Retailers and their landlords don’t see eye to eye about the role of brick-and-mortar stores or retailers’ top business concerns, finds a recent survey by FTI Consulting. Just 61% of retailers agree or strongly agree that new stores are critical to their sales growth, while 93% of landlords agree or strongly agree, according to the FTI Consulting Retail Real Estate Beat. Conversely, only 33% of landlords, compared with 73% of retailers, agree or strongly agree that shoppers require a more personalized in-store experience.
40% of retailers say flexible store configuration is important, compared to only 10% of landlords.
Landlords and retailers also view real-estate benefits of brick-and-mortar stores differently. Landlords believe that being located near other high-traffic retailers (87%) and providing a compelling architectural design and physical environment (73%) are the most important benefits they could offer a retail tenant.
Meanwhile, only 66% of retailers surveyed believe being located near other high-traffic retailers is the most important priority for their brick-and-mortar locations, followed by convenient parking (52%). Only 44% of retailers believe a compelling architectural design and physical environment are important. The biggest disparity in priorities is found in the value of flexible store configuration— 40% of retailers say this is important, compared to only 10% of landlords.
“While it may not come as a total surprise that landlords place a greater value on the physical location of the store than retailers do, these variations in perceptions present a real opportunity for landlords to work more closely with their retail tenants to explore how they can support their growth plans,” says Cynthia Nelson, a senior managing director in the Real Estate & Infrastructure industry group at FTI Consulting.
Landlords are far more concerned than retailers about the shift to online shopping and changing consumer preferences.
One of the greatest disconnects between landlords and retailers is the concern over evolving consumer demographics and preferences: 70% of landlords cite this concern, compared to only 40% of retailers. Further, 60% of landlords agree or strongly agree that retail customers are shopping in stores less often, while only 37% of retailers agree or strongly agree.
As a result, the approaches of retailers and landlords to attract shoppers and boost revenue in the online era and their specific concerns differ. Retailers expect to implement significant, transformative changes to their brick-and-mortar store locations to meet customers’ demands, including inventory management (74%), store upgrades/refreshes (69%), flexible return policies (67%) and free shipping of in-store purchases (64%). Retailers also cite store staffing levels (53%) and the checkout experience (44%) as ways to meet new customer demands in the online era.
Not surprisingly, landlords are far more concerned than retailers about the shift to online shopping and changing consumer preferences (80% of landlords, compared to 57% of retailers). “This concern is understandable since landlords’ real estate assets can’t be modified to succeed in the digital era as readily as can retailers’ ability to become omnichannel merchants,” Nelson says. In fact, retailers expect e-commerce to account for 23.6% of their sales in three years, up from 16.1% today.
Opportunity for future growth
Nelson add, “Perhaps the most important finding to come out of the FTI Consulting Retail Real Estate Beat is the mandate for landlords and their retail tenants to develop a better understanding of each other’s needs and how the evolving nature of retail will affect both sides of the equation. In so doing, mall owners and their retail tenants can purposefully focus on ways to work together to more effectively compete with the existential threat posed by retail game-changers like Amazon and Walmart, and thrive for years to come.”