Browse Tag: shopping center

New Supermarket Arrival Lidl Promises To Be Big

Retailing industry analyst Kantar Retail this month released an impact study on the US supermarket sector that highlights a new entry from Europe. Lidl, a no-frills grocery chain headquartered in Germany, is in business in 28 countries in Europe, is expected to enter the US market in 2018.

Similar to Aldi, another German supermarket competitor who have long since set up shop in the US, Lidl stores take a low-staff, no-frills approach to supermarket operation, displaying skids of product in aisles, letting customers take product from opened cartons. A lack of specialty areas, preferred by some other supermarket chains, creates store floor plans that are streamlined and configurations that demand less of basic space than does the average US supermarket.

The Predictions

Kantar sees Lidl as opening over 100 stores a year in the US, with a total of 400 up and down the east coast by 2020.  The chain’s operating efficiency is touted, as a single, fully mature store could generate $14 million, or , “a lot of volume packed into a 36KSF box”. Other highlights from Kantar:

  • Lidl could surpass USD2 billion in volume by the end of its second full year of operations
  • By 2023, we believe Lidl could approach USD 9 billion in sales, which is more than what Wegmans does today
  • Expect Lidl to have over 400 stores up and down the East Coast by the start of the next decade

East Coast Rollout Locations To Watch

The chain’s US corporate headquarters is announced as being located in Arlington County, VA. European press has put a location of the first wave of Lidl stores as Virginia Beach.  Its logistics network has already put down roots with two regional distribution centers, one in Alamance County, NC and Arlington County.

Kmart CEO: We’re Not Going Under

 

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Kmart, granddaddy of the big box retail format, addressed fears yesterday that the brand’s recent struggles are fatal.  Kmart CEO Eddie Lampert took to the pulpit to deny “recent reports”  that the chain was near the end, a matter of great importance to hundreds of Kmart-anchored shopping centers across the US.

Reports have persisted over 2016 that the chain was in a free-fall, but Lampert took issue with the fears in a statement posted at Kmart parent Sears Holdings:

I also wanted to comment on the frequent false and exaggerated claims surrounding our Kmart business. Recent reports have suggested that Kmart will cease its operations. I can tell you that there are no plans and there have never been any plans to close the Kmart format. In fact, we’ve been working hard to make Kmart a more fun, engaging place to shop, powered by our integrated retail innovations and Shop Your Way. To report or suggest otherwise is irresponsible and is likely intended to do harm to our company to the benefit of those who seek to gain advantage from posting these inaccurate reports.

There are a few things that are very important for you to keep in mind. First, Kmart continues to operate over 700 stores. Second, a significant number of these stores are profitable and have been profitable for many years. Third, we have been clear that we are intent on improving the performance of our unprofitable stores and, if we cannot, we will close them. Actions to improve our store productivity, including reducing inventory stored in the stockrooms, are designed to make our stores easier to operate and to eliminate unproductive inventory and processes. Decisions to close stores are never easy, but we recognize that the way people are shopping is changing significantly. This is why we have made major investments in our online and mobile platforms and this is why our focus on serving members through Shop Your Way is so important.

Uber Partnership Touted

In what could become, if proven successful, a game-changer for shopping center parking space calculation formulas, the Shop Your Way customer-convenience program touted by Lampert leverages both Kmart and Sears brands and includes an innovative partnership with ride-sharing powerhouse Uber. Points and reward programs are used to tie ride-sharers and Uber drivers to the Kmart brand at the same time they shop among Kmart and Sears’s shelves.

Will the new customer-convenience programs rescue these troubled, venerable retail brands? Can Kmart and Sears innovate their way into the future?  Can a recipe of hundreds of millions in loans from its CEO plus new ideas rescue Kmart?  Answers to these questions are fast approaching, anticipated by landlords, managers and brokers from coast to coast.

 

When Chains Close, What Happens To Retail Rents?

A major problem with using statistics is that today it’s much easier to count things than it is to decide exactly what to count, or exactly why to count. The answers we obtain when analyzing economic and commercial real estate data may reflect the real world, but there’s no guarantee that a set of questions are the right ones. In data science or statistical analysis, the quality of an answer entirely depends on the quality of the design of the question asked.

The way they describe this problem in the computer science world is: garbage in, garbage out. And out it comes indeed: when you ask the wrong question (or a question lacking in the right detail) the answers you get will come pouring out just as plentifully and convincingly as when you ask the right question.

The Retail Closures Question

As e-commerce continues to radically reshape the retail ecosystem, disrupting decades of assumptions about physical space, parking and real estate value, it’s perfectly reasonable to notice that a growing number of once-venerable retailing brands have closed, or are threatening to close, or are pointedly denying they will close.

In such a world, it’s reasonable to wonder what effect all this change is having on retail rents generally. That’s a good general question to put to statistical analysis, but incomplete in its basic form — you have to define exactly what retail rents are, and you have to decide what makes a good relationship between closures and those rents.

This is what Barbara Byrne Denham, an economist in the research department of Reis, Inc. has done.  Her best effort to keep garbage out was to get a good handle on what rents were in metros across the country. She included data on rent growth, ranking metro areas by their growth in rent rates, such data coming from within her Reis data warehouse.  From her piece “Impact Of Large Chain Closures On Retail Rents” published last week in NREI:

Few, if any, have analyzed the impact of these store closures on real estate statistics. Having property- level retail real estate data, analysts at Reis have been tracking store closures for the larger, more high-profile brands across the country. In short, the Reis database includes 280 store closures in 59 of the 80 primary retail metros that Reis tracks, totaling 12.8 million sq. ft. of closed stores across the United States. The major brands include Wal-mart, Kohl’s, Sports Authority, Pathmark, Superfresh, A&P, Waldbaums, Haggen and Kmart. Many of these closures were concentrated in a handful of metro areas, including Chicago, Central New Jersey, Northern New Jersey, Philadelphia, Long Island, San Diego and Los Angeles—all of which had more than 400,000 sq. ft. of store closures from 2015 through July of this year.

The report looks at the percentage of inventory that store closures account for and the change in rent growth rates by metro. The purpose of this analysis is to see if and how these store closures have affected rent growth rates. In short, the closures may have impacted these metros, but there is no overall conclusion that can be drawn from the data. It should be noted that this detailed data does not include details on whether or not the store spaces have been re-leased to other users. Some may have been in the interim.

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The conclusions are carefully drawn in Denham’s work, as she meticulously spells out the limitations of the analysis, highlighting where and how it could differ from the real world.  It’s not glamorous or provocative to be complete and correct about what a study has found, nor to be scrupulously above board concerning the work’s assumptions.  The business world wants plain and actionable insights, validated by “crunching the numbers”.  This isn’t that.  Denham’s study suggests that the impact of sizeable retail closures on rent growth was one of many factors that contributed to declines in rent growth, and perhaps not even the strongest factor.

The study is a helpful look into a use of statistics to ask the right questions, to avoid garbage-in-garbage-out and to be scrupulous in never confusing correlation (stuff that happens nearby something else happening) with causation (stuff that happens because something else is happening).  In an age marked by oceans of “big data” and thousands of software tools to work through it, it’s of growing importance that we all focus on the quality of the questions before we accept the significance of the answers.

 Read the entire article at NREI here.