New call-to-action
Connect Events

Whether digital or in-person, Connect Events set the stage to bring together relevant content with CRE’s most active players to engage, influence and inform.

National CRE News In Your Inbox.

Sign up for Connect emails to stay informed with CRE stories that are 150 words or less.

Sub Markets

Property Sectors

Topics

National  + Retail  | 

Q&A with Cushman & Wakefield’s Ben Conwell: Retail’s Not a Zero Sum Game, DTC, Digital Natives to Physical Stores

By Dennis Kaiser

The shifts transpiring across the retail sector are coming blazingly fast and frequent, which will be a hot topic of discussion at ICSC RECon in Las Vegas (May 20-23). Connect Media asked Cushman & Wakefield’s Ben Conwell, who is the firm’s national e-commerce fulfillment practice leader, to share a few insights in advance of a NAIOP-hosted breakfast where he’ll be speaking during the big retail event (Rise and Redefine Retail May 22nd ).

Conwell joined the commercial real estate firm after directing North American real estate operations for Amazon. He explains why retail isn’t a zero sum game, why Direct to Consumer approaches are being considered by some retailers and ways pure-play retailers are executing physical store strategies in our latest CRE Q&A.

Q: Why do you say retail is not a zero sum game?
A:
I use this phrase to call out the fact that omni-channel shoppers – a group that continues to grow significantly every year – do not shop online OR in physical stores. Rather shoppers are flowing seamlessly from digital to physical and back again, often multiple times before making a purchase decision. Furthermore, regardless of whether legacy physical or digitally native, retailers are increasingly discovering the complementing value of compelling offerings through both platforms. One does not rob from the other: they support each other. Where physical locations are closed, increasingly retailers are seeing a decrease in online sales in the service area. We are seeing the inverse as well – where the roll out of a new, or upgraded online offering correlates with increased physical store sales. This is not a binary proposition – it is an additive one.

Q: Apparel manufacturers are shifting their strategy to go direct to consumer (DTC). How is this approach playing out today?
A:
We are still in the early stages of this shift. It is sure to continue to gain traction, but is fraught with risks: brand, customer, supply chain and expense. Self-performing DTC takes significant expertise and resources, and usually is not easily scalable up or down. Failed delivery fulfillment promises to the customer can be disastrous to customer loyalty. Many retailers are moving to DTC executed by third party logistics providers (3PLs), with scale and expertise to perform fulfillment on contract for retailers. 3PLs offer flexibility in scale, generally quicker speed to market, and expertise, although expenses are significant.

Q: Why is this DTC strategy being considered?
A:
This strategy is driven by multiple factors, not the least of which are protection against brand value erosion from discount retailers, defense again counterfeiting risk, control of the customer experience and control of sensitive data. Select brands such as Nike that have historically been in thousands of retailers, including hundreds of discount outlets, are paring back significantly the number of doors they sell through. Discounters are great for shoppers, but not always great for retailers working to protect a value proposition and a price point.

Similarly, building a DTC offering insures absolute authenticity of goods; and no counterfeiting. DTC also keeps the shopping, fulfillment and delivery process under the brand’s control, mitigating the risk shoppers’ poor buying and delivery experience through another retailer or channel does not reflect poorly on the brand.

Fulfillment by Amazon

Finally, sales and product data protection is a growing concern. Every time an apparel manufacturer sells an item through Amazon or other marketplaces, the marketplace gets precious data on shoppers’ behavior, a brand’s most successful SKUs, specs and other information that can potentially be leveraged against the manufacturer. The explosion of Amazon’s private label business is at least in part informed by the tremendous flow of data gleaned from its Fulfillment by Amazon (FBA) and marketplace sales. Yes, marketplaces like Amazon and Walmart bring millions of eye-balls, but there is a downside. For many manufacturers, DTC is a viable alternative, but it is not for everyone.

Warby Parker Store

Q: What are some of the ways online retailers are developing a store network?
A: Emerging former pure-play online retailers, also referred to as digitally native brands (DNBs), are having increasing impacts to physical retail demand. As described above, the sales correlation between physical and digital stores is powerful and growing. Commonly, the first step on the road to a physical store network is one or more pop-up locations. Pop-ups often are in temporary or short-term spaces with limited inventory and little if any TI build out. Occasionally, pop-ups will land within established stores, more commonly in apparel and accessories. These more commonly land in vacant urban storefronts, malls or sometimes in shopping centers. They enable brands to test customer engagement, to learn some of the pros and cons of operating physical locations, to test how supply chains for store replenishment differs from DTC, and significantly for many, to leverage for marketing purposes. Successful limited pop-ups generally morph into greater numbers of pop-ups, then into actual store roll-out.

unTuckit Store

Q: How is that proving to be a wise choice or a powerful symbiotic relationship, as part of a digital native going physical strategy?A: For many manufacturers, it has proven to be pivotal in building the brand faster and more successfully than staying purely online. Among the more high-profile brands that have made the transition to a truly omni-channel offering include unTuckit, Casper, Warby Parker, Tuft & Needle, and Rent the Runway. There is no question physical retail will always be hugely significant; it is not going away. True, online in the U.S. continues to grow at three to four times the rate of physical retail, but the ability to actually interact with the brand in person complements shoppers’ demands for seamless omni-channel experiences. And that is regardless of how well a retailers’ returns execution runs.

Q: What are the implications for the retail industry, such as investors, mall owners, or high street property owners?
A:
This is bad and good for retail property owners, generally. No, we do not expect retail store closures to end any time soon, but all is far from lost for well located, well designed retail assets. Clearly, the increase in demand for physical spaces from digitally-native brands seeking omni-channel nirvana for their customers will be good news for property owners. These emerging occupiers alone, however, will not up-end the retail world. They are, however, among the drivers that will continue to have positive impacts on leasing demand.


Subscribe to Connect Retail

For comments, questions or concerns, please contact Dennis Kaiser

Connect

Inside The Story

Connect With Cushman & Wakefield’s Conwell

About Dennis Kaiser

Dennis Kaiser is Vice President of Content and Public Relations for Connect Commercial Real Estate. Dennis is a communications leader with more than 30 years of experience including as a journalist and in corporate and agency marketing communications roles. He is responsible for Connect’s client content operations and is involved in a range of initiatives ranging from content strategy, message development, copywriting, media relations, social media and content marketing services. In his most recent corporate communications roles, he led a regional public relations effort across Southern California for CBRE, played a key marketing role on JLL’s national retail team, and was responsible for directing the global public relations effort at ValleyCrest, the nation’s largest commercial landscape services company. In addition to his vast commercial real estate experience, Dennis has worked on communications and launch strategies for a number of residential projects such as Disney’s Celebration in Florida, Ritter Ranch in Palmdale California (7,200 homes, 22,000 acres), WaterColor in Florida and PremierGarage in Phoenix. Dennis’s agency background included firms such as Idea Hall and Macy + Associates. He has earned an outstanding reputation with organization leaders as a trusted advisor, strategic program implementer, consensus builder and exceptional collaborator. Dennis has developed and managed national communications programs for Fortune 500 companies to start-ups, both public and private. He’s successfully worked with journalists across the globe representing clients involved in major-breaking news stories, product launches, media tours, and company news announcements. Dennis has been involved in a host of charitable and community organizations including the American Cancer Society, Easter Seals, BoyScouts, Chrysalis Foundation, Freedom For Life, HOLA, L.A.’s BEST, Reach Out and Read, Super Bowl Host Committee, and Thunderbirds Charities.

New call-to-action