Although Americans are spending more time dining out than in recent decades, it's getting tougher to operate restaurants. Here's one reason: Private equity has been pouring into fast food, fast-casual, and other chain restaurants, pressuring chains and franchisers to open more outlets. And, that's one more reason why it's great for independently owned downtown restaurants, whose personalities and location make them unique.
The Community Land Use and Economics Group is a small, specialized, consulting firm that helps community leaders create vibrant downtowns and neighborhood commercial centers. Our work focuses on developing forward-looking economic transformation strategies, with particular emphasis on cultivating locally owned businesses, removing regulatory and financial barriers, creating effective incentives to stimulate new investment, reusing older and historic commercial buildings, and outlining practical implementation plans. Our clients include local and state governments, nonprofit organizations, business improvement districts, developers, and planning firms in the US and abroad.
Adding its voice to those of many other investment firms and economic advisors, Credit Suisse now predicts that 25 percent of US shopping malls will close within the next five years. To us, this suggests some significant opportunities for traditional downtowns and neighborhood commercial districts to grab back some retail market share.
Yet more evidence of big changes on the horizon for the shopping mall industry: A new report by real estate analyst CBRE says that, for the mall concept to survive, mall management companies must focus less on department store anchors and on small chains and more on food and entertainment. Only problem is that department stores - currently most malls' major tenants - usually have to approve significant changes beforehand, and their long leases make quick changes very unlikely.
The consolidation, downsizing, and outright shuttering of chain retailers continues. In this morning's Weekly Roundup, Fung Global Retail & Technology predicted that 9,452 stores will close by the end of 2017, a 361 percent increase over the previous year. The latest announcements include denim chain True Religion's bankruptcy, hot on the heels of announcements that Sycamore Partners will buy office supply retailer Staples (and close many of the stores), that Sears and Bed Bath & Beyond are closing more stores, and that Eddie Bauer is looking for a buyer.
What's going on? Lots of factors are at play, including overly ambitious chain store expansion plans, consumers' continuing shift toward online shopping, and the many ways in which Millennials' shopping patterns and preferences differ from those of previous generations. Many of these are promising signs for traditional downtowns and neighborhood commercial districts who stand to benefit from capturing sales that shoppers previously spent in now-closed chain stores. After all, independently owned downtown businesses offer shoppers the ultimate combination of personal attention, deep product knowledge, hyper-local market responsiveness - and, for those businesses that are savvy, both bricks-and-mortar and online shopping opportunities.
Want to talk about how to make your downtown more competitive during this period of enormous retail transition? Drop us a line or call us.
Drawing on data from Credit Suisse, internet marketing firm Kleiner Perkins predicts that more retail stores will close this year than they have in the past two decades. Things look grim for shopping malls, which rely on chain retailers. But there could be great opportunities for downtowns and neighborhood commercial corridors, whose businesses could see increased sales as chain retailers close. And, independently owned downtown businesses have the ability to customize their products and offer unique experiences tailored to their communities - unlike chain stores. Neil Blumenthal, one of eyeglass retailer Warby Parker's two CEOs, recently said, "I don't think retail is dead. Mediocre retail experiences are dead."
Yet more bad news for the chain retail industry: February-March were the worst months for retailers since 2009, with retail stores eliminating 60,000 jobs.
This could be good news for downtowns and for independently owned downtown retail businesses, with market share shifting from malls to main streets. Independently owned businesses have always been more adaptable to local markets than chain retailers. And, downtowns already have many non-retail uses.
REI attributes its 5.5% sales growth last year to being organized as a cooperative, listening to customers, and setting itself apart as a retailer that centers its strategy around valuing the outdoors.
Retail prognosticator Deborah Weinswig predicts that minimalism, environmentalism, and the Marie Kondo-fueled decluttering movement mean that people will buy less in the future, investing in products that last longer. She cites the five principles of Patagonia's Common Threads program as an example: reduce, repair, reuse, recycle, and reimagine. "Consumers' future priorities will be ethics, a concept of 'disownership' and sustainability", she says in her November 2016 report "Decluttering: Anatomy of a Consumer Trend and How Retailers Can Win".
Chain Store Age reminds us that Baby Boomers still have greater disposable income than Millennials. Like Millennials, Boomers place a high value on convenience. But, unlike Millennials, Boomers aren't particularly brand-loyal, and they have a pronounced (but not exclusive) preference for shopping in physical stores rather than shopping online.