The retail industry has been quickly changing the past two decades. Simply reflect on the shopping malls of the 1980s and those mixed-use, experiential spaces of today to consider how consumers’ needs have changed.
Real-time evolution in retail development is now the new status quo — and we can expect shakeups like Amazon/Whole Foods and Walmart/Postmates to continue. The important next steps for developers are understanding and adapting with the changes that e-commerce brings.
Technology’s interruption of the classic retail experience is probably the most telling event of what the future will hold and how the industry will change in ways that we have never seen in the past. People want products quickly and easily, and retail developers have an important role in helping businesses develop effective strategies to be exactly where consumers want them, and at which points during their sales cycle.
Skilken Gold has seen decades of shakeups in the retail development industry, and now we believe retail developers are facing a unique opportunity to think about bricks and mortar as more than a physical place where people do business. Your storefront has an important role in defining your brand by making the shopping experience special for consumers and logistics simpler and more cost-effective. E-commerce shake-ups can begin to look more like opportunities instead of obstacles.
The facts remain that to thrive in an evolving industry, fundamentals remain king. After all, the adage goes, “Change is the only constant in the world.” By applying these best practices, your firm can stay ahead of the inevitable changes to retail development that will continue to come.
- Develop a startup mentality: When you are in the retail development business, you realize quickly that success hinges on energy and urgency, as well as a clear line of sight for an exit strategy. Like many startups, retail development is all about how quickly you understand the opportunity, how fast you take advantage of the opportunity and then how quickly you strategically plan to exit.
- Find the best tenants: As online and offline worlds continue to merge, qualifications to consider when it comes to quality tenants are more robust than in years past. Taking the time to understand the viability of your tenants’ businesses and the possibility of longevity in an ever-changing marketplace is critical for retail developers. Ask yourself the questions: What is their financial status today? How are they combating direct sales? Strong tenants typically have a sustainable business model and demonstrate forward-thinking leadership. They are the ones that are typically having the conversations about how to create a business that harnesses the convenience of e-commerce while also leveraging personalized and memorable retail experiences for their customers. They are the types of businesses that consumers are demanding and will continue to demand regardless of how e-commerce transforms retail.
- Build relationships with local government: Getting in tune with your local municipalities will go a long way when it comes to understanding zoning and entitlement considerations, as well as what approvals are necessary in each of the cities where you conduct business. When you can build these relationships before you need to leverage them, your clients will appreciate the ease of doing business with you and with that city.
- Hire specialized talent: Startups are notorious for hiring the best talent from the get-go for the sole purpose of helping you get to your goals as quickly as possible. As you evaluate your client’s goals, consider specialized skill sets your current staff may not have, and consider adding those specialized positions. After all, in retail development time truly equates to profits, and the faster you help develop the right customer strategy for your clients, the quicker they can do business.
- Continue to look forward: It’s easy to get bogged down in past successes, but it’s more important than ever to look forward and understand the continually changing landscape of retail. Keeping up with consumers’ demands means understanding how you can make their retail shopping experience best fit into their daily lives. Present day, developments are not being overbuilt, and retailers and developers need to be more selective in locations and the number of stores that are part of their strategies. Looking ahead, it is no longer about how many stores can you get built per year, but how can each of those buildings be located to provide the highest returns for that retailer.
The intersection of direct sales and bricks and mortar will continue to unfold in exciting ways outside of recent headlines in the grocery industry, and retail developers that continue to apply these time-tested strategies will come out ahead.
Ken Gold is the CEO of Skilken Gold, a national real estate developer. Additionally, he is an adjunct professor for graduate courses in real estate finance and development at The Ohio State University.