retail on the riseWhy we can expect even better things in retail development this year. By Dan Villalpando

The retail industry welcomed 2016 with cautious optimism, not unlike the sentiment entering the previous year. Statistically, it turned out to be a decent year for retail developers and retailers, with estimates that retail sales in 2016 rose approximately 3.3 percent over sales in 2015.

While such growth is not as robust as many had hoped, it does represent movement in the right direction and begs the question: Can we expect to see even more improvement in 2017? Based on positive news regarding the gross domestic product, continued growth in the job sector and the influx of foreign investment dollars, it appears that there may be reason to expect even better things in retail development this coming year.

One facet of the economy that has a major influence on the health of retail development is the gross domestic product (GDP). The latest data indicates that the weak growth rates in the GDP of 2009-15 that stagnated around 2 percent may be a thing of the past as experts forecast growth of 3 percent in 2017. In addition, according to the UCLA Anderson Forecast of December 2016, real consumer spending, a factor closely linked to retail development, is expected to increase 3 percent in 2017 and another 3.7 percent in 2018. Another positive sign is that, according to the International Council of Shopping Centers (ICSC), holiday spending in 2016 rose by 16 percent over the 2015 season, beating predictions by 4 percent.

Although housing starts continue to be lower than hoped by homebuilders, the unemployment rate continues to fall, infusing cash into the pockets of many households. According to the Bureau of Labor Statistics, non-farm payrolls expanded by 178,000 positions in November and the unemployment rate declined by 0.3 percentage points to its lowest level since 2007. This news, coupled with predicted wage gains, indicates that more people will have jobs and those jobs will, on average, be paying more in the coming year. This should provide a boost to consumer spending, a driving influence for retail development.

In terms of what is occurring with different types of retail projects, owners of regional shopping malls have had to adapt to stay relevant. For example, as the public continues the trend toward healthier food selections and different types of cuisine, mall owners have been forced to re-envision their food courts through general upgrades in quality and the introduction of more “exciting” restaurant concepts.

They have introduced sit-down restaurants, entertainment and Internet experiences to make the mall more of an experiential venue where customers can shop, dine, socialize and be entertained. The goal is to increase “dwell time,” or the period the customer stays at the retail project, so that customers will spend more money.  

Grocery-anchored neighborhood centers generally continue to provide a good return for their owners, with transactions growing in volume since 2009, and 2015 being a peak year at $3.9 billion of transactions, and 2016 following close behind. One of the larger growth sectors in retail is a specialty grocer such as Whole Foods, Trader Joe’s and Sprouts, while another is a discount grocer like Walmart Neighborhood Market. And although there remains uncertainty over the consolidation between large-scale grocers, owners of neighborhood centers continue to be able to attract retailers eager to feed off of the foot traffic generated by a tenant mix that typically includes a grocery and a drug store.

Other retail developers are being more proactive dealing with existing space by negotiating early lease terminations in order to re-merchandise with better tenants and higher rents. Some “mid-box” or “junior anchor” tenants like PetSmart and Old Navy, which are looking to downsize their footprints, may be willing to give space back early, allowing landlords to aggregate enough square footage to attract certain “hot” retailers in an effort to revitalize their shopping centers.   

Meanwhile, many retail developers have had to deal with the closures of anchor stores, such as Macy’s and Kmart, as well as sporting goods operators like Sports Authority and Sport Chalet. As a result, so called “specialty leasing” is on the rise, with retail developers looking to re-lease large vacant space to concepts not traditionally associated with shopping centers, such as go-cart tracks, trampoline facilities, day care centers, painting studios and cooking schools. 

When it comes to the world of retail development, the undercurrent of optimism from the beginning of 2016 continues to grow. While the needle on ground-up shopping center development may still not be moving, a solid uptick in the GDP and continued growth in the job sector bodes well for continued improvement for retail developers in 2017.

Dan Villalpando, a partner at Cox, Castle & Nicholson, specializes in retail development and commercial leasing.

SENTELLHere are three steps to help retailers achieve operational efficiency in their stores. By Susan Sentell

Category Management is undergoing a profound reinvention. The Category Management Association (CMA) released its “Category Management 2.0 Best Practice Whitepaper” last year. Shopper diversity, new retail formats and more data and analytical tools will enable better processes. And manufacturers and retailers are pulling out all the stops to improve profitability while delivering an exceptional experience to the shopper.

As planograms, floor planning and shelf merchandising evolve, the critical centerpiece of these activities is consistent and accurate product content. In order for retailers and their CPG partners to continue delivering a satisfying shopper experience, here are three steps for achieving operational efficiency in store.

Ensure Proper Product Usage

To effectively market and sell products today, retailers need a comprehensive and accurate representation of each item. But all content is not created equal. The exacting dimensional requirements for an in-store shelf set may be different than the larger image or precise color required for a merchandising banner. It is critical that retailers have access to the different product images and detailed descriptions they need.

This includes captured and verified product details as well as manufacturer-sponsored lifestyle images, romance copy and other marketing material. Gladson’s platform allows integration and access for these different retailer needs.     

Since planogram measurements are so critical, the product content used by space management applications also should be verified to ensure product weights dimensions are accurate. This ensures that retailers can be efficient throughout their supply chain, from warehouse storage to shipping and delivery through shelf stocking. Gladson’s proprietary content collection process ensures such accuracy. An added benefit: As an early adopter of the GS1 measurement standards, Gladson content can help retailers speed their GDSN implementation. Our GS1-certified measurement system supports both retail grocery and food service, allowing for standards compliance across formats.

Execute Accurate Planograms

Each year, big investments are made to create and rollout new planograms. Whether you are using advanced analytics to drive space management or building shelf sets based on personal hard-earned experience, the planogram must be fueled with the most accurate and trustworthy product content and images. For example, if a shelf set is built without the proper product dimensions, there may be not enough – or too much – room for product facings.   

Either way, it’s potentially lost sales and increased re-stocking cost. As retailers begin to use planogram-based auto-replenishment systems, accurate product content becomes even more important for ordering and inventory.

Once in store, retailers can ensure that their planograms are implemented properly by considering solutions such as shelf strips, which can be used on a temporary or ongoing basis. Strips that include product images can help to address some of the retail industry’s toughest challenges, including recognizing out of stocks quickly, shopper confusion or frustration, and re-stocking inefficiencies. Image-based Shelf Edge Solutions and QuickSet strips and tags are examples of tools that retailers can use to engage shoppers where purchase decisions are made – at the shelf. Merchandising teams also benefit by using these solutions as a visual roadmap to optimally maintain the set.

Engage in Store Planning

Small format is the big news in retail today. Even some of the larger players are getting into the “small” game. The challenge - smaller spaces require more precise floor plans.

In the past, category management programs were limited by the data that was available for store level planning. Today, more granular data means that retailers can configure floor plans that maximize every inch of merchandisable space, by store, to achieve the highest margin per selling area.

Data such as individual purchase data, shopper demographics and complete product attribute detail are enabling deeper insights and better layouts. With these tools, small format stores can improve sales, profitability and inventory turns, while delivering an improved shopper experience. 

As retailers and their trading partners expand their category management capabilities, they are sourcing a greater amount of data to drive plans. By working with established, sustainable processes, retailers can ensure they are using the correct content for the right purpose, create more effective planograms and work to maximize profitability in their floor space.

With the tools available today, retailers can more efficiently act on store, category and shelf plans to operate effectively in their markets. The utilization of the right product content, for the right applications, will remain a core component of programs that can have a real impact on retailers, brands and shoppers.

Susan Sentell is the CEO and President of Gladson.

ThinkstockPhotos 516827814While the 2016 holiday season is one for the history books, it’s the future that counts for retailers. By Aimee Koontz

The good news for America’s retailers: We’re still living in a material world. If sales reports continue their trend, the holiday 2016 period will go down in history as America’s first trillion-dollar selling season, with Cyber Monday 2016 paving the way as the biggest single online shopping day in U.S. history. But the registers weren’t ringing at the same rate for every retailer, and there are trends that can be gleaned for retailers across the physical and online landscape for 2017 and beyond.

Some of the trends that continue to dominate conversations and media coverage have become so obvious that they’re really business-as-usual now. Consumers are addicted to mobile. Customers crave personalization. And shoppers enter a store armed with almost as much information as the associate on the floor.

So, to get to the really meaningful information that can help retailers identify where to shift their focus in 2017, we took a deeper dive into how consumers behaved and how retailers reacted. Here’s what we found.

Channel Your Efforts

Consumers don’t think in terms of channels. They think in terms of the brand, regardless of how or where they encounter it, and they expect the same experience across any channel that the brand uses.

Smart brands integrated all facets of their products and experiences throughout their channels, utilizing technologies like RFID to track inventory as a way to eliminate customer disappointment when products weren’t available in a particular channel at a particular time. Brick-and-mortar locations served as distribution hubs, both to get products into customers’ hands faster and to reduce shipping costs on the back end.

The ‘Why’ Before the ‘Wow’ 

Technology has dramatically changed the operations side of the retail industry, and many retailers want to lay claim to being first to try the next big tech innovation. But ask yourself why before you try. If it’s not going to drive loyalty and sales, then it might not be the best solution. The good news is that technology is coming out from behind the register to make physical stores smarter and give them an edge over their online counterparts. This holiday, artificial intelligence (AI) and machine learning were rooted firmly in many brands’ marketing strategies. Branded chatbots provided customers with human-like interactions, supporting them through product search, recommendations and reviews, while more advanced chatbots engaged consumers with psychographic-based gifting solutions.

The proliferation of smartphone use during the shopping cycle now allows brands to connect with consumers in real time, taking concierge commerce to a new level. And technology-enabled platforms are primed to provide brands with new ways to connect and engage with consumers who are making greater use of smart assistants, connected and wearable devices and virtual reality headsets.

Open Your Wallet 

Your mobile wallet, that is. A shopper’s physical wallet contains more than just cash and credit cards, so your brand’s mobile wallet also should be about more than payments. Shoppers are all about the speed of the journey, and one-click payments are the price of admission.

But “speed” for consumers really means “organization” – putting everything at the shopper’s fingertips to save time through a simplified checkout process that supports payment methods, loyalty and rewards tracking in a mobile-friendly experience.

Play Offense, Not Defense

It’s no longer enough to have prime retail space and a dazzling array of goods. The rise of online has blown up that model, so retailers need to start playing offense to keep pace with – or stay ahead of – online and alternative retailers. We saw a lot of retailers up their game this past holiday season to good effect.

Some retailers provided advance notifications of promotions to entice consumers and offered price matching to compete with online-only retailers. Member-only promotions also created the aura of exclusivity with insider pricing. And in a mash-up of the online and physical world, nearly two-thirds of consumers who purchased online during Thanksgiving weekend picked up their products in-store – and then also made an additional in-store purchase.

Several brands even created an innovative “e-gifting meets e-gift card” solution to engage last-minute shoppers. The e-gifting option enabled givers to select a proposed gift item for their recipient, and the recipient could accept the specific item, exchange it for something else or accept the value of the item on an e-gift card.

The coming years are shaping up to be even more competitive, with both brick-and-mortar and online merchants sharpening their selling skills. Smart retailers will put the customer at the center of the brand experience, enabling an immersive, simplified path to purchase for consumers and a strategic path to success for their own businesses.

Aimee Koontz, delivers the next generation of competitive advantage through marketing and loyalty thought leadership in her role as director, marketing & loyalty advancement for Alliance Data’s card services business, a leading provider of tailored marketing and loyalty solutions for branded credit programs.

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