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Retail Law Advisor

Rise of the Drones: Flying Over Newton and Registration Requirements Reinstated

Posted in Retail, Technology

The skies are a little friendlier for drones now that the Dutch police have suspended their squad of drone-hunting eagles. This is also great news for retailers, as drone popularity continues to soar with overall electronics sales.

With more advanced technologies available to consumers and drones rapidly filling the skies, the Federal Aviation Administration (FAA) and state and local governments are working to address safety, privacy, and other regulatory concerns. The Retail Law Advisor has been following these efforts for the last few years. Currently, 43 states have enacted drone-related laws and additional legislation is being considered.

Two recent developments have heightened the FAA’s regulatory authority over recreational and commercial drones.

Flying Over Newton

First, in September 2017, a federal court in Massachusetts struck down portions of a municipal drone ordinance. In Singer v. City of Newton, an individual drone operator challenged a local ordinance which required registration with the municipality before a drone could be flown over any portion of the municipality; required drones to maintain an altitude of least 400 feet over private and municipal property unless the operator received permission to fly lower; and prohibited any drone flights beyond the operator’s visual line of sight. The objective of this ordinance was to protect privacy and prevent nuisances and other disturbances. These concerns are not speculative, which the Retail Law Advisor has discussed in earlier posts.

Nevertheless, the court struck down portions of the ordinance because it intruded on the FAA’s authority to register pilotless aircraft and regulate the navigable airspace under the FAA Modernization and Reform Act of 2012. In addition, the court explained that the altitude restrictions effectively “eliminate any drone use in the confines of the city, absent prior permission. This thwarts not only the FAA’s objectives, but also those of Congress for the FAA to integrate drones into the national airspace.” The court did not address the ordinance’s provisions concerning reckless or negligent drone use and the use of drones for surveillance. However, the court explained that that state or local regulation of drone use was permitted in specific areas, including privacy and safety—as long as those regulations did not conflict with the FAA’s authority.

This decision is important because it represents the first challenge to a state or local drone regulation. Although the municipality initially appealed to the First Circuit Court of Appeals, it withdrew that appeal in December 2017. For now, Singer v. City of Newton affirms the FAA’s nationwide authority to regulate drone use. This should encourage continued growth in the drone industry by avoiding a patchwork of conflicting state and local restrictions.

Registration Requirements Reinstated

The second drone-related development is the reinstatement of FAA registration requirements for recreational drones weighing over 0.55 pounds. In 2015, the FAA issued regulations for small drones, including those used solely for recreational purposes. Federal courts in the District of Columbia struck those down regulations in May 2017 because the FAA lacked jurisdiction over toy and model aircraft.

That lack of jurisdiction is no longer the case. On December 12, 2017, Congress reinstated the FAA’s registration requirements in Section 1092(d) of National Defense Authorization Act for Fiscal Year 2018. Individual drone operators and retailers that sell drones to consumers should be aware of the FAA’s reinstated registration requirements:

  • Registration is required for the recreational use of Small Unmanned Aircraft Systems, or “sUAS.” These are “aircraft operated without the possibility of direct human intervention from within or on the aircraft” that weigh between 0.55 pounds (250 grams) and 55 pounds on takeoff, including everything onboard or attached to the aircraft.
  • Registration is available by mail or online through the FAA’s Small Unmanned Aircraft Systems (sUAS) Registration website: http://registermyuas.faa.gov/.
  • Registration requires only the registrant’s name, home address, and e-mail address. Registrants have the option of either providing their drone’s serial number or labeling their drones with an FAA-issued identification code.
  • After paying a $5.00 registration fee, individuals will receive a Certificate of Aircraft Registration, which is valid for three years and applies to all sUAS operated by the registrant.
  • As part of the registration process, registrants must acknowledge their intent to follow drone safety guidelines. The FAA also has developed a smartphone app called B4UFLY, which helps operators avoid restricted airspace.
  • Although there are some exceptions, commercial drones under 55 pounds may be registered through the FAA’s online registration system. Drones over 55 pounds, held in trust, or intended for operation outside of the U.S. still must register through the FAA’s paper-based process.

The Retail Law Advisor will continue to monitor this area as technological and regulatory developments encourage the growth of recreational and commercial drones and their applications.

Vitamin D and Retail: But Not Without Due Diligence First

Posted in Development, Landlords, Leasing, Retail, Tenant

We’ve all read about the question marks floating around the fate of brick and mortar retail in America. Factors like the strength of e-commerce and shifting consumer preferences (such as the popularity of urban centers over suburbia and consumers’ yearn for experiences over traditional shopping trips) are challenging landlords around the country to change the ways they think about their spaces. Some landlords are adapting to the current climate by repurposing the open area and common area spaces in their malls and shopping centers. The idea is not to replace brick and mortar retail, but rather to enhance it.

JLL surveyed 90 malls with approximate gross leaseable area in excess of 400,000 square feet that are in the process of, or have completed, substantial renovations since 2014. JLL found that nearly one-fifth of the 90 malls examined are incorporating spaces like kids’ play areas and green spaces that will benefit the community. Additionally, about twenty percent of the shopping centers studied are being redesigned as partially open or completely open air centers. These redesigns allow landlords to create malls with greater connectivity to streets and sidewalks and more green space for visitors to enjoy.

For example, in Houston, Texas, Memorial City Mall now includes a 4,000 square foot green area where community movie nights, watch parties and fitness classes are held. Brookfield Place in the Financial District in New York City hosts events in its atrium, boasts a skating rink in the winter and harbor activities in the summer. In Sacramento, California, the Downtown Plaza shopping mall became a basketball stadium and retail complex known as Downtown Commons with residential apartments and a Kimpton hotel. These redesigns have utilized both indoor and outdoor space to create micro worlds that cater to a diverse clientele for varying purposes.

But before landlords can embark on a complete overhaul of their space, they must confirm that their renovations will not cause them to be in default under any of their leases and related agreements with existing tenants. Often, tenants, and especially anchor tenants with bargaining power, are able to negotiate certain favorable terms in their leases. For example, an anchor tenant, like a department store, may have negotiated an exclusive so that they are the only tenant within the center that can sell certain goods or offer certain services for the duration of their tenancy. Those same tenants may have negotiated restrictions on the uses of neighboring tenants for broader uses like bowling alleys or movie theaters or restrictions on the signage of neighboring tenants. In certain instances, landlords may have agreed not to build higher than a certain height or disturb parking ratios. All of these restrictions may make it difficult for landlords to renovate and repurpose their space as intended. The planned upgrades at the Sunrise Mall in Northern California, for example, have been stalled due to existing tenants like Macy’s, J.C. Penney and Sears who have pointed to restrictions in their leases and reciprocal easement agreements to block development.

However, landlords too, may have some tools in their back pocket. For example, landlords may have negotiated relocation options in their leases entitling them to relocate tenants to new spaces of similar size within the retail center. This enables landlords to strategically rearrange tenants so that they can renovate and repurpose a critical mass of their center for things like green spaces. Landlords may also have the power to terminate leases if tenants are not meeting certain sales targets or harnessing enough foot traffic – a problem that is occurring all too often in today’s world. And, if all else fails, many landlords account for payment to anchor tenants in their redevelopment budgets.  In turn, anchor tenants often use the payment for renovations of their own.

In the end, however, repurposing shopping centers and malls to adapt to today’s consumer preferences seems like a win-win for all involved – making for a brighter experience for landlords, tenants and the community members served by these newly designed mixed-use, open air spaces.

Happy New Year to the Retail Industry!

Posted in Holiday, Retail

As we wave goodbye to 2017 and welcome in 2018, we take this opportunity to recognize our fantastic, growing list of readers. Thanks to retail industry leaders like you, this has been an other great year for the Retail Law Advisor!

In the coming year, we look forward to continuing to provide you with a comprehensive legal resource for the retail industry.

We wish you a happy and successful New Year!


Warm Wishes,

The Retail Law Advisor editorial board

Teavana and Whole Foods: Is the Pendulum Swinging in Favor of Protecting Mall Landlords Against Strategic Tenant Closures?

Posted in Litigation, Retail

As mall landlords continue to see substantial tenant vacancies, some landlords have begun to challenge solvent tenants who decide to go dark before the end of their lease. In two important recent cases — Simon Property Group, L.P. v. Starbucks Corporation, Case No. 49D01-1708-PL-032170 (Indiana Superior Court) and Bellevue Square, LLC v. Whole Foods Market Pacific Northwest, Inc., Case No. 17-2-27617-1 SEA (Washington Superior Court) — state courts have enforced continuous operations clauses against a group of Teavana stores and a single Whole Foods, requiring those stores to continue operating in retail malls even though, according to the tenants, the stores were not profitable. The cases are significant because they appear to signal a new willingness on the part of some courts to enforce covenants to keep open against non-anchor tenants. In the past, courts have enforced keep open clauses primarily, if not exclusively, in situations involving anchor tenants. In these new cases, courts are stopping non-anchor tenants from committing so-called “efficient breaches” of their leases, requiring them to keep operating even where particular stores allegedly were underperforming financially.

Simon v. Starbucks: On July 27, 2017, Starbucks announced its plan to close all of its 379 Teavana stores. Simon promptly brought suit to force Starbucks to keep operating 77 of those stores located in malls owned and operated by Simon throughout the country. Teavana stores have fairly small footprints, anywhere from a few hundred feet to approximately 2,000 square feet, and would not by any definition be considered anchor tenants. The Court acknowledged it was unaware of a previous instance in which a non-anchor tenant had been subject to an injunction requiring it to continue to operate. Nonetheless, the Court ordered Starbucks to keep operating the Teavana stores located in Simon malls because the overall balance of harms weighed in favor of Simon. In particular, the Court noted the otherwise strong financial position of Starbucks – of which Teavana was only a part – and held that Simon would suffer irreparable harm from the mass closures of Teavana stores. The Court focused especially on the domino effect the closures could have on Simon’s other tenants and the effects on consumers, harms that could not be easily quantified or compensated by money damages.

Bellevue Square, LLC v. Whole Foods Market Pacific Northwest, Inc.: On October 14, 2017, approximately one year into its 20-year lease in the Bellevue Square Mall, Whole Foods suddenly ceased operations, claiming the store was underperforming. Bellevue Square filed suit, seeking to force Whole Foods to reopen the store. On December 7, the Court ordered Whole Foods to reopen the closed store within 14 days. Similar to the Teavana case, the Court found that Bellevue Square would suffer irreparable harm as a result of Whole Foods vacating the leased premises after only one year of operations – including impacts on lease negotiations with other tenants, its relationship with lenders, and the reputation of Bellevue Square. The Court also found that such harms would be difficult to reduce to monetary damages individually and impossible to quantify collectively, and that Whole Foods is a highly profitable company. The Court did not decide whether Whole Foods was an anchor tenant, but stated that even “a smaller tenant can clearly have a broad impact” that would justify an order forcing it to stay open.

Although these cases gave big (albeit preliminary) wins to two mall landlords, their holdings should be treated cautiously by landlords hoping to force a typical tenant from going dark. Of particular importance is that both of the tenants in the cases are enormous, highly profitable corporations that made strategic business decisions to close certain stores. A truly struggling tenant will likely not be considered in the same light as Starbucks and Whole Foods. Where an independent tenant or struggling chain is going dark, a landlord will have a much harder time showing the balance of equities weighs in favor of forcing that struggling tenant to stay open. Additionally, even in these cases, where the balance of equities favors the landlords, Simon and Bellevue Square were both required to post substantial bonds –$15 million and $2 million respectively. Simon and Bellevue Square could ultimately forfeit those bond amounts if they do not prevail at trial.

ICSC New York Deal Making (2017)

Posted in Retail

On December 6-7, the Javits Center played host to this years’ ICSC NY Deal Making Conference. ICSC featured a new format at this years’ Conference. In addition to the deal making opportunities on Wednesday and Thursday, ICSC partnered with retailers and leading  real estate companies to present several hour long educational sessions, starting the day before the deal making sessions and continuing throughout the show. With topics ranging from omni channel retail to outlet centers to technologies disrupting commercial real estate, the Conference offered a broad range of topics. Reports were positive on the programming however many of the attendees did not plan their schedule to permit time to attend many sessions. If ICSC decides to continue the substantive programming in future deal making conferences, attendees may need to plan meetings so as to allow time to attend sessions of interest.

Notwithstanding the headwinds in our Industry, the vibe was positive and attendance was over 10,000, which exceeded last year’s conference. The Conference was located on the entire upper level of the Javits Center and a portion of the lower level where the large mall owners had their booths. This layout afforded the exhibitors and attendees ample room to walk the floor, meet other attendees and hold meetings. Those who attend the Conference on a regular basis are now pretty consistent in their support of the venue and layout of the Conference. One client from London commented that this is what he would expect a conference being held in New York to look like.

The Conference also featured Retailer Row, where over 20 retailers were available to discuss their needs and preferred projects. The Global Pavilion was front and center on the Conference floor, where retailers from other countries has small booths and tables to display their brand and talk to interested parties from the United States. The Retailers’ Runway was dropped this year, and, in its place, was the exciting RETAIL Revolution where omni-channel and international retailers presented their new concepts. There was also an Innovation Lounge where cutting edge technology was on display.

Given the changes occurring in the industry, there were meetings addressing early exit and rent relief. However there were as many meetings about new deals- redevelopment of existing shopping centers, building of large mixed use projects in several major metropolitan areas and back filling of vacant anchor boxes. There was activity with e-trailers looking for the right brick and mortar opportunities.

One of the stand-out sessions was on Food Halls. Garrick Brown, VP of Retail Research of the Americas at Cushman & Wakefield, moderated a panel of experts. Due to current popularity of Food Halls, it was no surprise that the room filled to capacity. The panel discussed the economic and operational challenges presented by Food Halls, and the ingredients for a successful Food Hall project. It boils down to the three C’s – culture, culture and commerce. And, with its life-like replica of the United States Capitol made with LEGOLAND building blocks, LEGOLAND had the most talked about display at the Conference.

There is no doubt that the next year will bring many changes in our Industry, but the Conference had a positive vibe and attendees expressed optimism about future  deals and projects.

Update: Tip Pooling by Restaurant Owners Remains in Flux

Posted in Employment, Restaurants, Retail

This past April, we reported on a recent Ninth Circuit ruling which upheld a 2011 Department of Labor (“DOL”) rule that prohibits restaurants from instituting tip-pooling arrangements that include both front-of-house staff that are customarily and regularly tipped (such as waiters, waitresses, bellhops, and service bartenders) and back-of-house staff that are not customarily and regularly tipped (such as dishwashers, cooks, chefs and janitors), even in instances where the restaurant pays its front-of-house staff a full federal minimum wage. We noted in our April posting that a writ of certiorari with respect to the Ninth Circuit decision had been filed with the Supreme Court. While the issue of whether restaurant employers can institute such tip-pooling schemes remains in flux, there are some recent developments worth noting:

1. Since the Ninth Circuit upheld the 2011 DOL rule, several other circuit courts have questioned the validity or enforceability of the rule.

The 2011 DOL rule was promulgated pursuant to the DOL’s authority under the Fair Labor Standards Act (the “FLSA”) to regulate restaurant worker wages. Under the FLSA, an employer may elect, rather than paying a tipped employee a minimum wage of $7.25 per hour, to pay such tipped employee a minimum wage of $2.13 per hour, with the balance of the employee’s minimum hourly wage covered by the tips received by the employee. This practice is known as the employer taking a “tip credit.” The FLSA requires employers who take a tip credit (i) to give notice of such election to its employees, and (ii) to allow its tipped employees to retain all tips they receive, unless the employees participate in a valid tip pool. Under the FLSA, a tip pool is considered valid if it is comprised exclusively of employees who are “customarily and regularly” tipped; therefore, an employer who avails itself of the tip credit cannot include back-of-house employees who are not customarily and regularly tipped in a tip pool. The FLSA, however, is silent as to whether an employer can include back-of-house employees in a tip pool if the employer pays its front-of-house tipped employees at least $7.25 per hour. The 2011 DOL rule was intended to address that silence by prohibiting employees from instituting tip-pooling schemes that included back-of-house employees, even in instances where the employer did not avail itself of the tip credit. The Ninth Circuit held that the fact that the FLSA is silent on tip pooling restrictions when an employer does not take the tip credit did not foreclose the DOL from promulgating reasonable regulations with respect thereto.

More recently, however, the Tenth Circuit found the 2011 DOL rule to be invalid, holding that the FLSA does not regulate tip pooling when the employer does not avail itself of the tip credit, and that the DOL, in attempting to impose such regulation pursuant to the 2011 DOL rule, had exceeded its authority under the FLSA.

The Eleventh Circuit also weighed in, acknowledging the Ninth Circuit’s ruling but holding that a plaintiff cannot pursue a private cause of action to enforce the DOL’s regulation of tip pooling practices when the employer has not taken a tip credit because the 2011 DOL rule only carries the weight of regulatory authority, not statutory authority. While the FLSA provides a private cause of action with respect to tip pooling practices when an employer takes a tip credit, the Eleventh Circuit explained, the FLSA provides no such cause of action when the employer does not take a tip credit, regardless of the 2011 DOL rule.

While the Supreme Court has yet to rule on the writ of certiorari, the circuit split created by the disparate Ninth, Tenth and Eleventh Circuit rulings makes this issue ripe for input from the nation’s highest court.

2. The Trump administration has indicated its intent to repeal the 2011 DOL rule.

In its semi-annual Unified Regulatory Agenda published in July, the Department of Labor indicated its intent to repeal the 2011 DOL rule. On October 24, the Office of Management and Budget announced that it had received a proposal from the DOL to rescind the rule. The repeal must now work its way through the administrative rulemaking process. While specifics of the repeal are still unknown, it is believed that the repeal will not impact the prohibition that applies to tip-pooling schemes when the employer avails itself of the tip credit, but only repeals the prohibition on tip-pooling schemes when the employer does not take the tip credit.

It is possible that if the DOL succeeds in repealing the rule, the DOL will take the position that a court ruling on the validity of the rule is no longer necessary (the DOL has submitted and received several extensions to file its reply brief with respect to the writ of certiorari). Some restaurant industry advocates, however, are hopeful that the Supreme Court will nevertheless resolve the existing circuit split, noting that even if the Trump administration is successful in repealing the rule, absent a definitive court ruling, a future administration could attempt to reintroduce the rule.

For now, and until either the 2011 DOL rule is repealed and/or the Supreme Court takes up and rules on the existing court split, restaurant owners should continue to exercise caution before extending tip pooling arrangements to include back-of-house employees who are not customarily and regularly tipped.

Supreme Court Removes Patent Litigation from the Heartland of Texas

Posted in Intellectual Property, Patent Litigation, Retail

For years, patent assertion entities have filed patent lawsuits against retailers in federal court in Texas.  The Supreme Court’s recent decision in TC Heartland LLC v. Kraft Foods Group Brands Supreme Court Removes Patent Litigation from the Heartland of TexasLLC may give retailers the ability to insist they defend such lawsuits on their home turf.

Deep In the Heart of Texas

For years, patent assertion entities have targeted online retailers for patent infringement claims relating to the operation of online retail tools.  As we previously discussed, the Supreme Court offered much needed relief to retailers in 2014 in its Alice Corporation v. CLS Bank decision by providing retailers with additional arguments for challenging patents that were the subject of complaints filed by patent assertion entities.  This did not, however, stop patent assertion entities from filing patent infringement lawsuits in the U.S. District Court for the Eastern District of Texas, which is widely considered to be patent owner-friendly.  In 2015, more than 45% of all patent cases in the United States were filed in the Eastern District of Texas.

Proper Patent Venue

A federal lawsuit must be brought in the appropriate judicial district.  This is known as “proper venue.”  The patent venue statute, 28 U.S.C. § 1400(b), states that patent litigation may only be brought in (1) “the judicial district where the defendant resides,” or (2) “where the defendant has committed acts of infringement and has a regular and established place of business.” In 1990, the U.S. Court of Appeals for the Federal Circuit interpreted this statute broadly, holding that patent infringement venue is proper in any federal court that has personal jurisdiction over the defendant.

In TC Heartland, the Supreme Court construed “resides” with regard to domestic corporations narrowly, holding that “resides” under the patent venue statute “refers only to the State of incorporation.”  Thus, proper venue in patent litigation is limited to (1) the state of incorporation of the defendant, or (2) where the defendant has committed acts of infringement and has a regular and established place of business.

After TC Heartland, Judge Gilstrap of the Eastern District of Texas, who handles more patent cases than any other judge in the country, denied a motion to transfer venue on the basis that the defendant allowed two employees to work remotely from their homes located in the Eastern District of Texas.  The U.S. Court of Appeals for the Federal Circuit disagreed, ordering the case be transferred out of the Eastern District of Texas.  Specifically, the Court of Appeals held that a “regular and established place of business” requires “a physical, geographical location in the district from which the business of the defendant is carried out” in a stable, non-sporadic manner.  An employee working remotely from home, without more, is not considered a regular and established place of business of the defendant.

Impact of TC Heartland on Retailers

As a result of TC Heartland, patent assertion entities will be less able to haul retailers into Texas to defend against claims of patent infringement.  Due to the large number of companies incorporated under the laws of Delaware, however, the aftermath of the TC Heartland decision has resulted in a significant increase in the number of patent complaints filed in the U.S. District Court for the District of Delaware.

If not incorporated under the laws of the State of Texas, there are many things retailers should consider to determine whether it has a “regular and established place of business” in the Eastern District of Texas.  For example, retailers should confirm whether there are any stores, employees, sales representatives, agents or contractors within the geographic reach of the Eastern District of Texas.  Understanding and controlling the business presence in the Eastern District of Texas will go a long way toward avoiding having to defend a patent lawsuit there.

Happy Thanksgiving!

Posted in Holiday

On behalf of all of us at Goulston & Storrs, we thank you for reading and subscribing to The Retail Law Advisor. We know that there are many options for gathering information about the retail industry. We are grateful you have chosen our blog and for the trust you have put in us as a resource for this changing industry.

Our wish for you and your families this Thanksgiving is evergreen. May the good things in life be yours in abundance, not only at Thanksgiving but throughout the coming year.

Warm Wishes,

The Retail Law Advisor editorial board

Cannes Brick and Mortar Retail in the United States Make a Comeback?

Posted in Restaurants, Retail

2017 MAPIC Conference in Cannes, France

Last week, a contingent from Goulston & Storrs attended the annual MAPIC conference in Cannes (pronounced “Can”), France for the seventh consecutive year. We expected to field questions about the challenges facing brick and mortar retailers in the United States as well as inquiries regarding how domestic political events might affect foreign companies entering the U.S. market. However, to our surprise, we received very few questions regarding the political climate; instead, the more immediate concern was how the U.S. retail industry would address its current challenges.

Food and beverage received the most attention at this year’s conference, an acknowledgement of its critical role in revitalizing malls and the overall retail experience in the United States. Following the success of the Time Out Market in Lisbon–a food hall containing restaurants, bars, and vendors selling fresh meats and fruits–two major U.S. cities will be introducing Time Out Market to its neighborhoods. Time Out Market will open in South Beach, Miami in 2018 and in Boston’s Fenway district in 2019. Time Out Market’s CEO, Didier Souillat, shared his experience on the panel entitled “Cosmopolitan Uplift: A New US Retail Scene.” On the same panel, Rachel Belam, head of food and beverage leasing for Westfield Mall Europe, spoke about the recently finished update to the Century City Mall in Los Angeles, California. Among the major improvements, Rachel mentioned the large Eataly that was added. Eataly presents consumers with the ability to stop in for an Italian coffee shop for fresh Italian products or pick up prepared foods. The rationale here is that food and beverage customers will spend some time shopping as well. We’ve seen this same idea put to practice at the Prudential Center in Boston’s Back Bay with the addition of an Eataly in 2016.

While food and beverage may bring customers to malls and the nation’s high streets, short term leases, concept and pop-up stores are designed to attract reticent retailers. Philippe Lanier of Eastbanc indicated that landlords are increasingly willing to be creative in attracting retailers to their properties by offering short term leases to reduce the retailer’s risk and to work with retailers in auditioning new concepts.

Concept stores were another hot topic discussed at the conference. A concept store carries merchandise from a number of different brands, and offers retailers and manufacturers who aren’t currently in a market an opportunity to test the viability of their goods before committing to a more permanent presence. By offering an expansion opportunity with low risk, the concept store idea is attractive to international brands not yet present in the U.S. At the USA Breakfast at MAPIC, we heard from Mohamed Haouache, the CEO of Storefront, Inc., a company that sets up pop-up stores for brands. We learned that Nike has worked with Storefront to open up pop-up stores internationally. This model seems equally useful to foreign retailers who are interested in testing different regions of the U.S. market.

From conversations with our friends and colleagues whom we’ve seen at the conference year after year, there seems to be a consensus that brick and mortar retail is faring better in the capital cities of Europe than it is in America. For one thing, e-commerce has not yet penetrated the European market to the same extent it has in America. And perhaps more importantly, European cultural attitudes continue to bring customers to the streets and stores in densely packed cities. We look forward to returning to Cannes next year to see how these trends play out.

Looking Inside the Mind of a Gen Z Shopper

Posted in Retail, Retail Sales

As the 2017 holiday season nears, consumers are getting ready to open their wallets and retailers are hoping their promotions will attract those consumers. Generation Z (“Gen Z”), which includes young people born in the mid-1990s to mid-2000s, is an important but often forgotten portion of the consumer population. There are about 2.5 billion Gen Z consumers worldwide, collectively wielding $44 billion in buying power. Although one might assume that having grown up in a world of technology, Gen Z consumers prefer exercising their buying power online, Gen Z buyers surprisingly prefer shopping in brick-and-mortar stores.

In January 2017, IBM and the National Retail Federation produced an executive report titled Uniquely Generation Z, which analyzed Gen Z buying habits. Sixty-seven percent of the Gen Z consumers surveyed for that report said they prefer to shop in stores while only 35% preferred to shop using a browser or an app.

More recently, PWC conducted a survey analyzing the 2017 holiday outlook. Of the 301 Gen Z consumers surveyed, 81% preferred to shop in stores. Many of those surveyed stated that the reason for their preference was fun experiences, live events, and in-store specials. Still, the survey suggests that a Gen Z buyer’s motivation to shop in stores may be due to their inability to purchase items online. Moreover, the survey cautions that as Gen Z shoppers grow older, wealthier, and busier, their preferences may change.

Nonetheless, this holiday season, retailers may want to customize their marketing strategies to capture the attention of Gen Z shoppers who prefer in store shopping. Retail Dive suggests the following three ways to reach Gen Z buyers this holiday season: (1) tell a story; (2) promote unique, personalized gift options; and (3) use the right medium.

First, retailers should target Gen Z shoppers by using visual forms of storytelling. The PWC 2017 holiday outlook survey referenced above showed that while Gen Z consumers prefer to shop in stores, a majority also look to Instagram, YouTube, and Facebook for inspiration when picking out a gift. Second, retailers should promote personalization services in their storefronts and focus on training store associates.  Gen Z consumers value fun experiences when making purchases and are more likely to make purchases based on a retailer’s recommendation. Finally, while Gen Z shoppers favor shopping in stores, they, more than any other generation, tend to research products online before buying. This includes reading reviews, looking through photo galleries, and using online wish lists. Retailers should capitalize on this preference by targeting Gen Z shoppers on social media, and connecting that online exposure with a more tangible experience in brick-and-mortar stores.

As we have discussed in previous blog posts, most retailers strive to strike a balance between online retail and the traditional brick-and-mortar experience. With so many ways to reach consumers, it is important for retailers that serve younger consumers to tailor their marketing strategy, especially for Gen Z, a new generation of consumers with unique buying habits.