Let’s put the market into perspective. Consider the following market facts covering the next decade and beyond:
Every day for the next 19 years, 10,000 Baby Boomers will reach age 65.The aging of this huge cohort of Americans (26 percent of the total U.S. population are Baby Boomers) will dramatically change the composition of the country. Currently, just 13 percent of Americans are ages 65 and older. By 2030, when all members of the Baby Boom generation have reached that age, fully 18 percent of the nation will be at least that age, according to Pew Research Center population projections.
According to a new study released from Deloitte, nine in 10 shoppers know what they’re buying before they arrive at a store.
Millennials now represent the largest generation in the United States, comprising roughly one-third of the total population in 2013. What’s more, the largest Millennial one-year age cohort is now only 23. This means the Millennial generation will continue to be a sizable part of the population for many years.
How do these factors impact retail in general, the site selection process and local economic development entities?
Between the huge cohort of boomers and the massive numbers of aging Millennials, the retail picture becomes clearer.
First, it is critical to recognize that it's not just the buildings that are getting revamped. Retail is becoming much more integrated with housing, especially in cities and the immediate outer rings of suburban communities.
In previous decades, homes, stores and offices were usually designed to be driving distances away from one another. Now, life styles of both Boomers and Millennials are reversing that trend. You can find evidence of the trend in places like Research Triangle Park in North Carolina, a classic office park where the master plan mandated significant increases in mixed use, adding shopping, restaurants and residential dwellings.
Boomers: Retail-driven services act as a draw for the older generation who are less inclined and perhaps less able to travel for their groceries but still need to access essential local services. Transport, accessibility and local infrastructure will therefore become increasingly important.
What does this mean to retailers? In general, retailers will be rethinking store design, marketing and the advertising campaigns to attract the graying dollars and above all understand these are older consumers who still think of themselves as young consumers.
The Baby Boomer generation is down-aging: acting younger, both physically and mentally. Understanding this is important because it’s this older segment that’s going to drive retail over the next decade. An aging population profile, helped by lower birth rates, longer life expectancy and the sheer size of the Baby-Boomer cohort – many of whom are now retiring – are factors driving this trend.
Not all Baby Boomers are awash with disposable income. Independent retail analysts agree that while conventional wisdom paints a rosy picture of a growing number of affluent retired couples with plenty of time and money to spend, the reality for many is rather different. With ultra-low interest rates and annuity rates, retirement income is under considerable pressure, forcing many older consumers back onto the part-time job market to supplement their financial resources.
Millennials: Millennials or Generation Y are also defining the way in which the global marketplace is heading, whether their behaviors are considered positive or negative for continued retail growth. Their beliefs, interests and behaviors will continue to impact and shape the future across every aspect of life.
The purchasing power of Millennials is estimated to be $170 billion per year. This shines a light into the growing influence this generation will continue to have over the world’s economy. (source: ComScore)
Forty-two percent of Millennials tend to shop for groceries once a week, as opposed to once a month, twice a month, two to four times a week, five to six times a week or every day. This make sense for many Millennials living in big cities not restocking with a few weeks of meals, but instead for a week at a time, due to the limitations of public transportation and time in their busy week. (Source: Barkley)
Thirty-seven percent of Millennials love shopping and 48 percent enjoy it. Fifty percent of Millennial men and 70 percent of Millennial women consider shopping a form of entertainment and something to share with friends and family. This relates back to the other statistics about how Millennials want retailers to make them smile as well as entertain them since shopping is often seen as a form of entertainment among their social circles. (Source: Urban Land Institute)
The impact of these factors is dictating the size, location and nature of new retail development. Another such example is the Walmart near the Capitol in Washington, D.C. where above the store there are 200 residential units.
Given that 80 percent of all the jobs in the country are basically in cities, it is not surprising that’s where both housing and retail growth are being integrated at an accelerated rate.
From Boomers to Millennials, people in these age brackets want to be close to restaurants, they want to be close to places to exercise, get groceries and they don't want to be tied to the yard, mowing grass and all of those things.
In decades past, it was considered déclassé to live above a store. But social and demographic realities change and retail development is simply following that lead.
The Impact of Change of the Process of Site Selection
For many retailers, site selection technology has become as important as local real estate brokers and site selectors. A key advantage of the technology is that retailers and restaurants can quickly crank out detailed market analyses, shaving months off the time it takes to get up to speed on geographic areas they are considering.
In the not-too-distant past, without these self-generated analyses, retailers and restaurateurs relied more heavily on third-party professionals to guide them through what was a longer site selection process. Now, many retailers and restaurants first call on site selection technology companies such as Buxton Co., Claritas Inc., geoVue Inc. and SRC LLC to aid their site selection homework before a real estate broker or local economic developer.
The data-driven decision-making process is exemplified by the ability of two or three retail executives to spend a week scouting a potential market that has already been identified using GIS-based data and technology.
Prior to having GIS and “big data” capacity, a retailer could have spent six to 12 months to learn about a specific market. Now, with access to megabytes of relevant data, maps and representative charts via a hand-held mobile device, it takes just a few weeks. Through the technology-propelled process, retail operations can cast a narrower net in site searches.
In short, site-selection technology “turns the table” on real estate brokers by handing more power to a retailer or restaurant. With the technology, companies seeking retail space become proactive, rather than reactive.
The evolving technology provides an unbiased assessment of the potential of a particular brand in a market, rather an assessment from a broker whose primary interest is selling or leasing property.
In a broker-initiated scenario, a prime location could more easily be snapped up by a competing retailer or restaurant, said Robert Buckner, author of The Science of Site Selection and a vice president at MapInfo. Using tools from these data platforms may prevent that from happening because the technology narrows decision-making time and enables the real estate operation to focus on the finer points of the search.
The availability and cost of site selection technology for retailers, restaurants and local economic development organizations is all over the map, with big and small vendors marketing software and services packages and the number of industry players growing. Prices for services range from several hundred dollars to $60,000 or more.
The Retailer’s Ground Game
Today, the representative of a retailer’s search team may insist brokers submit sites based on the visiting company’s criteria. They will confirm that the broker uses methods and data compatible with their process and be assured that all of the submitted sites meet the screening criteria.
The retailer front office may require the broker to send a list and map of all their proposed sites. With the proper information and tools, real estate representatives can then eliminate the ones that don’t make sense due to demographics, demand and/or cannibalization of existing stores.
Managing the site visit agenda instead of letting third parties manage the visit will make a local site visit more productive by reducing travel time — and expenses — to instead focus on better-quality sites.
Focusing everyone on a shorter list of the most relevant sites will also increase the likelihood that good deals are approved and are finished quickly enough to meet the all-too-frequent quick time lines.
When disconnects between available company-based research and on-the-ground site visit observations occur, a well-informed local economic development agency or team must be ready to respond with an accurate picture of what is there and where things stand. This is particularly true with respect to competition (the third-party store location data is rarely accurate).
The Challenge for Local Economic Development
To lease vacant retail space or develop new space, local professionals will experience increasing pressure to support home-office retail professionals to identify the best locations quickly while speeding the site selection process. This will be accomplished by:
Giving retail representatives and/or their site selector access to the information needed to identify the potential sites early in the process so they can focus on the best local sites
Providing access to tools that enhance and expedite every step of the retail real estate site selection process. In other words, make it easy for them to find and access what they are looking for.
Working on data platforms to track and enhance information about available sites while collaborating inside a system designed for retail real estate — instead of using scattered emails, spreadsheets and PDFs.
Local economic development professionals must be ready to, almost instantly, deliver information about what the market wants but doesn’t have. This must-have list includes:
Having reliable data available about what the trade area wants and/or needs as well as which retailers are there and which are missing
Maintaining current real-time data from the field as to property condition, infrastructure, housing and future demographic trends
Connecting local, regional and national site seekers to needed information about local properties and resources to facilitate their ability to make better decisions about available properties
Maintaining data and information systems that make it easy to get what’s wanted to who needs it on the fly.
Local economic development professionals and their respective data platforms require systems designed to enhance the real estate processes. This means making it possible to access to decision-making information faster using the technology that meets their needs — desktop GIS, online or mobile apps.
In Conclusion
Changing data systems, site selection process, demographics and shifting land use patterns will significantly influence development of retail investment strategies going forward.
These evolving trends stem from contemporary choices of an aging and changing population, rising transportation costs, community and government preferences toward mixed-use, higher-density, walkable communities and away from suburban sprawl.
The renewed urbanization represents a significant turn from suburbanization patterns of the past decades. Local economic developers, realtors and retailers are already adapting their formats to respond to these changes.
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