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Retail Law Advisor

Arriving Now: An Uber Alternative to Parking Validation

Posted in Retail, Retail Sales, Transportation

ct-uber-oakbrook-1125-biz-20141125We previously wrote about how on-demand delivery services, such as Uber and its competitors Lyft and Postmates, have the potential to provide brick and mortar retailers with an answer to Amazon’s delivery service. Services such as UberRush now allow retailers to serve customers who are looking to skip the shopping trip entirely by providing on-demand delivery. But on-demand mobility companies such as Uber can also be relevant to customers who want to shop in-person, and for landlords who subsidize parking there may ultimately be cost savings or other advantages in partnering with such companies.

It’s no secret that car-ownership and usage patterns are changing, and it’s not surprising that retailers generally have much more parking than needed (even on Black Friday). And often, municipal parking regulations may cause more parking than is actually needed. For retailers and landlords in urban areas, it may be more cost-effective to subsidize the cost of rideshare as part of a shopping experience than to subsidize on-site parking. And Uber may be a willing partner.

Recently Uber announced a relationship with a multifamily residential development in San Francisco. As part of the deal, the developer of the 8,900-unit residential project provides a $100 per month stipend to residents for Uber and public transit use, and Uber, for its part, caps fares between the project and the public transit station at $5 per ride. The developer hopes to save money by not requiring as much parking on-site, although at this point the project is still under development (as many as 5,600 of the total 8,900 units are not yet built).

Shopping center owners and retailers currently provide a significant subsidy to customers in the form of abundant customer parking.  In urban shopping centers, the cost of this subsidy may be shared between the landlord and the tenant in the form of a parking validation system where the nominal charge to a customer for parking is waived or reduced. In suburban locations, parking is usually entirely “free” for the customer, and the cost of owning and maintaining the parking field is either incorporated into rent and CAM or borne entirely by the landlord.

Shopping center owners may be able to unlock development potential in their parking fields, or lower their capital and operating expenses, by subsidizing customer trips rather than customer parking, and on-demand mobility services provide the technology to make that possible. To make this arrangement attractive to the customer, the landlord and its tenants could provide a subsidy for the cost of the customer’s ride home (ideally with a car full of purchases) just as they currently provide a subsidy for the cost of parking validation.

The use of Uber to generate retail traffic has already proven successful at a shopping center north of San Diego, California, where a landlord used Uber vouchers of up to $25 each way to combat a parking shortage at its shopping center. In fact, the program was so popular the Landlord shut it down after just over a month because of demand. However, when planned in advance (e.g., when the concept is addressed in leases and/or on-site parking is reduced or redeveloped), on-demand mobility services present not only an opportunity to reduce parking capital and operating costs, but also to attract new, car-less customers who may otherwise be satisfied to shop on-line from home and not make the effort to travel to a brick-and-mortar store.

Significant parking subsidies are currently baked into the retail format, but with the advent of on-demand mobility, there is an opportunity to change that and potentially realize cost savings and other advantages. A key component to making this concept work will involve planning for it in leases with retailers, financing documents, and entitlements.

Selfies: Changing the “Face” of Retail

Posted in Retail, Technology

long-selfie-stickSelfies are everywhere. From selfie sticks to photo editing applications, people are looking for new and better ways to take photos of themselves. At the same time, retailers are creatively taking advantage of our selfie obsession.

Companies such as Crest and Freshii have been gathering market research from consumer selfies through apps like Pay Your Selfie. Pay Your Selfie allows users to earn cash rewards by posting selfies of themselves accomplishing various “tasks.” The selfies aren’t published (although they can be made public), instead they are sold to retailers for a set fee per image, with a portion of those funds being used to pay the consumer. We personally downloaded the app, just to see how intrusive this market research was. Not surprisingly, some tasks were specific and some were more general. For instance, on the day that we downloaded the app, we could get paid $1.00 to take a selfie with food we had ordered from Freshii, or we could get paid $0.25 to take a selfie with a coffee maker (and give any major retailer an insight into my coffee preferences).

A similar app, Mobilizr, pays consumers for posting selfies, but the compensation is based on the amount of traction the selfie gets. Retail companies purchase plans with Mobilizr to run campaigns for their brand based on how many brand ambassadors they would like to hire. The consumer posts a selfie showing the brand logo and gets paid $0.03 for every “like,” “share,” or comment received. Stylinity allows fashion bloggers to share selfies of their outfits, and earn money doing so. Once a blogger posts an outfit, he or she earns points for every person who reacts positively to the outfit and earns a commission for any item in the outfit that is sold from the link that he or she posted. The commission amounts vary, but there are currently over 180 retailers who have linked their products to Stylinity.

Soon, however, selfies won’t just be for the fashionistas. Several companies like Mastercard and Amazon have been investing heavily in facial recognition software. The goal is to use a selfie as a form of identification to prevent credit and debit card fraud. Mastercard has already rolled out the project in Silicon Valley- a consumer first takes a selfie to establish his identity. When that customer uses Mastercard’s Identity Check App to make a purchase online, another selfie is taken and compared to the original. Amazon has taken this idea to a further level, requiring that the selfie be interactive, so as to deter criminals from using a static photo of a person. If the facial recognition software is not satisfied with a customer’s identity, it can require the person to blink, wink or frown.

So far, Mastercard and Amazon have only been able to employ these security measures online. Google is working to change that via its “Hands Free” system. The consumer sets up a Google account containing their picture. At the store, they tell the cashier that they want to “pay with Google.” Then, one of two things will happen: (i) the retailer’s cash register will connect with the consumer’s phone, display the photo, and the cashier confirms the identity of the consumer, or (ii) the retailer has installed a facial recognition camera that will scan the consumer’s face and verify their identity based on their account photo. This costly system has been implemented in select McDonalds and Papa John’s locations in San Francisco, but may migrate to the rest of the country if retailers are willing (or pressured) to purchase the necessary software.

Whether you love them or hate them, selfies are shaping the current landscape of retail. As consumers look to make money from their selfies, retailers use them as a direct method of conducting market research, and financial institutions hope to use them to prevent fraud (and potentially avoid fraud liability). While it is still unclear what new role selfies might play in retail in the future, selfies are likely here to stay.

No Cash? No Problem: The Emergence of Cashless Retailers

Posted in Retail, Retail Sales, Technology

credit_card_transaction_paul_burnsFrom the time we were little, putting birthday money into our piggy banks, cash has always been an important part of our lives. Now, imagine a world where cash is no longer king. Like so many other things that we thought were futuristic, a cashless society is becoming more of a reality and less of a fictitious idea.

The use of cash has been steadily declining, with cash payments expected to continue to fall by 30% over the next 10 years. Countries such as Denmark, Sweden and Thailand have recognized this and have been trending toward becoming cashless societies. These countries have enacted laws that permit businesses to ban cash payments, and in some instances, require payments by mobile applications or credit cards. In Thailand, commercial and state run banks have introduced a payment system which is linked to a mobile phone number and allows the consumer to pay for goods and services without the need for cash.

Businesses in the United Kingdom are also jumping on board. Citing increased efficiency and speed during the lunch time rush, the salad chain Tossed has recently introduced cashless restaurants in the UK. Another example, Waitrose, a UK based supermarket chain, has recently unveiled the first cashless supermarket in the head office of Sky. While this store contains only 1,700 square feet, it will serve over 3,500 customers who will use self-service kiosks to pay with credit cards and mobile applications. Both retailers are expected to introduce cashless platforms in more locations.

Similarly, many benefits of the cashless world are being seen here in the United States. The ban on cash saves employee time and payroll costs by eliminating cash registers and trips to the bank, gas for armored cars, streamlined accounting and the ability to track customer habits to increase retail sales. The salad chain SweetGreen and the sandwich shop, Amsterdam Falafelshop, each headquartered in Washington D.C., are among the growing number of businesses that have started testing the cashless market.

Don’t turn in all of your green just yet, however.  Despite the increase in mobile applications, cash is still used to complete over 80% of transactions worldwide. Security risks are still at the forefront of electronic transactions.  Although the banks, credit card companies and inventors of mobile applications are working tirelessly to find ways to create mediums that consumers can trust and feel safe using, the risks still exist. In addition, many people still depend on cash – people who survive largely on cash tips (i.e. valets, doormen), smaller stores that cannot afford the high fees that credit card companies charge, and individuals who cannot afford the latest smart phones or who have credit issues. It is also worth considering the dilemmas that we will face when networks are down and consumers can’t purchase groceries, gas or oil because cash options are not available.

There is currently no Federal statute mandating that businesses must accept cash as payment for goods and/or services. Absent a State law to the contrary, private businesses are therefore free to develop their own policies on whether or not to accept cash. Massachusetts is one state that does have a law that prohibits retail establishments from requiring the use of credit to purchase goods or services. But this law does not appear to be well known or actively enforced, and the statute does not impose a specific penalty on businesses that fail to comply. Retailers should familiarize themselves with the laws in states where they operate before they refuse to accept cash payments.

While the cashless world is certainly on the horizon, many kinks still need to be ironed out. We do need to start preparing for this new age though. The convenience of paying by mobile applications, credit cards and ApplePay could eventually eliminate the need to carry cash.  Will our grandchildren will be as excited to fill their virtual piggy banks with virtual currency as we were to fill ours with coins and paper?

Digitizing Brick and Mortar: Geofencing and Geolocation Can Help Retailers Win at Omnichannel

Posted in Retail, Technology

omnichannelWe have blogged previously about the steady rise of e-commerce, the benefits and challenges of creating a cohesive omnichannel experience, and some of the special issues omnichannel creates for the landlord-tenant relationship. Customers may appreciate the convenience of omnichannel, but they do not spend much time thinking about where a sale technically takes place. Retailers and their landlords, by contrast, need to understand the relative return of various channels and the location of sales to keep customers happy with their brand or experience. Both retailers and landlord need to keep their businesses running efficiently and profitably, even as a shrinking proportion of actual sales are run through the cash register. The key to that game may be “geolocation, geolocation, geolocation.”

Basics of Geolocation

In the retail context, mobile “geolocation” takes advantage of GPS and Bluetooth capabilities on customers’ smartphones, together with retailer and shopping center Wi-Fi networks and hardware known as “beacons”, to pinpoint exactly where customers are within a space. Retailers can establish a virtual perimeter or “geofence” in or around their store (or a competitor’s) and automatically send a text message or email with a special offer, or set up beacons to guide a shopper to exactly the right shelf. When a customer browses in-store and then purchases later through an app from home, the retailer will have the data it needs to make the connection between the store visit and the online sale.

A Range of Technologies

The technologies that enable geolocation are still developing, and each has its own benefits and drawbacks. Systems that require a user to opt-in may offer a less than complete picture of a customer’s movements, while GPS-based systems that rely on the customer’s cell network to connect may function poorly in some indoor spaces. Beacons are more precise, and use less battery power from customers’ phones, but have a shorter range.  As a result, a geofencing program requires careful and considered implementation so that a retailer understands not only the capabilities but also the limitations of the chosen technology, as well as the impact it may have on customers (shoppers who have not knowingly opted in may be dismayed to find a retailer has been tracking their movements, and even a customer who loves the coupons would be angry to find out the location-based app is draining their battery).

Benefits for Retailers and Landlords Alike

Not only can such data help retailers plan their store layouts and inventory levels and build brand loyalty, but landlords can use the data to establish appropriate percentage rent provisions for their retail leases, enabling them to preserve the traditional alignment of incentives between landlord and tenant and helping ensure they receive proper credit for “show rooming”— when shoppers visit a brick and mortar store to investigate options, but make their purchases later online.

In short, in addition to improving the customer’s experience and sense of convenience, the ubiquity of smartphones and the ever-better, ever-cheaper options for geolocation offer revolutionary opportunities for retailers and their landlords to gain insight into what is actually going on, and where.

ICSC’s New England Idea Exchange Draws a Crowd to Talk Shop

Posted in Retail

ICSCThe Hynes Convention Center hosted the ICSC New England Deal Making Conference in Boston last week from July 19 through July 21. ICSC announced that attendance was at an all-time high of about 1,200 people. The conference kicked-off with several social activities, including the golf tournament, the new sporting clays event and the retailer fun run. Feedback on all events was very positive.

The show’s first day sessions were interesting and diverse – ranging from public/private projects, current issues facing capital markets and the retailer runway. The Next Gen Committee held a real estate version of the classic gameshow – Jeopardy – with host Josh “Alex Trebek” Levy of Waterstone quizzing the contestants on all things retail. After lively interactions from the contestants, Lori McWeeney of Blackline Retail Group was crowned the Jeopardy champion. The keynote speaker at the lunch was Stephen Karp, Chairman of New England Development. In his remarks, Steve highlighted the vast changes in our industry – as his company has moved from enclosed mall development to mixed use urban projects to outlet development. His broad experience brought an interesting perspective to the conference, especially for the younger participants in the audience.

The deal making session was crowded and busy – particularly in the morning. The energy was positive and the meetings were reported to be productive. As is generally the case in the summer, attendance started to dwindle as the day progressed. Attendance at The Wilder Companies after-conference party that wraps up the show was strong and, overall, feedback on the two day show as positive. Attendees were happy to see the show moved back to the typical Tuesday through Thursday schedule, after the experiment last year with the Wednesday through Friday schedule. ICSC seemed to be signaling their commitment to maintaining the New England show as a major attraction for all sections of the retail industry.

The Implications of Trademark Infringement Decisions: Aw “Chucks”

Posted in Intellectual Property, Retail, Retail Sales

imagesThere is a growing population of fashionistas and #sneakerheads skyrocketing the sales of fashion retailers and traditional sneaker companies, such as @Nike and @Converse. Forbes contends that sneakerheads represent approximately 5% of the $22 billion dollar sneaker market in the U.S., which works out to roughly $1.1 billion dollars. Sneakerheads have an undeniable economic impact on the sneaker industry causing major sneaker companies to vie for their brand loyalty at every turn; thus, it should come as no surprise that these manufacturers have recently been embroiled in litigation to protect their trademarked brands and standing within the sneaker community.

A recent sneaker war – resulting in a seminal trademark infringement case– between Converse and a number of brands concluded this July and is expected to have a number of trickle down effects on the retail industry at large. By way of background, in October 2014, Converse filed a lawsuit against 30 companies, including Skechers and New Balance, alleging infringement of Converse’s iconic sneaker’s bumper toe, striped midsole and toe cap. The case hinged on whether the Chuck Taylor bumper toe, striped midsole and toe cap had acquired “secondary meaning” within the retail market. In layman’s terms, Converse needed to prove that these sneaker-elements were distinctive and prompted an association in the consumers’ minds between the element(s) and the manufacturer. A number of companies, in a measure to maintain their brands’ fashion integrity, opted to acknowledge their copycat designs and settle out of court, including Ralph Lauren, H&M, and Aldo. Skechers and New Balance, however, decided to press on with the case, and ultimately, correctly read the tea leaves. In the decision handed down by the U.S. Internal Trade Commission, the judge ruled that Converse didn’t have a common law trademark in the midsole, the bumper element nor the toe cap, and that the shoe design was not distinctive enough to acquire secondary meaning or iconic status.

The implications of this decision will not only reverberate throughout the halls of the fashion industry, as major retailers now seek to devise strategies to protect their innovative designs, but also the retail real estate market where more and more established, cutting edge brands will presumably seek restrictive covenants in their leases to thwart competition in order to survive in this ever evolving retail climate. A major takeaway from this decision is that retail brands will have an increasingly difficult task proving a trademark infringement claim because very few designs are wholly original. Given the uphill battle of establishing trademark infringement, obtaining restrictive covenants in leases may be the next legal approach for retail brands looking to protect certain designs and uses for the sake of their long term business interests.

Distinctions between fashion brands, especially sneaker brands, has become blurry as many retailers now sell items that are eerily similar to each other (e.g. New Balance’s “PF-Flyer” and Converse’s Chuck Taylor). Plus, proving trademark infringement is a difficult feat as this recent decision bears out. Therefore, landlords and developers of major shopping centers should keep this decision in mind and anticipate that major retailers will seek broader and more extensive exclusive protections in the hope of safeguarding their brands’ identity and signature elements.

RETAIL 2020: Future Ready – Innovate to Succeed

Posted in Retail, Retail Sales

Goulston Retail 2020In late June, members of the local and national retail community convened at Goulston & Storrs’ Boston office to participate in an interactive panel discussion billed as RETAIL 2020: Future Ready. Panelists included Ben Fischman, the Executive Director of M. Gemi, a designer and retailer of Italian hand-made footwear; Nicki Hines, a Partner at GCD Consultants, a retail real estate consulting firm; and Mark Roberts, the Senior Vice President of Leasing for WS Development, a developer and manager of shopping centers and mixed-use developments. David Rabinowitz of Goulston & Storrs moderated the panel discussion.

The discussion touched on four main topics:  (1) trends in e-commerce and omnichannel marketing; (2) struggling and disappearing department stores; (3) the future of shopping malls; and (4) the influence of Millennials. Omnichannel received the most airtime and generated an animated discussion. Mr. Fischman emphasized the “need to be where the customers are.” He argued that if retailers are innovative and customer-centric, they can succeed in either the brick & mortar or e-commerce environment. Ms. Hines said that teams need to work together to achieve a “click & mortar” model and that “it is all about customer experience.” From the landlord perspective, Mr. Roberts observed that landlords can help retailers to succeed by providing complementary support, such as social media promotions and unique physical environments that include food and entertainment together with other retail stores.

The discussion then shifted to the ongoing debate between landlords and tenants regarding the metrics used to calculate percentage rent charged for physical retail locations. As more and more sales shift on-line, it becomes more difficult to connect those sales to a shopper’s use of particular retail locations even though such sales often result directly from visiting a store. With regard to setting percentage rent formulas, Ms. Hines noted that all of the metrics are changing and that brick & mortar and on-line sales need to be combined, with lessons from one environment being applied to the other.

As the panelists worked their way through the remaining topics, they kept returning to the same core theme: innovation is the key to success in retail. Shoppers have the power, and it is essential to create a retail experience that appeals to their needs and desires. Retailers that continually innovate to meet evolving customer demands will be able to succeed, while those that do not keep pace will likely fail. Thus, just as not all department stores and shopping malls are doomed, not all e-commerce sites will thrive. It is a matter of adjusting to the demands of Millennials and other customers.

A Closer Look into the Growth of E-Commerce Sales

Posted in Retail, Retail Sales

Cart and ComputerIt is widely known that e-commerce sales have been growing and shifting sales from traditional brick-and-mortar establishments. As noted below, overall e-commerce sales in fact still account for a relatively modest percentage of total retail sales. That said, the percentage of e-commerce sales related to total retail sales continues to grow, and is especially pronounced in certain retail sectors. It is interesting to examine how and where that growth is taking place.

Every year since the first quarter of 2007, increases in e-commerce sales outpaced the overall growth of retail sales. This held true even during the third quarter of 2008 through the third quarter of 2009, when the decreases in e-commerce sales were not as great as the overall decrease in retail sales.

The Census Bureau of the Department of Commerce defines e-commerce sales as sales of goods and services where the buyer places an order, or the price and terms of the sale are negotiated over an internet, mobile device, extranet, Electronic Data Interchange network, electronic mail, or other comparable system, whether or not payment is made online. By that measure, in the first quarter of 2016, e-commerce sales represented 7.8% of total U.S. retail sales. If items that are not typically purchased online such as automobiles and fuel are excluded from the calculation, in the first quarter of 2016 e-commerce sales represented 11.2% of total U.S. retail sales. While total retail sales for the first quarter of 2016 were up 2.2% from the first quarter 2015, e-commerce sales were up 15.2% in the same period.

The two industries with the greatest percentage of e-commerce sales are apparel and computers and consumer electronic products. While e-commerce sales of computers and consumer electronics have traditionally outpaced sales of apparel, in 2015 online purchases of clothing and accessories eclipsed sales of computers and consumer electronics for the first time. Companies’ return policies, including free shipping and ease of returns, are thought to help bolster clothing sales. However, the data does not take into account consumers buying clothing in multiple sizes and returning items that do not fit. 

Although online sales of food and beverage and office supplies are growing at the smallest rate, those sales grew 15.2% and 15.1% over the previous year in 2013.

While online sales by smaller and larger companies are both growing, in 2015 there were several categories in which the online sales by smaller companies grew by a greater percentage than online sales by the largest 500 companies. Those categories are Apparel/Accessories, Automotive Parts, Accessories, Computers/Electronics, Food/Drug, Jewelry, Mass Merchant, Office Supplies and Sporting Goods. As a result, the growth of online sales by smaller companies outpaced the growth of online sales by larger retailers. 

E-commerce sales in the U.S. for 2016 are forecasted to exceed $550 billion. Furniture and home décor and handmade products are two retail categories that are expected to see increased e-commerce footprints. Furniture and home décor, which has traditionally not trended towards e-commerce in the same manner other industries have, began to see increasing e-commerce sales in 2015. These sales have most likely been bolstered by updated technology and graphics allowing multiple ways to view furniture as well as free delivery and easy return policies. Amazon recently launched “Amazon Handmade” and Etsy went public in April of 2015 giving sellers of handmade products and crafts an ability to increase their e-commerce footprint.

The brick-and-mortar divisions of retailers are fighting back against the increase in e-commerce sales as a percentage of total sales with enhanced omnichannel retail strategies, such as making retail stores more interactive and increasing connectivity to mobile devices and applications. As they say, if you can’t beat them, join them.

Set Pickup Location: Uber Is Coming to Retail

Posted in Retail, Retail Sales

NowOn-demand delivery services, such as Uber and its competitors Lyft and Postmates, are increasingly taking steps that have the potential to offer a counterpunch to online retailers such as Amazon and may shake up the brick and mortar retail industry in a big way.

UberRush: On-Demand Delivery Service Could Compete with Amazon

Uber is rolling out a platform, UberRush, to connect retailers with their customers, aiming to provide the sort of seamless, on-demand service to deliver goods that it currently uses to deliver passengers. Once a retailer signs up for the new UberRush service its customers can make purchases remotely via an app or website and rely on Uber’s network of on-demand drivers to make same-day or scheduled deliveries of those purchases. For brick-and-mortar retailers UberRush is a possible response to Amazon’s rapid delivery services. With Amazon’s next-day – and in some markets same-day – delivery option drastically reducing customers’ waiting time for online purchases and increasing convenience, there is growing evidence that the online retail behemoth is beginning to have a meaningful effect on brick and mortar retailers.

Amazon sweetened its rapid delivery service by waiving shipping fees for a one-time $99 subscription. Brick-and-mortar retailers could do something similar by offering reduced delivery costs for customers with subscriptions. For its part, Uber has shown some willingness to discount prices for certain types of trips where it can expect volume usage and seems to be in the market for partners.

On-Demand Food Delivery Is Already a Mature Market

On-demand delivery for certain types of brick-and-mortar outlets is not a new concept: customers have been ordering food for delivery as long as pizzerias have existed.  In many urban areas there is an already-crowded market of food ordering or delivery services that serve multiple food vendors, such as Grubhub, Doordash, Seamless, Foodler, Postmates, and, yes, even Uber. Likewise, on-demand grocery delivery services such as Instacart (which, like Uber, relies on individuals using personal vehicles) and Peapod (which uses dedicated delivery drivers) allow customers to shop from home for same-day and scheduled grocery delivery. Even grocery leader Wal-Mart is dipping its toe in on-demand grocery services.

The experiences of restaurants and grocers and the growing market-share of Amazon suggests a shift in customers’ expectations about their retail experience. Customers want the option to be able to skip the shopping trip and have goods and food delivered to them at home or at work. UberRush and similar services offer brick and mortar retailers a low-capital solution to provide same-day delivery services customers are seeking.

Technology continues to shape retail, and on-demand mobility applications may be the next frontier for brick-and-mortar retailers – at least until the drones arrive.