February 6, 2019
Countering the notion that the retail sector is suffering a prolonged death are a trio of reports suggesting otherwise. To be sure, shopping malls are undergoing a significant transformation.
But, to suggest they are dying would be incorrect, notes commercial real estate economist Jim Costello of Real Capital Analytics (RCA). He writes, “Despite these death proclamations, sales involving malls was where the action was in 2018. How can one square the fact that mall deal volume was up 846% in 2018, with the mantra that malls are dead?”
Costello points out a challenge that investors have when trying to understand the mall market is that the data on property sales often only covers assets trading out at the bottom of the market. “Indeed, looking at the distribution of mall pricing in 2018, there were three distinct pricing stories for the year,” he writes. The story here, Costello notes, is that the mall sector is not dead and there is a great disparity in pricing.
In fact, the National Retail Federation (NRF) is forecasting retail sales during 2019 will increase between 3.8% and 4.4% to more than $3.8 trillion, despite threats from an ongoing trade war, the volatile stock market and the effects of the government shutdown.
NRF’s Matthew Shay says, “We believe the underlying state of the economy is sound. More people are working, they’re making more money, their taxes are lower and their confidence remains high.”
Preliminary estimates show that retail sales during 2018 grew 4.6% over 2017 to $3.68 trillion, exceeding NRF’s forecast of at least 4.5% growth. The number includes online and other non-store sales, which were up 10.4% at $682.8 billion. That met NRF’s forecast of 10-12% online growth, and online is expected to grow in the same 10-12% range again this year.
That growth aligns well with retailers’ strategies, too. According to Shopgate, Inc.’s 2019 omnichannel report, 67% of retailers say omnichannel retailing will be a priority in 2019. The top benefits driving retailers to invest in omnichannel capabilities revolve around the customer, cost efficiencies, revenue and competitive advantage.
The five “power plays” for omnichannel retailing suggested by Shopgate include:
– Bridge the online and offline experience gap through mobile
– Create up-selling opportunities through buy online, pick up in-store model (BOPIS) and the buy online, return in-store model (BORIS)
– Create a single, cohesive view of each customer with clienteling
– Create better efficiency through omnichannel fulfillment
– Target customers better at the right time and place through geofencing.
For comments, questions or concerns, please contact Dennis Kaiser