The Great Myth of Dying Retail

During my research for this article, I asked 43 local residents, business people, and elected officials the following question: What percentage of all U.S. retail sales go to online merchants versus brick and mortar?

The average answer given was close to 30% for online sales. Not one single respondent came close to the real answer of 9.1%. Read that carefully, it’s not 91% but just nine point one percent…that’s right, less than 10% of all U.S. retail sales are e-commerce related. Those are the stats according to the most recent report from the U.S. Department of Commerce that covered the first three quarters of 2017.

I bet you, like many others, believe the hype that Amazon and other e-retailers are taking every dollar from the brick and mortar businesses. To be clear, Amazon is doing very nicely but in fact, in-store retail sales are growing more than online. In 2016, retail sales grew $128B excluding items like fuel and autos. Online sales added a healthy $53B, but in-store sales added an even healthier $75B.

The simple fact remains that business for the brick and mortar folks is robust. That doesn’t apply to everyone. There are big brands, like Sears and K-Mart, which have major problems. Those issues have everything to do with the fact that their brands are not relevant to a new generation. To those of us who grew up with those iconic brands, watching them die seems terrible and makes it easy to believe the myth that retail is dying. But in fact those brands are dying due to poor business practices. Unfortunately many of the old brands are stuck in outdated strip centers and large shopping malls whose time has come and gone.

It is important to note these things because the retail market around us is continually evolving and what is going to be successful in the future has to do with how and where retail is built. The strategy to succeeding in today’s retail world is a matter of improving the customer experience.

THE TRANSFORMATION
There is no better example in the changing landscape than what is happening in Alpharetta. The North Point Mall was once the crown jewel of the area and now the sexy new beast is Avalon, which is practically a stone’s throw away. Most of you have probably been to both and it’s not hard to see that the experience at each location is completely different. Avalon has what people want, which is connectivity. Simply put, the mixed-use concept is the way forward, but that oftentimes gets complicated in local politics.

Downtown Alpharetta continues to grow.

As our outdated shopping centers age, they will need to transform or die a slow death. Roswell in particular has a bad problem with outdated shopping models. The city is full of them but the fixes are not easy.

In speaking with area developers there was a continual theme of not wanting to deal with Roswell politics. I spoke to one developer who stated that they looked at several area investment opportunities but decided against investing because any purchase of existing retail real estate would certainly require a mixed-use component. That leads to much higher density requirements and that’s where things get derailed in local politics. The “anti” crowd is against everything and when a developer is looking at investment that sometimes goes well north of $100m they tend to avoid communities who demonize them. So the strip centers sit.

I get it. Nobody likes construction and the headaches associated with it, but we live in a capitalist society and property owners have every right to maximize value. If our local economy is going to hold it’s own, or better yet grow, then there needs to be an adjustment in thinking in Roswell. Every decision on construction can’t hinge on density but rather it must be judged on total value and what it brings to the market place.

The irony here is that two age groups agree that the experience is the key to successful retail. A higher percentage of young (less than 35 years) and old shoppers (older than 65) cite the need to see, touch, feel, and yes, even live near the shops they frequent. This appears to be indicative of age groups that have more time on their hands to go to stores and shop around. They are also less likely to have kids in the house so that cool condo sitting in the middle of Avalon looks pretty sweet when you don’t have a stroller in tow.

Alpharetta is a city where decisions have been a little easier due to several exits on GA400 that were ripe for growth. But their downtown has been transformed; yes with some political handwringing, but in the end it is moving into the 21st century. There is a new parking deck, a new mixed-use project going up right in front of the new City Hall complex and their economy is booming as a result.

Roswell on the other hand, had some success nearly a decade ago with the transformation of Canton Street but that energy is dying and while there is a new mixed-use concept opening this spring there is a disjointed feel to the whole area that is not quite sure what it wants to be.

Tax dollars at work. The citizens of Roswell purchased this property several years ago… in that time Alpharetta has debated, voted on and built a parking deck and a new mixed use concept at the new city plaza.

Roswell has what is essentially a new government in place, with a rookie mayor and six council members that have little government experience among them. It will be interesting to see where things go as they face several projects that require bold decisions. Among them is the old Southern Skillet location near city hall. As she recently stated in her address to local business leaders, mayor Lori Henry said, “It’s the number one question I get asked almost every day… What’s happening with the Southern Skillet location?”
Time will tell, but a much larger project will be the only profitable way forward and mixed-use will have to be part of the equation. Roswell does have one new project that was surprisingly approved last year in the form of a new mixed-use project at the corner of Alpharetta Hwy. and Sun Valley Drive. The Fuqua Development project is taking the place of an outdated strip mall and will contain a grocery store, office, retail, restaurant space and up to 300 apartment units in a four-story complex. In total it’s an $80M project that brings approximately 400 jobs. Only time will tell if that is an outlier or a sign of things to come.

THE SHOPPERS
Beyond their physical location, a retailer these days must provide more that just product. Consumers want to experience something and the “touch” factor is key, especially amongst women. According to a consumer survey by Retail Dive last year the female shopper wants the ability to see, touch, and feel items. Two-thirds (66%) of female shoppers say trying-it-out is a deciding factor for shopping in stores versus online. Shopping for products with a high fashion quotient—think apparel and accessories or home furnishing—is a likely driver.

“Take furniture as an example. The consumer wants to sit on it, touch it, feel it. If they are looking for a new Nikon camera? They’re going for the lowest price online. The cameras aren’t different but the price is,” said David Bercaw of City Antiques in Roswell. “We’re unique, we provide an experience to shopping, if all you’re looking for is a product number and the cheapest price then you’re probably going online. We’re big on repurposing here and that makes our product unique.”

Retailers must also have the right store strategy. A compelling experience is key to shoppers’ demands and that becomes an easier task when the retail complex is a close-knit community with a shared interest. The ability to see, touch, feel, and try out items is the top reason why consumers choose to shop in physical stores versus online. With 62% of shoppers wanting to kick the tires, retailers must take full advantage and up their game to create compelling shopping experiences.

This is the main reason why developers seek mixed-use concepts. It’s the most popular concept they can lease, and consumers, especially those who are opposed to such development, need to understand these vital aspects to the local economy.

To that end Roswell INC, the public-private partnership that serves as the economic arm for the city is in the process of a three-year study to find out what does work locally. With one Super Target location recently closed in east Roswell, many residents are unsure where the future is headed.

Steve Stroud,
Executive Director of Roswell Inc.

“We’re excited about this three-year opportunity because we’re going to be able to know where people are shopping and in what shopping centers. We’re going to know that the tale of two Targets in Roswell is so drastically different in the city of Roswell,” said Steve Stroud, president of Roswell INC. “How do we change that? How do we recruit the right kind of retail for Roswell? This survey will help provide answers.”

These are vital issues we’re dealing with as the economy continues to grow our micro economy must keep up. The retail sector is huge to our economy. Last year, according to the Bureau of Labor Statistics, locally we spent over $525M on apparel and services and over $800M in local restaurants. By any standard that’s a lot of money. So the next time a development is proposed, let’s try to see the whole picture. A healthy economy is in all of our shared interests.