Brick-and-mortar stores

President’s Message: The Collision of Physical and Digital Retail

For quite some time now, you have undoubtedly seen the exaggerated headlines about the death of brick-and-mortar retail. How ecommerce—led by Amazon—would put physical stores out of business. How ironic is it now that these digitally native retailers are aggressively moving into the brick-and-mortar world?

In fact, Amazon is very bullish on opening new physical stores in all its various formats (Amazon Grocery, Whole Foods, Amazon Four Star, Amazon Books, etc.). And conversely, while Amazon is adding new stores, traditional brick-and-mortar retailers are determinedly expanding and beefing up their ecommerce platforms as well. Why? Because it provides multiple avenues and touchpoints to engage with and satisfy the demands of the consumer. It’s like two trains coming from different directions colliding in the same retail space.

We’ve already seen many physical changes occurring in brick-and-mortar retail stores as a result. Retailers and retail property owners are shifting away from the one-size-fits-all model and curating more personalized and experiential environments, a change that has been occurring for quite some time. Consumer safety features, BOPIS (buy online, pickup in-store), curbside pickup and expedited pickup zones for fast-casual restaurant establishments have all become the norm, even consumers’ expectations.

Retail real estate has certainly evolved over the years, but those who believed that brick-and-mortar stores were dying failed to understand consumers’ behaviors and preferences. Sure, specific retail formats and retailer stores have or will die, but overall, brick-and-mortar retail is healthy and here to stay. The onslaught of the COVID-19 pandemic further accelerated trends that were already beginning to occur and even proved that some types of retail are actually essential to consumers. The COVID crises also confirmed that retail centers are more than just for shopping. They offer healthcare services, wellness clinics, fitness, entertainment, community gathering places and social connectivity—all things digitally-native brands are now trying to capitalize on.

Moving forward, retail centers will only play a more critical role in everyday living and bringing communities together, and retailers must recognize and adapt to their role in this transformation. So, what can we expect to see for the future of retail?

  • Rapid expansion of those retailers that have emerged as the winners. Grocery stores (value, ethnic and specialty) are performing exceptionally well and remain attractive tenants in retail centers. Off-price players, fitness, healthcare and digitally native brands will grow substantially.
  • Constant and substantial physical changes to retail centers. Retailers will continue to alter store sizes and formats to adapt to consumer demands, such as convenience and safety (some may be larger, some smaller), more convenient front-of-store operations for customer pickup and quick product collection.
  • Enhanced online ordering systems, technology integration and expedited pickup zones for fast-casual restaurants.
  • Activation of common areas and outdoor spaces for restaurant and dining uses, entertainment, community events, and social gathering places.
  • Emerging new retail and food concepts (e.g., food kitchens).
  • Creative ways for retailers to use data mining and tech advancements to better engage with and attract customers into the physical store.
  • Continual incorporation of brick-and-mortar in the supply chain as more stores are utilized as distribution and fulfillment spaces.

Brick-and-mortar retail is definitely not dead, but it will continue to evolve and transform at a rapid pace—and the collision of physical and digital uses of retail space will drive most of this transformation.

Understanding the implications of these changes and being ready and able to adapt will be critical for retail owners and operators. And, for those able to do so, there will be many opportunities in the future.

As the physical and digital retail worlds continue to collide, retailers and property owners will be forced to get on board or get crushed!

June 2, 2021|Blog, President's Message, Retail|

President’s Message: Gross Exaggeration

Facts Myths Balance

I recently read another doom-and-gloom article in the local newspaper that embellished the dire health of shopping centers and the retail industry in general.

It reminded me of an old quote regarding Mark Twain, “The report of my death has been grossly exaggerated.” As the story is told, Twain was traveling abroad on a speaking tour. A rumor began that he was gravely ill, subsequently followed by reports that he actually died. A major news publication picked up on this rumor and ran with it—soon enough, the news went viral. Twain read about his own death in the media! Ironically, once the very-much-alive Twain was contacted by a reporter for a statement, he gave (a variation of) the famous line above.

His story is very reminiscent of the rumors and headlines regarding the death of retail and brick-and-mortar stores today—grossly exaggerated. This statement may sound contradictory in the wake of numerous high-profile store closures and bankruptcies over the last couple of years, but, according to a recent study by Deloitte, “The great retail bifurcation: Why the retail “apocalypse” is really a renaissance, here are some hardcore facts to add to the hysteria:

  • In 2017, retail sales increased 3.5%, compared to a gross domestic product growth rate of 2.3% the same year.
  • In the 1st quarter of 2018, retail spending was up 1.6% YOY; total spending across brick and mortar grew 3.2%.
  • Last year, 44% of consumers reported spending more on retail than 2016. Only 14% said they spent less.
  • Brick and mortar is predicted to grow by $36 billion by 2022, and e-commerce is predicted to grow by $50 billion in the same period.

Retail is not dying; it’s evolving. Deloitte’s report found that high-end, luxury retailers have seen revenues soar 81% over the last five years, while price-conscious retailers have seen their revenues steadily increase 37% over the same period. This contrasts with mid-level, balanced retailers (deliver value via a balance of price and/or promotion), whose revenue has increased only 2%. From 2015 to 2017, price-based retailers gained 2.5 stores for every store balanced retailers closed.

Net store openings and closings

Net store openings and closings

(Source: Deloitte, The Great Retail Bifurcation survey, 2017)

Here’s why: The study shows that consumer economics are actually changing the retail environment, and household income has the strongest observed correlation with shopping behavior. Unfortunately, for the majority of U.S. consumers, the last 10 years have represented a dramatic worsening of their financial situations. Rising healthcare costs combined with new expenses associated with mobile phones and data plans are eating away at discretionary spending that would otherwise have benefitted retailers.

Additionally, income levels affect where consumers make purchases. Low-income consumers are 44% more likely than their wealthier counterparts to shop at discount retailers, and also more likely to shop in-store at supermarkets, convenience stores, and department stores. High-income consumers, on the other hand, are 52% more likely to shop online. While millennials are often lumped together and portrayed as the source of disruption, reporting found that millennial behavior (by income group) is virtually indistinguishable from other generations.

Likelihood of Online vs. In-store spend

Likelihood of Online vs. In-store spend

(Source: Deloitte, The Great Retail Bifurcation survey, 2017)

The “e-pocalypse” can officially be filed away under fake news. While there is no question that technology has disrupted the retail business via e-commerce, mobile devices, virtual shopping, etc., physical stores continue to dominate retail sales. Research shows that 78% of consumers prefer to shop in-store and spend significantly more in physical stores than online.

In fact, the real story is that the vast majority of retail sales still take place in brick-and-mortar stores—e-commerce sales account for less than 10% of total retail sales. It is also estimated that over half of those online sales actually go to brick-and-mortar retailers. The online vs. brick-and-mortar struggle is not quite what it seems.

However, that doesn’t mean that all retail stores are going to survive. As I’ve said before, there will be winners and losers in the retail race. The winners will be those retailers that can evolve with the changing landscape and capitalize on the consumers increasing demands—and we will continue to see more store closures, especially among the mid-level, balanced retailers.

Home furnishings, beauty/cosmetics, and home improvement stores are performing exceptionally well. Stores such as Best Buy, Dollar General, Ross Dress For Less, TJX Cos. (T.J.Maxx, Marshalls, HomeGoods), ULTA Beauty, and countless others are all thriving and rapidly expanding their physical presence. We see new-to-market retailers pop up every day. Even Amazon has taken note of the power of physical stores and rolled out brick-and-mortar expansion plans. Many other pure online players have followed the same path, like Warby Parker, Fabletics, and Bonobos.

The folks at Deloitte concluded their insightful report with this: “A sea change is clearly taking place in the retail market—but it is not the retail apocalypse. In our view, it is instead a renaissance—driven by huge shifts in economics, competition, and consumer access to options, all fueled by exponential advancement in technology. And in this renaissance, the winners appear to be those retailers that can capitalize on consumers’ experiences of their economic well-being—or lack thereof—to offer a value proposition that aligns with consumer needs.”

Despite the deathly tales, retail is very much alive and well—as was Mark Twain!

May 7, 2018|Blog, Corporate, President's Message, Retail|

Consumers Still ♥ Brick-and-Mortar

Valentine’s Day Shopping

Valentine’s Day has come and gone—and it was retailers who were feeling the love this year. According to the National Retail Federation (NRF), early sales projections leading into the holiday were estimated to reach a near record of $19.6 billion, an increase from $18.2 billion last year. U.S. consumers individually were expected to spend an average of $144 on Valentine’s Day, also up from last year’s $136.57. The NRF reports these retail numbers are the second-highest in its survey’s 15-year history. Additionally, the majority of Valentine’s Day retail sales were expected to be made in a physical store, including department stores, discount stores, specialty stores, florists, or local small businesses.

This healthy holiday spending is reflective of the upwards trend across the U.S. over the past year. The 2017 official Holiday Season (November & December) rounded out with total retail sales estimated to be more than $690 billion, a whopping 5.5% aggregate increase over 2016, indicating the strongest holiday season growth rates since 2010. Shoppers spent an average of $842 on gifts and holiday-related items versus $714 in 2016. Furthermore, 85% of total sales were by retailers with a physical presence.

These statistics confirm and reiterate that the retail real estate industry is thriving, and the rise of ecommerce hasn’t changed that. Yes, we’ve read the bloated headlines about “the retail apocalypse,” “the death of shopping centers,” and “the Amazon effect on retail” but the real story is that ecommerce sales account for less than 12% of total retail sales. It is also estimated that over half of those online sales actually go to brick-and-mortar retailers. Even though ecommerce sales are growing considerably, online giants such as Amazon still only account for a small percentage of the overall market.

As we saw this past Valentine’s Day and during the 2017 Holiday Season, consumers prefer to shop in-store. In fact, 90% of holiday shoppers made purchases from retailers with a physical presence. In the retail game, successful stores are actually using ecommerce to their benefit, giving consumers more options and convenience to make their purchases. Omnichannel buying options, like click-and-collect and click-and-ship, are enhancing the brick-and-mortar shopping experience and boosting sales at physical stores.

To add even more sentiment to your post-Valentine’s Day heart: In the past year, we saw more retail store openings than closures and store openings are expected to outpace closures over the next 5 years (according to Zebra Technologies-IHL Group study). In 2017, the retail market had 4,080 net store openings.

And… To put the icing on the heart-shaped cupcake, retail sales are expected to continue to increase for the next several years. Many experts forecast that overall retail sales will rise between 3.8% and 4.4% in 2018 over last year. That certainly warms my heart.

On track with the rest of county, the retail landscape here in the Gulf South region is solid. Occupancy rates in our centers remain high. Retailers are reporting strong foot traffic and higher-than-anticipated sales numbers—especially those who are learning to adapt to consumer demands and offering unique shopping experiences. We are also attracting and welcoming many new-to-market stores and restaurants.

So, on Valentine’s Day, today, and every day, let’s remember to advocate for and show a little love to our brick-and-mortar retail friends.

Marty Mayer Signature

Marty Mayer
President & CEO

February 16, 2018|Blog, Gulf South, Retail, Retail Sales|

President’s Message: The Death Knell of Retail Real Estate Is Exaggerated

Stirling Properties President;s Message

I am sure you have all read attention-grabbing news headlines such as these and share the same concerns regarding the future of retail real estate. In this new era of constant access to millions of digital media streams, dramatic headlines cut through the clutter and generate more attention. Drama sells. But despite all the negativity circulating, I am confident that the retail landscape is solid, and the death knell of brick-and-mortar stores is heavily exaggerated.

While there is no question that technology has disrupted the retail business via e-commerce, mobile devices, virtual shopping, etc., physical stores continue to dominate retail sales. Research shows that 78% of consumers prefer to shop in store and spend significantly more per month in a physical store than online. E-commerce, multiple fulfillment options, omnichannel retailing, and other technological advances are improving the brick-and-mortar shopping experience and boosting sales at physical stores.

Even though e-commerce sales are growing significantly (approximately 15% annually), the in-store vs. online struggle is not quite the battle that it is portrayed to be. E-commerce sales—combined with mail-order sales—account for less than 10% of total retail sales. Furthermore, it is estimated that over half of online sales actually go to brick-and-mortar retailers. Consumers are still buying from stores, but now they have more choices to compare prices, make transactions, and receive their goods. Major retailers such as Anthropologie and Nordstrom are effectively leveraging e-commerce sales to grow their business. Anthropologie notes that 36% of its total revenue is earned online and Nordstrom reports 22%. Successful retailers are learning to integrate online sales and omnichannel retailing.

However, in every industry, there will always be winners and losers. Companies must adapt to an evolving business climate. That includes retailers. Competition and shifting customer habits are hurting more merchants than the internet, and innovative new retail concepts are coming to market daily. Unfortunately, corporations like Blockbuster, Sports Authority, and The Limited did not survive the ever-changing retail industry. But on the flipside, stores such as Best Buy, Dollar General, Ross Dress For Less, TJX Cos. (T.J.Maxx, Marshalls, HomeGoods), ULTA Beauty, and countless others—most of which are in Stirling Properties’ portfolio—are all flourishing and rapidly expanding their physical presence. New-to-market retailers like Filson, Iron & Resin, KENZO, and Woolrich are getting in on the action. Even online retail-giant, Amazon, has taken note of the power of physical stores and rolled out brick-and-mortar expansion plans. Many other merchants with digital roots have followed the same path (i.e. “clicks-to-bricks”), such as Warby Parker, Fabletics, and Bonobos.

Similarly, there will be winners and losers as retail real estate investors and owners. Well located, solidly anchored centers are thriving, while Class-B and -C malls and poorly located centers are continually losing national tenants, struggling to fill empty spaces, and downsizing significantly. Some are failing altogether.

The bottom line is that consumer patterns and expectations have shifted. In this so-called “era of the high-maintenance consumer,” they demand value, convenience, multi-channel fulfillment options, and a unique, entertaining experience.

Well-located retail real estate with strong anchors is still a profitable investment option. Net absorption has been high, demand has been exceeding supply, and rents have been rising. Retail is yielding the best 20-year return of any property type due to a combination of strong fundamentals, favorable demographics, limited new supply, and cash flow growth potential. Secondary and tertiary markets are proving to be especially attractive for investors to buy value-add retail opportunities.

Retail real estate is not dying; it’s disrupted. Anyone with any involvement in the industry must embrace this changing landscape to be successful. We will continue to hear negative news and over-exaggerated headlines as the retail race endures, and more stores announce weak sales forecasts and closures. But disruption creates opportunity and a chance for reinvention. At Stirling Properties, we plan to take advantage of these opportunities to re-evaluate and enhance our portfolio and strategic growth plans.

We must ALL adapt and deliver…or get left behind!


April 10, 2017|Blog, President's Message, Retail Sales|

Debunking E-Commerce Myths

Shopping at brick-and-mortar stores

We’ve recently heard of fake news stories, hoaxes, and fabricated plots that have permeated headlines lately—and, unfortunately, the negative consequences that some have caused.

One such fictitious headline that’s running rampant is “the death of the shopping mall” and countless more tales of online sales putting brick-and-mortar stores out of business. But the reality is that the in-store vs. online struggle is not quite the battle that you probably think it is. In fact, physical stores continue to dominate retail sales.

So with the proliferation of fake news stories, here are a few facts to debunk these e-commerce myths and demonstrate the strength of the shopping center industry.

In-store retail sales accounts for $4.2 trillion or 90.7% of the market. A common perception is that online giants, such as Amazon, dwarf brick-and-mortar competition, but the reality is that Amazon is still a small percentage of the overall market. Online-only retailers represent merely about 3.5% of all U.S. retail sales.

Research also shows that 78% of consumers prefer to shop in-store, and spend significantly more per month in a physical store than online. We’re also seeing that omni-channel retailing is actually an enhancement to brick-and-mortar stores. E-commerce and other technological advances are improving the brick-and-mortar shopping experience and boosting sales at physical stores. 93.4% of all retail sales owe all or part of sales to a brick-and-mortar presence.

These are all encouraging statistics that confirm the shopping center industry is thriving, and the rise of technology and e-commerce is not going to change that. But we do need to change our thought process. Industry professionals and supporters need to advocate for our shopping centers and educate the consumer. According to one of my industry colleagues, “The consumer needs to be told that bricks and mortar is here to stay because if you keep telling the consumer it’s dead, the consumer will think it’s dead and start shopping online.”

Our friends at ICSC (International Council of Shopping Centers) have recently drafted several editorial pieces that have appeared in national news publications such as The Wall Street Journal. We are grateful for the leadership of Tom McGee and his team to help this business create our own sources of credible information, and to educate consumers on how vital the shopping center industry is, to both them and our entire country. Read the full articles “A Talk With Tom McGee” and “E-Commerce and Physical Stores Are Friends with a Common Purpose.


December 14, 2016|Blog, Corporate, Involvement, Louisiana|
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