• Americas

Retail Newsline: Mall Colonoscopies and Waiter! There’s a Pokemon in my Soup!

By Garrick Brown, Vice President of Retail Research, Americas

doctor_digital_tabletBefore I get into the meat of this week’s Newsline there are a couple of events coming up that I would like to give a quick couple of plugs to. If you happen to be in the Bay Area this week, swing by San Leandro Thursday morning for San Leandro by Design: Creating a Vibrant Downtown Core. I am going to be a speaker at this event that is covering a topic near and dear to me… urban revival. It features a great lineup of speakers and among the topics we will be tackling are private/public partnerships and what kind of retail works in the new Experiential Age. Click on the link above for more details, but it will be a great event and well worth your time to attend if you are involved in Northern California retail and/or development.

Additionally, next month I am going to be out in Nashville for the ICSC Tennessee/Kentucky Idea Exchange. This is always a great dealmaking event at an incredible venue in one of the nation’s coolest cities. The event itself will be Wednesday, August 24th and Thursday, August 25th at Music City Convention Center. I am going to be speaking to the General Session on Thursday morning at 8:30 AM on the topic: Cool Streets of America: Can Hipster Concepts Save Mid-Market Retail? If you can make it, please come check it out. I promise an enlightening and entertaining session and, hey… it’s in Nashville!

By the way, if you missed our Cool Streets of North America report, you can check it out by clicking here.

Now on to the serious business of mall colonoscopies (and no I am not referring to your landlord’s latest lease renewal rental rate) and the rise of Pokemon…

Bloomberg published a great article this past week, “The Mall of the Future Will Offer Dinner, Movies and a Colonoscopy (But Not in that Order…),” which begs more than just a few questions… Certainly when it comes to order, I would strongly suggest dinner post-colonoscopy but that’s just me and probably every gastroenterologist out there… but if you want to roll the dice with a visit to Wetzel’s Pretzels before that particular procedure it’s between you and your medical provider. Actually, the article does a good job of exploring the rise of medical use of prime retail space… a trend that has been on the upswing for the past couple of years and that will only continue to rise. Suzette Parmley of the Philadelphia Inquirer also tackles the subject adeptly in “Health Centers Quickly Filling Up Space in Philly Area Malls.”

But, as usual, while malls tend to generate the biggest headlines in our industry, most of the traction behind this trend is actually not taking place there… but in local community/neighborhood and even power centers. DaVita, for example, has been growing aggressively over the past few years, primarily in quasi-retail space. The kidney disease and dialysis care provider has been averaging unit growth above the 100 unit mark annually for the past couple of years and retail space in well-located (though often struggling) shopping centers offering strong demographics (density, age, income, etc.) being key to their success.

This isn’t anything new; dentists, chiropractors and medical clinics have long been part of the tenant mixes for smaller, neighborhood-focused retail centers. But their numbers are skyrocketing. Urgent care clinics, in particular, are on the rise as a new class of tenants to take retail space. In our 2016 Annual Retailer and Restaurant Expansion Guide we track a number of urgent care concepts that are looking to seriously ramp up their presence. Whether you love it or hate it, Obamacare has had a lot to do with this spike in demand. Even more conservative estimates put the number of additionally insured Americans under the ACA at 16.9 million. This has put pressure on healthcare systems struggling to keep up with the additional flow of patients, both in terms of preventative and urgent care.

All of this ties into why, despite the ongoing trend of consolidation that continues to impact a few key retail categories, that overall shopping center vacancy in the United States continues to decline. You can read more about that in our newly released Q2 2016 Shopping Centers Market Beat report.

But there were a number of different ways I could have taken this week’s Newsline… but at the end of the day there seemed to be nothing quite so big a story in the retail world (to me, at least) as the incredible rise of Pokemon Go! Sure, I am probably a little biased by my experience and I have been on the road for much of the past two weeks. In New York two weeks ago I saw random mobs of Pokemon hunters roving bars on the Lower East Side popping in and out of ‘Pokestops” in between downing drink specials and walking in front of taxicabs. I saw the same thing playing out in San Francisco last week and even in my little suburban sprawl community outside of Sacramento this week… where, despite 100 degree heat and a non-pedestrian atmosphere, I have seen roving bands of Pokemon hunters on the prowl… not at hipster watering holes but at such strongholds of suburbia as Chili’s, McDonald’s and Starbucks.

The fact is that three weeks ago there were only a handful of retail tech wonks and geeks who had ever used the term “Gamification,” much less ever used it in a sentence. Pokemon Go changed all that in just a matter of days. It certainly made a massive difference in Nintendo stock (which literally went in a straight line upward overnight), click here for a fascinating analysis from Statista. That, however, has changed somewhat (see today’s latest) for a couple of reasons (actual ownership—Nintendo vs. the actual gamemaker Niantec is one of them, but I happen to think the issue of additional retail driven revenue is part of this). But we think those will be worked out in pretty short order…

But let’s get back to the issue of just what exactly is Pokemon Go?  For lack of a better definition, it is basically an adult scavenger hunt. Except that you’re hunting Pokemon monsters on your phone… who “appear” in designated Pokestops and are visible only on the user’s smartphone. The company may have been ready for the game’s instant embrace by fans (it has broken download records and it is estimated that consumers have downloaded the game more than 75 million times in just the first three weeks). But it apparently wasn’t ready for its embrace by retailers and restaurants looking to add their locations as Pokestops. Despite such high profile deals like with McDonald’s in Japan, they reportedly have been scrambling to keep up with demand from merchants looking to be added as Pokestops.

Clearly it is too soon to tell how much Poke-metrics will impact actual retailer and restaurant foot traffic and spending… but in the age of experiential retail this will go down as the first huge success of gamification applications as a retail tool. Yes, there had already been a number of applications in this field and a number of retailers experimenting with different concepts. But none of those had exploded into the mainstream on any level comparable to what has happened with Pokemon Go.

waiter with a silver plate .Isolated on a white background

And that is the big story… even if Pokemon Go turns out to be a flash in the pan. First off, it is not clear that this will be the case… but what Pokemon’s success tells us is that the idea of a workable, interactive game on smartphone devices to lure people to stores, restaurants and bars is not just a feasible one, but one with a lot of potential upside.

It is also clear, to me at least, that while there is definitely a potential upside here for retailers, it is restaurant and bar owners that might see the greatest benefit so far. When I have come across Pokestops, I have made it a point to speak with everyone I can to try to gauge the impact. A few merchants have shared with me that it has brought people into their stores (mostly Millennials and Generation Z) and resulted in some sales. But the anecdotal feedback I have received from bars and restaurants has been much more substantially positive—Pokebeer hunts is becoming a thing.

How long the Pokemon craze lasts may be another story. For example, the Rubik’s Cube fad lasted all of three years (1980 to 1983). At its peak (1981/1982) this translated into about 25 million sales per year, but it was a mere afterthought by 1984. Is this an apples-to-apples comparison? Obviously not, it’s a plastic toy vs. simulated cutesy Japanese monster comparison. Games, particularly video games, tend to have a short shelf-life.

But I would submit none of that matters… Pokemon might be hot for just another few weeks or for another couple of years… what is most important is that retailers and landlords who have struggled to come up with workable models for gamification now have one. This, I am sure, will continue to morph to other game apps. Some may try to copy the Pokemon model, others will, no doubt, embrace trivia, strategy or other popular game themes.

What may be even bigger are the implications for online couponing sites like Groupon, review-driven sites like Yelp or reservations sites like OpenTable. The potential marriage of game elements with these services is huge and likely to happen in the not-so-distant future. The real challenge will be coming up with something that seems and feels fresh to consumers while not appearing to be just another copycat. And that may prove to be the biggest challenge of all because what isn’t clear is just how many of these types of programs the market could support simultaneously.

Fads like Pokemon Go only come around every few years and they are usually like lightning in a bottle; virtually impossible to replicate and just as hard to predict. But one thing is clear; the merger of smartphones, gaming technology and physical landscapes has just begun and this combination can, and will, become yet another arsenal in retail’s toolbox for driving traffic in the future.

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 garrick.brown@cushwake.com.

garrick-brownGarrick 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.

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