By Garrick Brown, Vice President of Retail Research, Americas
The drumbeat of bad news seems to keep coming with each week. It’s enough that the good news (like retail sales actually being up the last couple of months) doesn’t seem to be making much of an impact. Consumer confidence remains a bit of a roller coaster and I would have to say that the confidence of players that I speak to in the industry is in much worse shape. At least, depending on the category of retail. And let’s not lose sight of that. I am not here to make you drink the Kool-Aid… there are plenty of challenges in the retail world. But it is a huge one with an awful lot of categories out there… most of which are holding their own and a few of which are actually growing. I could give you ten white papers worth of reasons why… but let’s keep this week manageable. You’re probably here for the articles and not my ranting anyway so I am going to try to keep this short and laser-focused.
Let’s start with the big challenge… and that is the challenge of the Millennial consumer. Now I could get all cliché corporate motivational speaker on you and tell you that the words for challenge and opportunity are the same in Chinese. There are two problems with that statement. The first is that there is no language called “Chinese.” The second is that the statement is simply not true… you could argue that the written symbols in Mandarin for both words is similar… but no cigar folks. The only thing true about the statement is the actual statement…every challenge does bring opportunities to someone. Might not be a very good one… like the challenge of plague and the great opportunities it brings undertakers… but there is a silver lining to every cloud… even though the silver lining might actually just be lead.
But let’s get to that challenge of the Millennial consumer… they don’t buy stuff. Or so it is said… Actually it seems as if they will spend money on experiences but they don’t spend in the same way that past generations did on George Foreman grills, collections of Derek Jeter bobbleheads or even full-priced clothing, apparently. Once again, that is its own 100-page white paper so I am not going to go there.
But let me share this… According to the latest data released by the U.S. Commerce Department (May 2016), sales at food and drinking places accounted for 12% of all retail sales. This is the highest level recorded in the 30 years this metric has been tracked. From 1992 to 2010, this metric averaged just 9.7%. Sure, cheap gas prices are playing a role in this, but it is important to note that even in past boom periods this number only infrequently climbed above the 11.0% threshold.
Think this has a millennial connection? I do and I break out how and why in a paper we are releasing tomorrow morning: The Cool Streets of North America. If you received this newsletter you are most likely on my mailing list and you will get it as soon as it drops. But basically I have spent the last six months doing deep dives on Millennial consumers and the rising tide of new urban shopping districts that are catering to them, as well as the retailers who are succeeding there. Sorry for the shameless plug, but in an age of increasingly negative news from some of our most important retail sectors (department stores, apparel, etc.), the rise of the Cool Streets are emerging as one of the brightest stories.
The Cool Streets are increasingly the incubator for what works with that Millennial consumer and the retailers that are doing well there are typically doing so on their own terms and at that elusive mid-range price point that the common wisdom has said Millennials will not touch.
Interestingly enough, Fast Company just released an article the other day on two of the most active players in this arena (Shinola and Warby Parker) that hits on this. The Robin Report also released a great piece about how the independents in this arena (primarily apparel) are getting it right while all we hear is the cataclysmic news about one household mega mall brand after the other.
The reality is this; the retailers who are making it now are the ones that truly understand that the most fundamental part of becoming an “experiential retailer” is to be interesting. Sadly that lesson is being learned the hard way by many of our largest brands who are increasingly boxed into a corner by Wall Street demands and the fear to take risks in the face of those demands. But the reality is that whenever we hear Wall Street complaints about a retailer nowadays it generally isn’t just the issue of they are not closing stores fast enough… Certainly, that is the big one (and if you read this regularly you know how I feel about that one from my posts of the last few months). But the other one big complaint we keep hearing is “lack of creative direction.” The fact is that to connect with Millennial consumers you can’t be boring. Your stores cannot be homogenous carbon copies of the same homogenous goods merchandised in the same homogenous way in one homogenous mall after another. That might work for discounters and the off-price folks, but if you want to engage consumers at the middle price point level you have to be interesting. If you aren’t, you are driving your customers to the internet.
But check it out in detail tomorrow when Cool Streets drops. In it, I cover the macro trends driving things and then we feature what we think are 15 of the coolest new retail districts emerging throughout the US and Canada and we crunch a whole lot of useful numbers on 100 hipster retail neighborhoods ranging from the Funk Zone in Santa Barbara (yes, that is an actual neighborhood name) to Jamaica Plain in Boston and from the Blue Dome District in Tulsa to the Corktown neighborhood of Detroit.
At ICSC ReCon we released our inaugural version of the 2016 Cushman & Wakefield North American Retail and Restaurant Expansion Guide. This report represents the growth plans (as we interpret them) for roughly 2,000 major chains throughout the U.S. and Canada.
Also, while we have begun work on our Q2 2016 reports… in the meantime, in case you missed it, here is a link to the latest Cushman & Wakefield US Shopping Center Marketbeat.
You can also check out any of our latest research reports by clicking here.
This post is commentary from the latest weekly edition of our Cushman & Wakefield Retail Newsline, which you can subscribe to for free by e-mailing firstname.lastname@example.org.
Garrick serves as Vice President of Retail Research for the Americas. He speaks frequently at industry events and has been a keynote speaker at symposiums, conferences and market forecasting events for groups like the Appraisal Institute, Urban Land Institute, CREW, ICSC and PRSM. He is also a member of Lambda Alpha International, an invitation-only land use society for those who are involved in the ownership, management, regulation and conservation of land, but also those who are involved in its development, redevelopment and preservation.