With the recent vaccine development news from various pharma companies such as Pfizer-BioNTech, AstraZeneca, and more, it seems as though the world is coming back to be “normal” again.
But if you remember your history lessons about the British empire that lasted for about 3 centuries, many people at that time thought that the British empire would be ever-lasting.
That is, until WW2, which has significantly weakened the British empire, and it led to a cascading wave of independence from its colonized states.
It’s crystal clear that 1 significant catastrophic change of event can alter the fate of a country.
Covid-19 pandemic surely is 1 significant catastrophic catalyst that has brought forth many changes and adjustments to the world as a whole.
In that fashion, it’s time to look at the retail business as a whole, which has seen its boomings in the early 20th century until recently.
This article is organized as follows:
-A)US Retail & eCommerce as a whole
-B)Innovations in last-mile delivery
-C)Value in retail space
A) US Retail & eCommerce as a whole
The market share of US non-eCommerce retail peaked in 2015 and it’s been on the downtrend ever since.
From the chart, it is also evident that eCommerce started to pick up steam in the early 2010s. This was made possible with the availability of 4G connectivity that torpedoed the adoption of online sales.
A recent study done by Mckinsey & Co showed that 75% of US consumers have tried a new shopping behavior, and most of them do intend to continue this new behavior.
Covid-19 certainly has taken more than 1.5 million lives worldwide, it also seems to be catalyzing the change in consumer shopping behaviors.
If there’s one thing we learned from the British empire history, change is always the constant in the life equation.
B) Innovations in last-mile delivery
The increasing usage of drones in various companies such as Amazon, UPS, and more, have been pushing the innovation edge in the last-mile delivery.
Take UPS as an example, UPS has been granted Part 135 certification from the Federal Aviation Administration (FAA) in 2019.
2 significant features that made drone delivery more viable granted by Part 135 certification are as follow:
-a)Drones of the approved company can fly out of the operator’s line of sight
-b)Drones of the approved company can carry a cargo of up to 55 pounds (or 25 kg equivalent)
Imagine these 2 features at work, this means that (licensed) drones can now have greater coverage and deliver more products per cargo slot in one go.
Just imagine the fuel cost savings and the potential amount of shipping cost savings, not to mention the time saved for a consumer in shopping.
When you have the regulatory body given the green light in greater technology adoption, you’d know that the changing wave is already coming.
C) Value in retail space
Let’s take a look at the US non-eCommerce retail sales per square foot data trend.
It’s loud and clear that the US non-eCommerce retail sales per square foot are on a declining trend, and many believe that this is just the beginning of the onslaught.
If this chart is not convincing enough, perhaps take a look at the 2019 report filed by CoreSight Research: Major US retailers have closed up to 7567 stores in 2019, compared to 5524 stores in 2018.
With so many technological advancements cementing the paradigm shift in consumer shopping behaviors, one must ask what’s left for retail?
To answer this question, let’s go back to the basics of a retail mall operation. Retail malls rent out store slots to different tenants, and the rental rates are charged differently according to the size of the stores and other factors.
With so many retail stores closing down, this also means that many store slots would be left empty.
In the realm of real estate, this simply isn’t working out for the retail mall owners, as they’re sitting on assets that are not being monetized momentarily.
This represents a huge opportunity for retail mall owners as these assets can be repurposed to fit certain needs and therefore, remonetized again.
If there’s one thing about the retail malls is known for, they’re often in close proximity to pockets of communities in the nearby areas.
Perhaps a better way to help retail mall owners to prevent mall asset misallocation and increase mall asset utilization rate is to engage with their local county estate planners and determine what services the pockets of communities really need in the near future.
Key Insights
It’s inevitable that the technology changing wave is coming. As more and more retail malls are expected to be closed, this also means that retail mall owners would have more opportunities to transform the unutilized mall assets that can generate financial & non-financial values for themselves and the communities around them.
Let me know what you think in the comments!
