Americans were born to shop.
Nationally, the U.S. averages four to five times more retail square footage per person. Online purchases total 8.5 percent – a $300 billion payout. And e-commerce and big-box chains present investors with extraordinary premiums and unprecedented crossover.
But, is a retail apocalypse overtaking brick-and-mortar business?
Or, will high yield alternatives find a lucrative loophole inflated with “Amazonian” charm?
Retail think tanks report department store closures have nearly tripled this year. With no recession in sight, favor falls to frontline innovators, like Amazon. With many calling this groundswell, the “Bezos” effect. And here’s why…
The brand’s CEO and largest shareholder, Jeff Bezos, recently acquired Whole Foods. The high-end grocer, brandished with Amazon’s Midas touch, welcomes the boon. After all, his ground zero fulfillment and distribution hubs, competitive price structure, and customer service merit rapid-fire expansion. These changes are translating into new models of selling, buying, leasing, and investing in high net worth industrial real estate.
So, are flagship retailers capable of becoming “Amazon proof”? In many cases, yes.
Through mid-2017, investors poured nearly $24 billion into industrial real estate, despite storefront shakeups. In 2018, successful hybrid brands – harvesting online and offline market share – could prove to be bigger and better.
Here are the differentiators to look for:
#1: Customer Loyalty Reflects Engagement, Personalization, and Customization.
In recent projections cited by Barron’s, 50 to 60 percent of retail investment firms plan to offer “digitally enabled onboarding and integrated client experiences.” Much like the cashless AmazonGo stores and AmazonFresh on-demand grocery delivery service, patrons revere this four-tier offering:
- Immediacy – the click of a button brings everything to your front door.
- Options – multiple ways to order, ship, and/or pickup merchandise offers flexibility.
- Consistency – a seamless checkout advances consumer confidence and efficiency.
- Community – both online and offline experiences afford interaction with fellow brand loyalists.
#2: Delivery Hubs are Right in Your Neighborhood.
Amazon capitalized on the stable grocery market. The challenge, however, was delivering guaranteed fresh produce within hours. The solution? New Amazon stores would serve a dual purpose, both as distribution centers and storefronts, located within city limits. Meanwhile, rival competitors, like Costco Wholesale, opened close to 30 new locations internationally. In addition, its signature buy-in-bulk business model remains economically priced. For sustainable ROI, look for like-minded retailers who are bringing their “A” game: accessibility and affordability.
#3: Wellness and Lifestyle Offerings Equate to Healthy, Happy Customers.
Brick-and-mortar establishments are also getting savvier about stealing the lion’s share. By offering experiential events (pinning patrons and in-store associates under one roof), the mass appeal is evident. Williams-Sonoma, for instance, conducts in-store cooking classes. Apple plans to create “outdoor plazas” where people can congregate, listen to music, and check out provincial artists. Even Amazon has opened a handful of bookstores. Flesh and bone investment, in a world gone tech, pays high-net dividends.
#4: Brands Targeting the 35-Plus Age Range are Ripe for Revenue.
According to Inc.com, this generation holds deeper pockets than its younger counterparts, controlling 70 percent of the nation’s disposable income. Real estate investors can sniff out those judicious companies who are ahead of the growth curve and on the pulse of prioritization. The right companies know that longer life spans breed both longevity and profitability. They see the future, prepare for it, and can justify their long-term viability. This is every investor’s dream portfolio.
#5: Offerings that can’t be bought at Amazon.
There are serious outliers, too. Novelty retailers are amplifying their natural assets and paying no mind to the big competition. And, it’s working. Instead, concerted efforts rely on mastering the art of old-school selling. MartinPatrick3, a high fashion menswear company, prides itself on remodeling showrooms within 24 hours. Another anomaly… they aren’t afraid to counsel elite clients toward a lower price point. This earnest, individualized attention has jumpstarted a 40 percent average annual increase in revenue. At its highest grossing cycle, the menswear leader shattered records accruing triple-digit growth.
In 2018, “Amazon-sized” feats could lead to a “super-sized” and fiscally sound future.
So, what does this mean for you? And how can you take a different approach toward managing your portfolio?
At Circle Squared, our motto is simple: Invest in the Real Economy. This is where run-of-the-mill strategies can fall short. Our big picture, however, includes alternative investments that work on bridging the gap between your financial desires and your ability to achieve them.
In the new year, think big and embrace the alternatives that could be available to you.