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Even With Retail Evolving

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It can be easy to get the impression these days that Chicken Little has been fluttering about the retail industry, predicting doom for the brick-and-mortar sector due to the rise of online shopping and the well-publicized issues of some of the iconic department store chains and other sellers of soft goods.

But while some shifting is occurring within the retail sector, that’s not really anything new. Anyone who’s from the Baltimore area remembers names like Hutzler’s and Montgomery Ward, Hochschild Kohn’s and Stewart’s, as well as Hecht’s, which was absorbed by Macy’s more than 11 years ago.

In recent times, it’s been Macy’s and some other contemporary department store stalwarts, like J.C. Penney, Kohl’s and Sears/Kmart, that have closed stores due to associated financial issues (Sears is having problems obtaining merchandise to sell), but is that type of news really anything new? Department stores and many specialty retailers have come and gone with changing retail landscapes for decades.

As for the impact of online shopping, despite its popularity, it hasn’t proven to be the death knell to the shopping experience; the recent Census Bureau in the Quarterly Retail E-Commerce Sales 4th Quarter 2016 report revealed that less than 10% of all purchases are made online.

Another telltale sign is the buzz around the large malls and the newer “avenue”-style shopping areas. It’s not always as hard to park at these centers as it used to be — but it can be.

Changing Habits

This latest evolution is “certainly part of a new reality that the industry is facing,” said Cailey Locklair Tolle, president of the Maryland Retailers Association, in Annapolis. “We’re seeing consolidation among larger retailers, but consumers have been changing their approach, too, and spending more on food and travel.”
And while Locklair Tolle also said that Christmas 2016 “was the first that more people shopped online than in brick-and-mortar stores,” she also noted that the new market’s not all doom and gloom, even though,” nationwide, 1,500 store locations have shut down this year.

“Retailers are saying that number will reach 3,500 by the end of the year,” she said, “but we have largely avoided that trend here in Maryland” due the various market factors, including low unemployment and higher incomes.

Those factors have even led to what some observers, including Locklair Tolle, might term “a brick-and-mortar boom, from stores like discounters T.J. Maxx, Marshalls and Home Goods, which are opening stores nationwide,” she said. “So [today’s market] isn’t just about consolidation, it’s about consumers changing their shopping habits. And that’s not all new, either. Fifteen years ago, those three retailers were also part of the [then budding] big box trend.”

And the good news even extends to the mom ’n pop shops, she said.

“I think we’ll also see the Main Street setups thriving, with more marketing and campaigns, like Midnight Madness,” a ritual in Annapolis and in Ellicott City every Christmas season. “They’re creating an experience. And,” Locklair Tolle said, “the smaller shops are putting stuff online, too. Online’s not just for the big guys.”

The deal today comes down to shoppers having a bigger-than-ever interest in the discount shopping platform, and the old-school anchor stores are still are figuring out how to work within that model.

But all told, Locklair Tolle thinks there will always be a place for brick-and-mortar. “There are things that you need to touch and feel,” she said. “E-commerce will continue to cut into the market to an extent, but it will reach a certain point and stop.”

It’s Happened Before

Tom Maddux, principal with KLNB Retail office in Towson, attended the recent International Council of Shopping Centers (ICSC) conference in Las Vegas, and is also among those observers who feel that the impact of online shopping, while significant, is often overstated.

“ICSC has had several presentations about the Internet making up less than 10% of total sales, and much of that figure is derived from pharmaceuticals, which makes sense,” Maddux said.

As for the possibility of more large, vacant retail spaces, as in empty anchor stores, Maddux offered his viewpoint. “ICSC figures state that 45% of all retail space is occupied by anchor stores. So, if a mall has four 200,000-square-foot anchors, that’s where [a great deal of empty retail space] is coming from,” he said. “When anchors close, the whole mall is affected.

“But that’s happened before,” Maddux said. “Go back to Hutzler’s, Stewart’s, Wards and Memco. These stores weren’t usually in bad locations, so they were torn down (or maybe renovated) and repurposed.”

Today, the anchors in question seem to be every company — aside from Nordstrom.

“Sears, Penney’s, Macy’s, etc.,” Maddux said. “These companies are closing stores, but not in Westfield Annapolis Mall, The Mall in Columbia or Towson Town Center, all of which are anchored by Nordstrom.

“Then there’s everybody else” around the Beltway, he said, noting Cranberry Mall, Eastpoint Mall and Marley Station, which are in varying stages of economic distress; Hunt Valley and Chatham Mall; which have been renovated and repurposed; and Owings Mills Mall, which was torn down to make room for Greenberg Gibbons’ mixed-use Owings Mills Town Center.
That’s Entertainment

Brian Gibbons is CEO of Owings Mills-based Greenburg Gibbons, which is behind several of the successful retail reinventions in the area. He, like Maddux, noted how many of the smaller malls, like Laurel, have gradually been repurposed to feature the “avenue”/big box hybrid mixed-use concept with a grocery component, like Towne Centre Laurel, which features a Harris Teeter.
With different factors at work, Gibbons stressed that assessing today’s market takes more than just a brief observation and a sound bite.

“You can’t generalize what’s going on with the retail industry, because what’s happening is segment-related,” said Gibbons. “The ‘fortress’ malls [like The Mall in Columbia and Westfield Annapolis] generally thrive, but secondary malls were a dead format that have been mostly repurposed as new products that include grocery, big box, entertainment and food options.”

“Entertainment.” Who ever thought that going to the store was supposed to be entertaining? “That’s my opinion,” Gibbons said, noting the presence of companies like Wegmans (“Grocery-anchored retail is the best way to go, because its part of the whole entertainment concept.”) and L.A. Fitness. “Experiential retail is what the new generation wants. You need to create a reason for them to go to the centers.”.

On that note, Greenburg Gibbons projects also often include a mix of office and residential uses, like at Towne Centre Laurel, both (adjacent) Waugh Chapel centers and Annapolis Town Centre, among the company’s other properties in the Baltimore region.

And that approach has led to a winning formula. “Our portfolio is 98% full,” Gibbons said.

Coming Soon

Gibbons added that much of the softness in brick-and-mortar is in the clothing sector, a remark that was reiterated by Mark Millman, president of Millman & Associates, in Owings Mills. “All clothing categories are having a challenging year, as millennials are shopping online,” he said, though pointing out that many other brick-and-mortar categories are doing much better.

“Electronics, home furnishings and home accessories, and pet supplies or anything else animal-related is going through the roof,” said Millman. “The death of outdoor shopping is greatly exaggerated.”

Head to The Mall in Columbia for proof of that statement. The mall has lost a few tenants of late, notably Champps, a large restaurant in the center’s outdoor area. However, news is forthcoming on that front.

“Retail is an ever-evolving industry and is constantly adapting to meet the new challenges, with the most successful merchants fully embracing omni-channel retailing,” said Barbara Nicklas, general manager of The Mall in Columbia, “and we’re seeing many existing retailers are investing in their stores with renovations and expansions.

“Additionally,” Nicklas said, “several major retailers and restaurants will be announced in the coming months, which is a wonderful indication of the strength and appeal of the Columbia market.”

If a shopping area can be called a fortress, it’s The Mall in Columbia. It opened in 1971 and is still as vital as ever, still evolving and still attracting crowds through the days of the over-malling of America, the big-box/warehouse phase and the return to shopping on a new kind of avenue.

“Why did Two Guys, Ames and Memco go out of business, while Wal-Mart and Target did not?,” queried Maddux. “Because retail constantly evolves. We overbuild retail, office, etc., and the market corrects.”

And now look: “Today, we can’t find space to build warehouses for retail fulfillment centers for the online retailers along Route 95 or elsewhere,” he said.
Speaking of area warehouses, “Everybody worries about Amazon, but what do you think early retailers thought when the Sears catalog first popped up?”

Maddux said. “So know that change is opportunity. When you think something won’t happen, something does. Catch it on the way up or on the way down.”