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Retail Law Advisor

ICSC RECon 2016 – Holding Court

Posted in Real Estate, Retail

d36faa060a1fe99d9fc4ec28b1eb7d31ICSC RECon 2016 tipped off with a keynote address by Earvin “Magic” Johnson, Chairman and CEO of Magic Johnson Enterprises and former NBA superstar. Attendance was up by about 2.7 percent from last year, with around 36,000 attendees, representing the more than 1,100 companies that registered for the sold out event. Real Estate developers from throughout the country touted new projects, while brokers and retailers hustled through the Las Vegas Convention Center halls in search of new deals. The mood of the crowd was mostly positive, reflecting a sense of cautious optimism with the current economy.  At the same time, some expressed unease with the lack of visibility on the direction of buyers’ shopping habits and trends, and a feeling that there could be a pullback in upcoming quarters.

Doug Karp, President of New England Development, a premier developer of retail centers and mixed-use projects, reflected positively about this year’s show. “We had great meetings out at ICSC. The general theme from potential retail tenants was to look carefully for the right opportunities and to proceed with caution. Most retailers seemed to have limited buys and wanted to be strategic where they applied there capital. But the good news was that with good real estate, the retailers were looking to make deals. We too are cautious but optimistic about the outcome of the convention.”

Conference attendees were greeted by a new Technology Lab exhibit, a showcase of technology start-ups and their products, as they entered the main Convention Center lobby. The growing impact of technology and the dynamic nature of retail was a big theme at the formal sessions this year, with topics such as “Retail Technology Trends to Watch”, the “Future of Retail” and “Tomorrow’s Shopping Center Today”.  As we have noted in several blogs in this space, the increasing impact of social media and new developments in technology and omni-channel retailing are top of mind for retailers and developers alike, as they continue to work to find common ground in this rapidly changing retail landscape.

But most attendees were not there for the formal presentations, but rather to be part of the game itself. Fit bits were buzzing everywhere, with people hitting their target step count by mid-morning as they weaved through the crowds to get from meeting to meeting. The wheeling and dealing continued late into the evenings at large after session parties, such as the New York Developer’s party poolside at the Bellagio and the Bisnow Beltway Bash at Intrigue at the Wynn, as well as numerous dinners and booth-side cocktail events.

By the time the final buzzer sounded for the show on Wednesday afternoon, all were exhausted, yet hopeful that their efforts would lead to some slam dunk deals in the near future.

Meet The Jetsons: Fashionable Technology

Posted in Retail

Fashion technologyIn the opening montage of the famous American 1980’s sitcom, The Jetsons, we see the family zipping through their futuristic utopia donning clothing and accessories that we could only dream of, until today. Coco Chanel once aptly noted that, “Fashion is in the sky, in the street, fashion has to do with ideas, the way we live, what is happening.” What is happening now is that fashion and technology companies are coming together to create technological clothing that will forever change how we live and interact with our environment. Over the past decade, we have witnessed the evolution of the multichannel role that technology can play in the ever-changing cycle of fashion –e.g. through SMS text messaging, e-commerce, and, now, the fusion of technology and fashion. Like the Jetsons, whimsical inventions are now within the reach of modern-day consumers. The budding partnership between tech start-ups, such as Lyst and OMsignal, and fashion retailers has a chance to blossom into a fashion breakthrough that will allow consumers to personally engage with their innovative functional clothing, reveal their personalities, and interact with the environment.

As more and more brick and mortar stores devolve into deserted showrooms due to the rise of e-commerce, fashion retailers have finally recognized that technological innovation is a worthwhile experiment to hopefully reinvigorate the consumer experience and engage consumer’s every-day fashion lifestyle. Many trend-setters within the fashion industry, including Ralph Lauren, Victoria Secret, and Tory Burch, have begun to adopt new innovative strategies to infuse technology into apparel – including fashion shows and the retail experience, as a whole – that has day-to-day relevance, while also being aesthetically fashion-forward. By fostering the relationship between our physical and digital worlds, fashion retailers aim to reinvent the concept of a retail space and transcend consumer’s wildest expectations.

Major brand labels, including Burberry and Tory Burch, are in the early stages of developing fashion wearables that seamlessly blend into a whole line of other apparel in hopes of creating a trend-setting physical and digital collection that raises the bar in terms of functional tech-fashion. At this year’s Met Gala – the holy grail of fashion — many prominent fashion retailers displayed tech-inspired garments that pushed the boundaries of traditional fashion and heightened anticipation for what is to come. Among these pieces of fashion-tech innovation included a dress with adorned LED lights, a heat-sealed crystal dress, and a gown with a built-in IBM cognitive computer system. Even more encouraging, fashion retailers have begun to adopt new interactive measures, including, video and microchips in clothing and interactive digital screens in stores, to keep pace with the evolving penchants of consumers.

The growing spending power of Millennials is undeniable, and has spurred forward-thinking fashion brands to develop innovative campaigns and create interactive digital retail space to capture their minds, and, hopefully their brand loyalty. The next era of fashion is quickly approaching, and it promises to usher in tech-inspired clothing that interacts with our environment in culturally relevant ways – whether by addressing issues of sustainability through utilization of environmentally-friendly fabrics or managing our daily health and fitness. Fashion at its very essence is about evolution, and #techstyle is the future.

Retailers Take Notice: Will Customers .shop at Your .store?

Posted in Intellectual Property, Retail, Technology

gTLDHave you thought about establishing a new distinctive web address for your business? Do you worry that someone else may try to register your brand name within one of the new generic top level domains (gTLDs)? Whether consciously or not, many retailers have been sitting on the sidelines during the rollout of new gTLDs. But the recent approvals of .shop, .store, and other gTLDs with especially wide appeal should cause retailers to take notice and revisit their domain name strategies. Even if other gTLDs have not piqued their interest, retailers may want to register additional second-level domains (SLDs) within a gTLD such as .shop either for defensive purposes or for actual use.

In January 2016, GMO Registry, Inc. (GMO) paid $41.5 million to outbid seven other companies for ownership of the .shop gTLD. This was by far the highest amount ever paid by any company for a gTLD. The Internet Corporation for Assigned Names and Numbers (ICANN) has not yet formally “delegated” the .shop gTLD for use. Therefore, the sunrise registration period in which trademark owners can get a jump on registering SLDs has not yet been announced. However, considering the number of bidders and the hefty price that GMO paid for .shop, it is likely that GMO and others anticipate heavy registration activity and widespread commercial use of the domain.

ICANN also recently approved and delegated the .store gTLD, and the sunrise period for .store is currently open until June 5, 2016. There was no auction process for .store, which may suggest that it is not expected to generate as much interest and acceptance in the marketplace as .shop. Nonetheless, since the sunrise period will soon close, retailers may want to consider registering SLDs within .store.  Another gTLD in ICANN’s pipeline that could have broad appeal is .shopping. This, too, bears watching.

Observers may wonder, though, whether the new gTLDs are gaining traction in the marketplace. The use of gTLDs by major companies in the banking and technology industries may indicate a trend toward use of new gTLDs. For example, large banks like Barclays and BNP Paribas have chosen to use their brand-specific gTLDs to replace their original .com web addresses (www.home.barclays and www.mybank.bnpparibas). Similarly, some regional banks like Lead Bank in Kansas City, Missouri have chosen to use the more generic gTLD .bank for their new web address (www.lead.bank).

Last year the gTLD trend attracted another major pioneer, the technology giant, Google. In 2015, Google created an umbrella company called Alphabet and chose www.abc.xyz for its web address. Based on subsequent registrations by others of some 20,000 .xyz domain names, Google’s use of a generic gTLD has already influenced other new gTLD registrants, and may encourage other companies to follow suit.

The implementation of gTLDs by large companies like Barclays and Google and the hefty amount paid for .shop are indicators of the potential value and impact of gTLDs. In some cases, a retailer may benefit from using a gTLD that matches its brand. In others, the retailer may benefit from establishing an online presence within a gTLD that corresponds to its field of business (e.g., .bank or .shop).  At the very least, retailers should take steps to protect their brand and business from abuse by cyber squatters or cyber criminals. Otherwise, they may risk becoming victims like Burberry, Tommy Hilfiger, and Adidas became in 2013 when the .clothing gTLD became available. When non-affiliated individuals in different regions of the world successfully registered adidas.clothing, burberry.clothing, and tommyhilfiger.clothing, these clothing retailers were forced to expend precious time and financial resources challenging the SLD owners. For tips on protective steps to take with regard to new gTLDs, please see our previous post on this subject or this article here.

It is still too early to know the full extent to which new gTLDs will affect the retail environment. But we do know that three new gTLDs that are especially relevant to retail will become available for registration and use this year. We also know that businesses have already invested significant capital to acquire and control new gTLDs, and that some high profile and established companies have begun using new gTLDs in their businesses. Therefore, now would be a good time for retailers to revisit their online marketing strategies to consider the role of new gTLDs such as .shop, .store, and .shopping.

Microbranding Leads to Big Success

Posted in Retail, Retail Sales

department storeFrom your local watering hole to Nordstrom’s, microbranding is making a big impact in retail. Microbranding is brand recognition experienced by small-scale businesses in a particular marketplace. The expansion of the internet marketplace, including websites such as Etsy and Kickstarter, allows small businesses to use various methods to tailor its product and target niche markets directly. Not to be left out, “Big Box” department stores are making space on their shelves for in-demand microbrands.

Kickstarter, a well-known crowd source funding site, allows an entrepreneur to tailor its products to consumers by introducing an idea to the marketplace then asking the marketplace to fund production. LIV-Swiss Watches placed one of its most recent watch designs, the Genesis X1-A, on Kickstarter with a goal of $40,000. The X1-A hit the $40,000 goal in 34 minutes and currently has 2,169 backers that have pledged $1,119,029. Backers receive a Swiss watch that may not have the same cache as other higher-end luxury Swiss watches, but the $500 pledge is tiny compared with the price tag of some Swiss watches that may cost thousands of dollars. Not only are backers buying the watch, but they are also “buying-in” on the company. The consumer knows that the pledge contributes to getting production up and running and experiences the feeling of having been among the exclusive backers/investors that were part of the overwhelming success of the product. The consumer is not just buying a product, but rather there is a relationship that goes beyond the normal consumer retailer interaction.

A major factor in achieving success through microbranding is the direct interaction between the consumer and the retailer. Pledging a contribution to a product is just one way of establishing a relationship between the retailer and consumer. Over the last twenty years, micro-breweries have used microbranding to take market-share away from the Anheuser-Busch and other giants in the industry in order to earn enormous success. Breweries like Dogfish Head Ale use labels to tell the story of their brewery and their beer to create a dialogue with consumers. The Delaware based brewery has a Grateful Dead American Beauty pale ale and Robert Johnson’s Hellhound On My Ale brew to share not just a shared love of beer, but also a love of music with its consumers. By using storytelling and infusing consumer’s other interests in its product, Dogfish Head Ale is one of numerous breweries that has carved out a unique voice in a once homogeneous industry and found success.

As some once-small businesses find success through microbranding and begin to grow, there becomes a need to expand. Major department stores such as Nordstrom’s are providing financing and floor space for expanding online stores like customized shoes retailer Shoes of Prey. The collaboration between Nordstrom’s and Shoes of Prey accommodates consumers that want the customized options provided by online retailers with the immediate attention and satisfaction that can only be provided by a brick-and-mortar location. As the debate continues to rage regarding whether online or brick-and-mortar will reign supreme, partnerships between traditional department stores and microbrand online retailers are hoping for massive consumer appeal.

Apparel Peril!

Posted in Retail, Retail Sales

Today’s post is guest-authored by Nick Egelanian, a leader in the retail and shopping center industries. 

clothes racks

These are perilous times in the apparel sector. What seems on the surface to be a contradiction–a series of underwhelming sales reports in apparel sales, coinciding with a dramatic and ongoing expansion in many types of apparel retailing – are in fact the byproduct of an evolving retail segment sending up red flags for apparel retailers going forward.

The disconnect is particularly noticeable in discount and budget apparel, which continues to grow at a pace that far exceeds overall sales. Commodity brands like T.J. Maxx, Marshalls, Nordstrom Rack and Ross Stores are opening over 250 stores annually. On the specialty side, familiar names like H&M, Zara and Forever 21 (F21 red) accompanied by newcomer Primark are driving expansion. Outlet center expansion only adds further to the surge in discount apparel.

A race to the bottom

One of the clear trends in apparel right now is a “race to the bottom” on price, which is crowding out full price apparel and producing clear winners and losers in the segment.  Discount brands are gobbling up market share while full price brands and department stores are losing ground. It is no coincidence that iconic names like J. Crew and GAP are focusing their expansion resources almost entirely on off-price stores.

Virtual volume

Online competition is another issue apparel retailers are wrestling with. Online and mobile transactions make up approximately 25 to 30 percent of all apparel sales, a far more significant figure than the 7 to 8 percent overall number for the entire retail industry. This disparity is likely due at least in part to a segment where shoppers are accustomed to exploring omnichannel options for size, color and bargain hunting flexibility. Whatever the reason, the fact remains: brick-and-mortar apparel retailers already trying to adapt to a discount-dominated marketplace now have to face additional competitive pressure from virtual vendors.

What does it mean?

The big question remains: what do these developments mean for apparel’s future? With outlets and discount concepts growing at an eye-opening pace, and these trends showing no signs of slowing, mid-market brands and department stores will continue to struggle to respond. Even discount adaptation success stories like Nordstrom Rack have delivered weak numbers lately, and there isn’t much evidence that other brands can do much better.

As a result, brands like Aéropostale, Abercrombie & Fitch and Gap Inc. will tread water and will likely continue to lose market share. The forecast for department stores is even more dire. Icons like Macy’s and J.C. Penney, already in the midst of decades-long market share slumps, will almost certainly cede even more ground and the ripple effects will be profound as struggling B and C malls are especially hard hit with the loss of hundreds of additional department and full-price apparel retail outlets, leading more and more second tier regional malls into obscurity in the coming years.

As always in retail, however, challenges for some create opportunities for others. Federal Realty’s Assembly Row in Boston has redefined the discount retail venue, successfully combining entertainment and restaurants with outlet style apparel in a mixed-use shopping venue. Assembly Row demonstrates that adapting to new retail realities requires innovation and inspiration. In retail as in life: you evolve or you go extinct.

 

Today’s guest blogger, Nick Egelanian, served as Vice President of Real Estate and New Store Development for Crown Books and FAO Inc./Zany Brainy before forming SiteWorks Retail Real Estate Services in 1992. He pioneered the segmentation of retail into Commodity and Specialty sub-categories as the author of the Retail chapter of the Urban Land Institute’s Professional Real Estate Development: The ULI Guide to the Business, 3rd Edition in 2012.Nick is an active author and speaker on retail trends and the evolution of the retail industry, and has contributed numerous articles and editorials in publications such as the Urban Land Institute’s Urban Land Magazine and Madison Marquette’s PLACES Magazine.

Retail Shopping Outlets in Emerging Markets: A Shopaholic Box of Chocolate

Posted in Retail

Outlet ShoppingDespite its universality, the shopping mall, as we know it, is at a pivotal juncture in its existence. A tsunami of torrential trends – in particular, the rise of floundering malls and underwhelming sales for luxury anchor tenants – has spurred mall owners to abandon the notion of commoditized shopping experiences and steer towards an aggrandized value proposition for consumers. Long gone are the days when going to the mall was simply about shopping; today, consumers seek experiences that go well beyond the traditional shopping excursion. Due in large part to rapid urbanization, rising living standards and spending power abroad, there is a tremendous desire among foreign consumers for open public spaces in which to mingle and rendezvous. To avoid being a retail anachronism, foreign mall operators and developers, retailers and investors have begun to expand their view of what the ideal shopping experience should be, and have embraced the notion that “shoppertainment” is the approach to enhance foreign consumers’ shopping experiences. Nowadays, a memorable shopping and leisure experience influence consumer behavior; therefore, developers and retailers have incorporated value-added elements that recast an outlet center as the new downtown center, replete with leisure, entertainment, and, most importantly, high-end retail. Foreign developers now envision themselves as purveyors and alchemists of “shoppertainment” seeking the appropriate mix of shopping and entertainment to survive in this ever-changing retail industry.

Undeniably, high-end fashion retailers and malls have taken one on the chin due to the struggles of the U.S. economy and yet another financial calamity across Europe. Despite being blindsided by this economic uppercut, foreign developers and retailers have gone back to their respective corners and changed their strategies leading to a proliferation of outlet centers across Europe, Asia and Latin America. As a testament to their economic resilience, outlet centers have outshined shopping malls and big-box retailers over the past decade as penny pinching consumers have turned to outlet stores in hopes of finding top brands at discount prices. This tour de force has even caught the eyes of certain domestic institutional property investors, such as the Simon Property Group and the McArthur Glen Group, who have recognized the allure of foreign outlet centers by investing considerable capital to entice even more foreign consumers to these outlet centers. The proliferation of foreign outlet malls in recent years has also been greatly aided by luxury heavyweights, such as Alexander McQueen and Prada, taking a “can’t beat em’, join em’ approach” and crossing their fingers that the outlet business will not result in brand dilution. Many retail industry cognoscenti believe that outlet centers will multiply on a global level in size and number over the next few decades as more and more high-end retailers embrace the outlet store concept.

The retail industry has always transformed with each new trend and cultural shift. In the here and now, foreign outlet centers are the new trend gaining significant traction as a means of enticing not only deal seekers, but also amusement seekers. Innovative outlet centers, such as Xanadu in Madrid and Bicester Village in the UK, beget big business, and their competitive differentiation from traditional shopping malls is the primary force behind their success. Across emerging countries, such as Brazil, China, and Bangladesh, outlet centers have outperformed traditional shopping malls by offering convenience as well as entertainment. To that end, emerging markets are now establishing themselves as an investors’ golden goose, and the increased spending power of these foreign consumers is a significant factor contributing to investors’ and developers’ eagerness to venture into these untapped markets and open new outlet centers.

Return of the Food Trucks – New Offerings vs. Old Favorites

Posted in Permitting, Real Estate, Restaurants, Retail

bostonfoodtrucklargeIt’s that time of year again: flowers are blooming on the Common, the Red Sox had their opening day, and the best parts about Boston summer have started to reappear. This year, however, many of Boston’s beloved food trucks almost did not. Food trucks began to really take off in Boston in 2011, jumping on the growing national trend. Since then, the number of food trucks in the City has grown from around 25 to more than 70 this year. But such fast growth has not come without pains. The City of Boston has 530 time slots available for food trucks at 21 different sites around the City, not including the spaces available on the Rose Kennedy Greenway, which are allocated under a separate lottery process.

The Boston Office of Food Initiatives, an office under the Mayor of Boston dedicated to the coordination of programs like food trucks, farmers markets, and urban agriculture, held its annual lottery for food truck locations in the middle of March. Returning truck operators, such as Bon Me and Stoked Pizza, were allowed to keep two of their previous lunchtime spaces. This prompted outrage from new food truck operators, and, in response, the City changed its position. Unfortunately, this change came only a few days before the lottery on March 14, prompting further outrage from the returning truck owners- some of whom had turned down alternative spaces in reliance on the promise of a recurring spot. In a fast move, representatives from the City met with all of the food truck operators, and were able to broker a compromise, moments before the lottery was scheduled to begin.

Previously, Boston held its lottery in January to coordinate with the Rose Kennedy Greenway lottery, which will host 33 food trucks this summer at four locations along the Greenway. The later lottery this year has caused many food trucks to snap up available spots outside of the city lottery. The SoWa Open Market, New England Open Market, and various events around the state (not to mention the many food-truck specific festivals planned for this summer) act as alternative venues for many food trucks.

These outside opportunities for the vendors could work against the Boston Office of Food Truck Initiative by leaving less popular trucks to fill in the open slots. Additionally, prices have increased over the past year (for instance, a Zone 1 shift rose from $100 to $125), in a way that disincentives breakfast or dinner slots- the price is based on location, not time of day, so there is no discount for off-peak hours. It is an open question of how well the novel and familiar food trucks will perform this summer, and whether the later lottery will impact the quality of offerings available to Boston workers, tourists, and residents.

Perhaps Boston simply cannot support the number of food trucks currently licensed? Perhaps the new food trucks will flourish this year, and returning trucks will continue to build a loyal customer base? One thing is certain: if the Boston Office of Food Initiatives hopes to change the face of mobile dining in the City, some of the processes in place will need to adapt to the needs of the food truck operators.

Retailers Digitizing Daily Operations: From Mobile Payments to E-Receipts

Posted in Retail, Technology

omnichannelWhen asked last year to name one technology that we rely on today that would no longer be around in 10 years, Microsoft CEO Satya Nadella responded: “fountain pens.”

Some may question Mr. Nadella’s prediction of the imminent demise of pen and paper.  Indeed, such prognostications date back more than 40 years to a 1975 Business Week article, in which analysts first coined the phrase “paperless office” and predicted that use of paper would begin to decline immediately and “by 1990 most record-handling will be electronic.”  Yet our collective reliance on paper has hardly diminished.  In fact, it’s higher than ever, which has led some to dub the thought of going completely paper-free a “pipe dream.”  Others have pointed to scientific and even evolutionary reasons for why a drastic reduction in paper consumption is – at least in the near term – unrealistic.

But when it comes to the retail industry in particular, perhaps Mr. Nadella’s prediction has more credence.  Consider the following ways that retailers are – or are planning on – digitizing traditional paper processes in their day-to-day operations, and the uniquely powerful incentives for implementing such changes:

  • Electronic Receipts:  Instead of printing out paper receipts, many retailers now give customers the option of having their receipt e-mailed to them.  Apple was seen as revolutionary when they introduced this service over ten years ago.  Big box stores like Wal-Mart and Home Depot have followed suit in recent years.  But according to a recent study, still only 10% of retailers offer e-receipts.  However, that percentage is expected to increase to 70% over the next three years.  Digital receipts at the most basic level provide a cost savings to retailers.  Each receipt costs about penny to print, which may not seem like much, until you take into consideration that in the United Kingdom, for instance, over 11 billion receipts are printed annually.  It has been estimated that 9.6 million trees are cut down each year due to the demand for printed receipts in the United States alone.  Transitioning to e-receipts therefore presents a major environmental benefit, an important factor for a customer base that is increasingly “sustainability-conscious.”  But perhaps the strongest incentive for merchants to adopt e-receipts are the marketing opportunities they provide.  As one study found, 83% of retailers who offer e-receipts identified the ability to collect customer e-mail addresses as the primary factor for implementing this technology.  As that same study explained, e-receipts are “an innovative communications vehicle for retailers that offer limitless marketing possibilities, providing deeper insight into consumer shopping habits, which can lead to more targeted advertising mailers, promotions and emails.”
  • Mobile Payment Applications:  Mobile payment apps like Apple Pay and Android Pay continue to evolve at a rapid pace, allowing customers to replace their wallet with their smartphones when they go shopping.  These technologies can make the point-of-sale processes more efficient and convenient, thereby improving the in-store experience for customers.  They also have a cost savings component by reducing the credit card fees paid by merchants.  But as we discussed in a recent post, perhaps the biggest incentive for retailers to replace traditional paper currency with mobile payment apps is the ability to track customer spending habits.  Adoption of mobile payment technology – both by customers and retailers – has been slow.  But many see 2016 as the year when use of these technologies will take off.
  • “Beacon” Devices:  The Wall Street Journal last year discussed how paper circulars and coupons were one of the lone holdouts in today’s increasingly digital world.  But even retail’s reliance on paper coupons may be nearing an end thanks to a technology dubbed by some as the “beacon of hope” sand “savior” for brick-and-mortar stores.  “Beacons” are small, battery-operated wireless devices that transmit messages and offers to nearby smartphones.  When a customer walks by or into a store that has one of these devices installed, their phone might buzz with a welcome message or a targeted coupon.  The hope among retailers is that these low-cost “beacons” will create a more personalized shopping experience and replace newspaper circulars as the most effective means of drawing customers back into their brick-and-mortar locations.  Traditional retailers like Macy’s only began installing these devices on a large scale during the 2014 holiday season, but by the end of 2015 “beacons” were seen in the industry as “on fire.”  And shipping trends as well as widespread roll-out of “beacon” implementation strategies indicate that 2016 will be another big year for this burgeoning technology.

Each of the above technologies represents an example of how the retail sector is uniquely poised to reduce its use of and reliance on traditional paper processes due to the strong incentives for doing so, such as cost savings, improved in-store experience and enhanced opportunities for customer data collection and targeted marketing efforts.

 

Sustainable Retail – Eco-Friendly Shopping at the Mall

Posted in Office, Real Estate, Retail

Globe in SpaceSustainability experts claim that “a good building- efficiency rating is quickly becoming the real estate equivalent of a motor vehicle’s miles-per-gallon rating and helps bring capital to owners and investors.” The National Real Estate Investor reports that investors and tenants alike prefer retail properties with sustainability measures in place. Studies based on the office market indicate that green office buildings trade at a 13% premium, on average, when compared to non-green buildings, and rental rates are 3% higher, on average, at green buildings than non-green buildings. Though the retail sector has been slower to improve the sustainability of malls and other shopping centers, there are some retail property owners who have taken the lead in the movement toward sustainability.

First Capital Realty Inc., a Canadian owner, developer, and manager of over 150 grocery-anchored urban shopping centers has focused on reducing greenhouse gas emissions and energy consumption at its properties  by using the investigative method of re-commissioning to focus on building operations (rather than retrofitting) to identify ways  to reduce gas emissions and consumption. During a re-commissioning process, a building consultant will evaluate the existing electrical and mechanical systems, analyze utility usage, and implement no- and low-cost changes so the building operates at the highest possible level with the existing equipment. Oxford Properties, an international portfolio manager, has used target sustainability thresholds for each of its properties, and since 2010 has achieved a 20% improvement in energy efficiency on a per square foot basis. Tanger Outlet centers have installed electric vehicle charging stations at 50% of its outlets, and they report that customers appreciate the free charging stations and are attracted to the shopping centers because of this new amenity. Many traditionally office-based property owners such as Boston Properties and the Irvine Company have applied sustainability methods learned from their office properties to their retail holdings as well. Boston Properties, a Boston-based REIT, has focused on LEED certification for its entire portfolio of buildings, and the Irvine Company has invested in Tesla Energy battery systems for its office buildings and plans to expand the hybrid-electric building concept to each of its 41 shopping centers. The batteries will be charged during nonpeak hours and will provide energy to the centers during peak daytime hours for energy cost-savings.

City and State governments are also increasingly concerned about the energy usage of commercial properties, and energy benchmarking laws mandating energy scorecards for commercial buildings have been passed in California and Washington state, Montgomery County, MD, Atlanta, GA, Austin, TX. Berkeley, CA, Boston, MA. Boulder, CO, Cambridge, MA, Chicago, IL, Kansas City, MO, Minneapolis, MN, New York City, NY, Philadelphia, PA, Portland, OR, San Francisco, CA, Seattle, WA, and Washington D.C.   In January 2014, the International Council of Shopping Centers established their own property efficiency scorecard to help retail landlords compare property-efficiency in terms of controllable costs (energy, water, and waste consumption) and green operating practices across their portfolios and to identify shopping centers where energy efficiency could result in cost savings. Since the launch of the ICSC property efficiency scorecard, owners and investors are becoming more thoughtful about the efficiency of their shopping centers.

Many single-brand retailers, such as Ikea, Kohl’s, and Walmart, have already embraced sustainability practices to control energy costs and build their brands as eco-conscious retailers. Now, the sustainability push from shopping center owners, investors, and building managers for whom the brand to sustainable building connection is a bit more attenuated points to a growing realization that environmentally sustainable buildings are both good business and the way of the future. If green buildings have lower operating costs, higher tenant occupancy, better re-sale value, and resonate with eco-friendly shoppers; the only question remaining for many property owners is what do they need to do and how soon can they start?

Revamping the Runway-to-Retail Model

Posted in Retail, Retail Sales

runwayWith the increase in digital coverage of Fashion Week, from live streams to Snapchat stories and Instagram postings, designers have put what might be considered the most coveted and exclusive ticket in town directly in the hands of consumers. During the most recent New York Fashion Week (“NYFW”), which took place in February, over 400,000 Fashion Week images were shared on Instagram, generating over 113 million “social engagements,”or likes, comments and shares. The increased digital integration between show and consumer has created an impatient consumer base that sees now and wants to buy now. And the traditional NYFW format – meant for a trade audience with shows in September previewing next year’s spring and summer trends, and shows in February previewing fall and winter trends – is not currently in line with this shift. For the Insta-generation, waiting six months on the traditional runway-to-retail schedule to buy that winter coat that you saw on your feed in February is simply too long.  Fast fashion empires have largely filled the need for instant retail gratification with sweeping success.

In response to the shifts in technology and consumer demand, designers and their brands are being pushed to rethink the traditional Fashion Week format. Earlier this month, the Council of Fashion Designers of America (“CFDA”), the trade organization for American designers and the organizer of the official NYFW schedule, released a report examining the current NYFW format, its challenges and potential solutions. The report cites the idea of “in-season relevancy” as a potential solution to the challenges posed by technology and consumer demand to the traditional Fashion Week format. “In-season relevancy” is the idea that a designer would time fashion events to when collections hit stores to maximize sales, but no uniform approach has emerged as to how to achieve this solution.

Some brands are achieving “in-season relevancy” by showing a parka at the September Fashion Week show (to be delivered in January) and swimwear at the February Fashion Week show (to be delivered in July). Other brands like Burberry and Michael Kors have experimented by showing immediately shoppable apparel during their most recent February 2016 NYFW shows. Taking a more radical approach, designer Tom Ford cancelled his NYFW show in favor of showing his designs in September as they hit stores. Parisian house Vetements is moving its February 2017 show to January, with designs hitting stores the following month. Emerging brands have opted for Instagram-only shows. Still others, like New York-based Jason Wu, and fashion heavyweights Kering (owner of Balenciaga, Gucci and Saint Laurent) and LMVH (owner of Louis Vuitton, Marc Jacobs and Céline), have resisted change and are sticking to the traditional runway-to-retail schedule.

So what does this shake up mean for retailers preparing for the September 2016 Fashion Week season?  Generally, retailers will need to be flexible during the designers’ experimentation phase, as some brands are adhering to the traditional 4-6 month delivery schedule while others are making their collections immediately shoppable. Accordingly, this September, apparel buyers may have to attend traditional runway shows, potentially by appointment-only, as well as look to Instagram and other social media platforms.

Retailers that have customers spanning different climates may benefit from the differences in brand approaches during this experimentation phase. For those retailers, whether a designer is showing a parka at a February show (for retail delivery in July) or an immediately shoppable trench coat in September, the designs will inevitably be “in season” somewhere in the world. Such retailers may want to consider marketing and sales strategies that emphasize their all-season inventory. Even those that serve more limited customer bases should consider developing marketing plans that will capitalize on the perceived novelty of designs as deliveries are timed and marketed closer to consumer need. Where designers have announced immediately shoppable collections, retailers may consider consumer-centered activations that leverage NYFW to increase traffic to their brick & mortar and e-commerce sites.

While it remains to be seen if the quest for “in-season relevancy” will take complete hold of the industry, as long as large fashion conglomerates like Kering and LMVH follow the traditional model, retailers should prepare for a multi-platform and multi-season Fashion Week in September.