Tuesday, January 31, 2017
Retail disruption actually about innovation
By Marissa Rose (Chicago), Amit Parekh (Los Angeles), Hilary Kellar-Parsons (Toronto) and Michael Ganz (Irvine, CA)
A current theme in retail real estate, as in many other industries, is disruption. Reoccurring throughout 2016, particularly at the 2016 ICSC NextGen Conference in Los Angeles, were key conversations on this trend. Some of Avison Young’s retail affinity group’s young professionals had the privilege of attending the conference and getting to hear speakers from several key companies driving the disruption of the retail industry.
Retail real estate is undergoing a transformative and dynamic shift, due in part to disruption from technology, integration with existing shopping centers and consumer experience. This disruption results in improved consumer shopping experiences, investors raising capital through crowdfunding in local communities and changes in the ways that retailers allocate product through seamless channels of distribution.
Attended by four Avison Young up-and-coming real estate professionals, the ICSC conference showcased various perspectives on how disruption is affecting the retail real estate industry across North America. Impressive panelists and presenters included senior members of the retail real estate community, including designers, in-house real estate executives, investors, and market experts who were able to give their opinions and thoughts about how disruption is affecting their businesses and the retail sector in general from a theoretical perspective. Next, bus tours allowed attendees to touch and feel the physical retail spaces discussed during the conference – one tour included various hot new Los Angeles retail destinations. This tour provided a great opportunity to see first-hand how new retail developments and retailers are adapting their retail platforms to embrace and capitalize on the disruption that the retail world is facing. A key lesson is that much of what is going on in the industry is driven by the desire of millennials to live-work-play in urban areas, and their concentration in city centres – specifically locations where they are near their offices and surrounded by retail properties where they can shop, eat, and socialize.
The biggest take-away that was evident at the conference was that disruption was never really about disruption, but instead about finding the gaps in customer offerings and filling those gaps through innovative and creative approaches to retailing. Many retailers embracing this trend have been dubbed as “disruptors” as a happy accident. When many of these retailers set out, their goal was to explore the gap, listen to what people wanted, and then create a retail experience curated specifically with customer desires in mind. In an industry where you must “adapt or die,” these companies found a way to take innovation a step further, and many are experiencing sizable growth as a result. A common trend is that these retailers have really embraced consumer preferences, which have shifted; consumers now desire value, authenticity, and/or meaning in their retail experiences. Companies like SoulCycle and ShakeShack have been able to fulfill these wishes. Because of this shift, the darlings of the retail industry, like Macy’s and Gap, have really struggled to withstand change. Macy’s and Gap have struggled to instill the brand loyalty seen in so many of today’s successful retailers.
Lion Capital’s Sherif Guirgis shared with the attendees an investor’s perspective on the changing retail landscape and about the changing ways in which retailers are valued in the current economy. He echoed many of the above sentiments about current retail trends and about the importance of customers’ experience to not only the brand as a whole, but the brand’s value in the financial world.
(Marissa Rose, Amit Parekh, Hilary Kellar-Parsons and Michael Ganz are up-and-coming Avison Young Associates who specialize in retail sales and leasing services. Rose is based in the firm’s downtown Chicago office while Parekh works out of downtown Los Angeles; Kellar-Parsons advises Toronto-area retailers and Ganz assists clients in Irvine, CA. Services that the four brokers provide include landlord and tenant representation, sale and lease negotiations, and market analysis.)
Posted by Avison Young Guest Blogger at 11:05 PM