Positioning Retail Real Estate for a New Generation

January 30, 2020

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Levin Management Survey Unveils Growth and Change Ahead for Retail in 2020

10th Annual Outlook Poll Shows Strong Performance Yielding High Optimism

NORTH PLAINFIELD, N.J., Jan. 30, 2020 – Fueled by strong 2019 holiday and annual performance, retailers are gearing up to embrace opportunity in 2020, according to Levin Management Corporation (LMC). The North Plainfield, N.J.-based commercial real estate services firm today released the findings of its 10th annual Retail Sentiment Outlook survey, polling store managers within its 105-property, 15-million-square-foot leasing and management portfolio.

The survey reflected the highest-ever percentage of respondents reporting holiday sales and traffic at a “same or higher” level than the prior year (77.4% and 76.5%, respectively). These figures met or exceeded expectations for 70.4% of participants. For the full year, 68.0% reported sales at or above their prior annual total. This compares to an LMC survey trailing average of 60.4% reporting same/higher sales year over year.

“Brick-and-mortar retail is on a roll, and our own tenants reflect the positivity we are seeing among companies focused on evolving within this ever-changing landscape,” noted LMC’s Matthew Harding, chief executive officer. “A strong end to 2019 provides further justification for a positive outlook." Harding cited a recent National Retail Federation report, which shows 2019 holiday sales grew 4.1% – nearly double the 2018 growth figure.

“In our Outlook survey, nearly three-quarters of respondents [71.8%] indicated they are optimistic about the coming year,” Harding said. “Of the many drivers impacting retail, they anticipate the economy and consumer confidence to weigh most significantly in their success entering this new decade.”

EMBRACING OPPORTUNITY AND CHANGE

More than one-quarter (25.6%) of LMC survey participants noted their companies plan to open additional locations in 2020. Additionally, 28.9% said they plan to increase staffing levels – a notable jump over last year, as only 18.3% of participants indicated their teams expanded during 2019. Further, the majority are seeking – and capitalizing on – new avenues to success, according to Harding.

In fact, more than half (54.3%) of LMC survey respondents say they have adapted their business models over the past two years. “Physical-store retailers are working hard to win the patronage and loyalty of today’s consumers, and this means doing more than simply providing access to quality goods and services” Harding said. “They are leveraging their advantage over online retail – including the abilities to offer a personal touch and distinctive experience. Our Outlook survey indicates that ‘convenience’ has become a central objective.”

A full 70.0% of the survey respondents who have adapted their model in some way or ways have increased training and focus on customer service. Nearly half (47.9%) have upped their use of in-store technology – with digital coupons, price-check scanners, free Wi-Fi, scan-as-you-shop, self check-out and/or electronic receipts, and other convenience-oriented tools. Significant percentages have added in-store, online ordering with free shipping for out-of-stock items (34.3%) and in-store pickup and returns for purchases made online (34.3%).

Technology also is playing a key role in retail marketing. More than half (52.9%) of LMC survey respondents who have adapted over the past two years have increased their use of tech-centered marketing tools – including but not limited to email, text messaging, SEO optimization, Google AdWords, banner ads or other Internet advertising, social media, and/or social marketing.

“There is no doubt tech advancements have been a boon to retailers as they look to build brand awareness,” noted Melissa Sievwright, LMC’s vice president of marketing. “At the same time, they are gathering a wealth of customer data through various channels. This information, in turn, is being leveraged to help them build business and marketing strategies catering specifically to their customers’ patterns and preferences.”

Sievwright noted that change is good – and LMC tenants agree. Nearly two-thirds (60.1%) of those who have made adaptations reported they have seen benefits in terms of sales and/or in-store traffic. “This statistic has risen steadily, and by nearly 20%, since we added this survey question in 2016,” she said.

“It is no surprise, then, that our retailers continue to try new things,” Sievwright continued. “About one-third [33.6%] of our Outlook participants say they plan to adapt their model in some way during the coming year. When asked what they see as the biggest opportunities for their business, providing the highest-quality service and building customer relationships were – by far – the top themes.”

LMC’s next Retail Sentiment surveys will be conducted in May, exploring year-to-date performance and technology issues, and in October/November, gauging expectations and plans for the holiday season. For nearly seven decades, the company has served as a trusted single-source commercial real estate services provider for institutional and private owners. LMC today maintains a diversified, retail-focused portfolio in the Northeast and Mid-Atlantic states. The firm’s capabilities continue to evolve with new technologies, efficiencies and sustainability-focused initiatives to serve a new generation of properties, investors and tenants.

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