Q&A Colliers’ Tom Lagos: Death Knell, Changing Retail’s Message
By Dennis Kaiser
Retail is not dead. Are you listening shopping mall owners and managers? It might be easy to get caught up in all the dire predictions, negative news or shifting consumer preferences, yet a strong, steady beat still can be heard across the retail landscape. Connect Media asked Colliers International’s Tom Lagos, a veteran of nearly 25 years transacting shopping centers, why he sees a healthy future for the retail industry.
Q: Why do you think the future is bright for malls?
A: There’s a perceived bias that online retailers, such as Amazon, are causing the downfall of brick-and-mortar stores. The reality is that’s simply not true. When you examine the growth in the sector, it is easy to see why retail’s future is promising. And there’s stats to back that up. In 2017, retailers will open 4,000 more stores than it closes. Retail sales this year have increased more than $100 billion over same period the year before, and shopping center operators report tenants are achieving some of the most historic performances ever. Those are all true statements that paint a rosier picture of the retail industry, but this reality runs counter to negative headlines and controversy.
Q: If online sales are increasing, doesn’t that point to a bleak outlook for malls?
A: A closer look at the numbers reveals a more nuanced reality. Online sales only represent about 8.5% of total retail sales and Amazon, as an example, only accounts for less than 5% of total U.S. market share. That means, a lot of money – and opportunity – is still up for grabs, if retailers are willing to pursue new strategies. Certain consumer goods, such as grocers, are performing better with physical locations rather than a pure e-commerce platform. Even in the electronic goods category, which was considered a poster child for the end of brick-and-mortar, there are success stories. Best Buy has experienced an increase in Return on Assets (ROA) reaching 9% in 2017.
Q: How does the retail industry begin to change the perception that it is a dying sector?
A: Changing the reality starts with starting a new conversation about experience, not Internet shopping. To be sure, it is easy to blame the internet for the demise of retail. Yet, upon closer inspection, the cause of so many retail closures likely is tied to the neglect of the customer service aspect. Physical stores really aren’t becoming obsolete, they just may need to attune their focus and adjust strategies around tangible experiences that attract consumers to visit. That means delivering something people can’t get online.
We’re also seeing tenants thrive by making their expertise, guidance, and assistance indispensable. They are successfully cultivating a need to go physically into the store and perhaps even make shopping a desired experience (think resort-type shopping environment). A restructured approach may include using employees as educators, rather than salespeople, and providing hands-on experiences. But an even bigger appeal for shopping malls may be the ability to walk out of the store with the product, which aligns with consumers’ desire for instant gratification.
Tom Lagos is an Executive Vice President with Colliers International.
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