Recent news has shed light on an increase in retail store closings in 2019. In fact, we’re on track for more retail store closures this year than ever before. The natural thought process is to assume that ecommerce will eventually replace brick-and-mortar stores, and that traditionally physical retailers must prioritize an online presence above everything else to survive.
This isn’t entirely true. Yes, physical retailers must change with the times like any other industry, but that doesn’t mean brick-and-mortar retail is near extinction.
Retail is dead. Long live retail.
If everything is doom and gloom for retail, then why are we seeing digitally native brands opening physical stores?
In a recent Wall Street Journal supplement (May 2019) on retail real estate, MRI Software’s Brian Zrimsek states, “Bricks and clicks are not mutually exclusive – they actually complement each other.”
Contrary to the apocalyptic media coverage, there’s no data to suggest that online sales will take over retail sales. Instead, taking an omnichannel approach to retail is essential to survival. A recent report from CBRE provides deeper insight into what omnichannel real estate is and how it can shape the future of retail.
How data can help retail management
Retail property managers, owners, operators and REITs must make the right decisions to stay competitive. The ability to leverage data is the best way to see the full picture of retail health and effectively evaluate portfolio performance.
With the right data, retail property managers and others can understand their optimal tenant mix, understand the health of their retailers, and stay agile to respond to market changes.
Identify and evaluate tenant mix
Data can provide insights into what’s working and what isn’t. When viewed from a performance standpoint, a retail asset manager can uncover the right mix that works for a given location and then curate tenants that fit with that mix. This can lead to decisions such as letting leases expire or choosing to remove a retailer that does not fit with the optimal mix.
Understand retail health
The retail health score of tenants can help landlords stay ahead of the curve for potential problems. What ratio of rent to sales are they equipped to handle? What level of risk can your tenants tolerate? Learn more about how to calculate and the retail health score and use it as an early warning system to evaluate performance across your portfolio.
Build in the flexibility needed to react to changing market trends and mitigate risk for your retail portfolio. Structure your contracts and leases with shorter terms or even create spaces so that you can add new permanent or popup stores. Some online retailers are actually considering brick-and-mortar spaces as “marketing expenses” and have shorter time horizons as a result. Gone are the days of being locked in to a 30-year lease with Sears.
The retail industry is experiencing lots of volatility, but brick-and-mortar retail isn’t going anywhere. Smart retail real estate managers and REITs will rely on data, not hope as a strategy, to navigate the road ahead.
Learn more about MRI Software’s retail property management solutions here.
Andy Welkley is a Product Marketing Manager for MRI Software, where he drives product strategy and direction for the company’s Financial, Commercial and Retail property management solutions. Andy is passionate about leveraging the power of data to drive actionable decisions across organizations, and he enjoys developing and teaching best practices that support the needs and requirements of MRI clients.