at an Apple store.”
“In the last 100 or 50 years, a lot of brands have come and gone. Today, the velocity of change is very fast because of technology and the fact that you have an incredibly well-informed consumer who has the ability to price compare and product compare.
“People make it very easy to generalize about company-specific challenges and opportunities,” McGee added. “It’s important to think of technology in terms of, do I have an online strategy or not. The impact of technology is great, while the percent of online sales is still very small. The pervasive nature of technology is broader than online because you have a more informed consumer.”
McGee, an undying optimist, said, “To me, this is a retail renaissance. I say we’re living in a period of rebirth. So often, the narrative gets stuck between online and in store. It’s not either/or. The customer expects a seamless experience wherever they shop. Stores provide a halo experience. Brands that opened a store experienced a 37 percent jump in sales, while those that closed a store saw a similar decrease. There’s a whole movement of buy online, pick up in store, where over 67 percent pick up something else in the store.”
McGee isn’t surprised by the delivery arms race that’s heating up between Walmart and Amazon, which have been lobbing salvos at one another. Walmart’s latest move, announced last week matched Amazon’s free next-day delivery on minimum orders of $35, without the membership fee of $119. “Retail is a fiercely competitive business,” he said. “They’re the greatest example of the concept of conversions. Walmart, the world’s largest retailer with a huge physical network of stores, is playing in digital, and Amazon is playing aggressively in the physical space, not just with its Whole Foods acquisition, but the planned expansion of Go. Retailers that want to be successful and have a winning formula need to be able to play across both channels.”
WHAT TO WATCH AT RECON
ICSC is always tweaking the conference with exhibitors and programs that will be most meaningful to the organization’s constituency. McGee highlighted a number of new destinations at ReCon 2019 that he hopes will check all the boxes of convention-goers.
Retail in Focus will feature more than 30 emerging brands, many of them digitally native, that are interested in opening physical stores. “Some have opened stores and are looking to expand,” McGee said.
Health and wellness users are becoming more appealing to shopping centers and turning up on more leasing plans. ReCon is featuring a new health and wellness center “given the growth in medical offices and fitness centers…We’ll showcase a number of those tenants, along with Walgreens, CVS and Kaiser Permanente, where you’ll be able to check your blood pressure,” McGee said.
An innovation center has been added to ReCon this year, featuring new technologies that can have an impact on retail and real estate, from artificial intelligence and virtual reality to data collection and demographic analysis. “We’re building out our retail and real estate development programs and mentoring program,” McGee said.