The big news last week was Macy’s announcing the closing of 100 retail locations. Paired with this was the report that newer fashion brands are not seeking placement in traditional retail stores out of a fear it devalues their brand. Together these reports paint a bleak picture for brick and mortar retailers that sell brands that are not their own.
Retail is seeing the impact of multiple trends converging at once. Trends that also point even further down the road that could impact even online giants like Amazon. The internet + social media has made it possible to actually control your brand while direct selling your product in a cost effective way. Until a decade ago the only way to get to market at any sort of scale was to have your product in a department store (including the likes of Wal-Mart and Target) of some sort. They provided you with access to customers that would be interested in what you have available.
The trade-off to this arrangement was that you had to comply with how that department store wanted to position and sell your merchandise and you had to setup your supply chain around those outlets. In short, the infrastructure of your business was not setup to support who you needed to be as a company, it was setup to support your vendors and make their life easier and more cost effective.
Over the past decade we have seen the information revolution really blossom. The end result has been more and more brands choosing to self-source their retail spearheaded most notably by Apple. Self-sourcing allows companies to control their message, more strongly interact with customers, and manage inventory and discounts. They get to control the entire experience of their brand. This applies even to smaller online storefronts that slowly start to build dedicated followers.
Any business reliant upon a product produced by others and customers that can go directly to the vendor is starting to realize the impact to their business. Macy’s is just the latest in a long string of retailers that are evidence. I do like how Macy’s and Best Buy are spearheading their turnaround – give companies a place to showcase themselves instead of just being another brand on a rack. The store-within-a-store concept can really work. Customers have a reason to come in because they get to see lots of brands in a way that matches how the brand wants to be represented and walk away from immediately with their purchase. Brands have a reason to partner in because they get a brick and mortar presence at a fraction of the cost.
Here’s the takeaway for you though: are you planning for disruption in your CRE portfolio? What are your plans for when customers demands start to shift? What are your plans for when your vendor demands start to shift? How will you ride the wave of demographic change that is starting to cascade across all parts of the economy? All of this effects the CRE decisions you are making today. Those accounting for it will find themselves in better business positions 3+ years from now than their competitors.