Brokering the Future at ICSC New York Dealmaking
The International Council of Shopping Centers’ New York Dealmaking 2019 might be remembered as one of the first conferences in recent years to live up to its name. Most participants agree that retail leases typically aren’t signed at the Manhattan conference, nor are leases executed at the organization’s flagship
ReCon event in Las Vegas in May. Rather, shopping centers and brands have been engaged in a mating dance where the winner depends upon whom is on top at any given time and the amount of pressure one side can exert on the other to gain concessions.
Not that brands with expansion capabilities have been stampeding the convention floors. Since the recession and Internet disruption those with the desire and wherewithal to open stores have often been direct-to-consumer brands whose idea of aggressive expansion is a handful of units per year, compared with the 50 to 100 locations retailers such as Gap Inc. and Victoria’s Secret rolled out in their heyday.
“There’s a lot more action than people expected,” said Joanne Podell, vice chairman of Cushman & Wakefield, adding that “there wasn’t as much talk at the conference about online vs. offline.”
Even some legacy brands are thinking outside of the proverbial retail box. “American Eagle Outfitters is launching a new retail concept,” said a REIT executive who asked not to be named. “It’s part of a brand they’re already selling online. They’re going to be opening their first stores. It shows that brands are iterating and evolving and launching brand extensions.”
Here are some of the highlights of ICSC’s New York Dealmaking.
Retailers that roamed the exhibition halls of ICSC in the Eighties and Nineties, strutting new spin-off concepts and dangling open-to-buys at the booths of REIT’s, are gone, and they’re not coming back. They overexpanded. Today’s digitally native brands have the advantage of technology that didn’t exist two decades ago.
“Even if they had the data, Gap and Victoria’s Secret wouldn’t necessarily be on better footing,” said Greg Maloney, president and chief executive officer of
JLL Retail, adding, “If you give consumers what they want, they’ll come back. If you think you know better than the consumer, you won’t succeed.
“We had closures and bankruptcy downsizings this year,” Maloney added.
“In 2018, we didn’t have lots of closures, but it was a lot big boxes that were closing, so more square footage. It’s all relative.
The industry has absorbed all the closures and bankruptcies. The other thing is that we’re not building new space. Most new space is market-driven.”
Maloney said JLL conservatively estimates that 850 online retailers will open physical stores in the next five years. “We believe there will be a lot more as other brands realize the benefit of operating stores. My guess is it will be more like double or triple that. The digitally native brands want to be more cautious. There’s no rush. They see the benefit of opening brick-and-mortar stores in key locations.”
“Secondhand and consignment had a stigma,” said Meghann Martindale, global head of retail research at CBRE. “Consumers are embracing it a lot more. It remains to be seen how full-line brands respond. Outside of independent consignment stores and auction houses, which sold Hermès bags, this next iteration is far more democratic and symptomatic of where we’ve gone as a culture.”
The big question is who will ultimately control the resale of high-end products. Luxury brands and fashion houses clearly play a role, experts said. For now, resale sites such as The Real Real and ThredUp, among others, are vying to beat a path to the front doors of labels such as Chanel, Louis Vuitton and Fendi. Martindale said luxury brands may be worried that if a consumer has a negative shopping experience on a resale site, it may color their perception of the brand. “Consumers are so vocal about everything and the Internet has made everything so transparent,” and consumers may associate a negative experience with a luxury resale site with the actual brand.
“It opens up a new market. The challenge is how do luxury brands define luxury going forward. A redefinition is happening there. Luxury brands are exploring resale and gleaning insight about the technology. In addition to maintaining price points, it’s about control of the brand. If you look at the financial model, it makes sense for the brands themselves. We’re seeing a lot more brands collaborating with resale sites, but its being done in a very intentional and very strategic way,” said Martindale. According to sources, a major luxury brand is getting ready to bring resale in-house, to stores and its web site.
“On many levels, we’re coming back to the roots of retail — even ancient marketplaces,” Martindale said. “We’re embracing the DNA of retail before the dawn of the e-commerce world. We’re, now going back to those sensitivities. I appreciate the part of me that feels nostalgic for the retail of yore. We’re now striking a balance between that and online and digital.”
Luxury resale sites and other retailers began offering this holiday buy now, pay later options, which are an “elevated way of doing layaway,” Martindale said. “Alternative payment systems for pure play retailers is expanding robustly. We’ll see access to higher-priced items as we have more of those types of innovations. The Real Real is making luxury fashion even more affordable through a partnership with Affirm, which offers short-term, flexible payment installment programs to finance high-ticket purchases as an alternative to cash and credit cards.”
JLL said that while fewer shoppers are expected to use their phones for online ordering compared to last year, while more shoppers will use their phones for reading product reviews, checking store inventory, and making in-store payments. Mobile payments appear to Millennial shoppers, who use their phones for everything. service to table, and variety, everything from Mexican to salons de thé. At the World Trade Center, where there is a transportation hub, it’s more grab and go. It’s not really food courts.
“We’re also going for more entertainment,” Tritant said. “We signed with The Void a partnership for 25 locations, 12 are in the U.S. It’s the number-one player today in locationbased entertainment Virtual Reality.
It’s a content-equity partnership with Disney, and James Murdoch invested into it to deliver globally reaching content. We want to demonstrate the ability to do transcontinental deals and showcase how retail hookups can look. We want to be seen as a platform to launch brands. This is a brand-new category for VR for Disney. It’s the entertainment industry’s way to create additional value from their Intellectual Property.”
Tritant said there could be a “Star
Wars” or “Avengers” experience where potentially, say, Scarlett Johansson could be wearing a look from one of the retailers at the mall. “We’re not at that [crossmarketing] stage, but they should be able to do that at one point in time,” he added. “We want to develop a catalogue offer [for retailers], but it’s not the offer yet.”
Disney has a new title for Edward Park, who is tasked with reimagining its retail business: senior vice president, unified retail, Disney Parks, experiences and products. The word, unified, says it all, since Park is bringing merchandise from the entertainment company’s theme parks, for the first time, to the Mouse’s stores.
Retail brokers were buzzing that Disney is poised to open more stores. “The new head of retail, who came from Guess Inc., is changing the assortment,” a source said. “They’ll carry product sold at theme parks and make an investment in the digital platform, so there’s more synergy between stores, parks and digital.”
Camp, the kid-friendly concept that’s nostalgia-inducing for adults and combines sleep away camp-themed shopping and play areas, is scaling with an upcoming fifth store opening at The Hill in Dallas. This follows last year’s inaugural 10,000-square-foot flagship at 110 Fifth Avenue in Manhattan’s Flatiron District, and units at The Shops and Restaurants at Hudson Yards, City Point, Brooklyn and The SoNo Collection, Norwalk, Conn.
Brands, brokers and digitally native brands are more aligned than before.
Millennials are the center of their own universe, so why wouldn’t they be obsessed with their health? Gen Z is going in hard for wellness. Everything old is new again, remember? SoulCycle, Peloton and Lululemon could be seen as Eighties’ soccer moms feeling the burn and flaunting their bodies in Juicy Couture track sets, while today’s wellness trend seems like another route to the Fountain of Youth. Instead of plastic surgery, there are CBD-laced creams and lotions and youngblood plasma drips.
Unibail-Rodamco-Westfield’s Tritant said brands with fitness or health benefits are going to greater lengths at their stores to show consumers how they can get results faster. “Peloton is creating a small gym in stores where you can test the equipment with full amenities like showers. The product is easy to sell online, but being able to experience it in person is important.”
Lululemon is building relationships with yoga teachers, and is looking to open more locations for its massive new concept, which bowed in Lincoln Park, Ill.
UCLA Health’s The U bar, located at three Unibail-Rodamco-Westfield
West Coast sites, is an interactive health technology station designed to help patients manage their health, wellness, and fitness goals by downloading healthrelated apps onto their mobile devices.