MICHAEL COHEN: At Citi, we look for fundamentally sound real
estate and are aggressive when we see an opportunity for grocery-anchored centers. We want to know the grocers in that market. Who
is number one? Are they new to the market? Who are they replacing?
We also want to know where the Walmart Super Centers, the
Super Targets and some of the lower-priced options are. We’re definitely keyed in on knowing their sales or projected sales. We do see a
lot of anchors with short lease terms remaining but with options and
structure around that. When looking at smaller grocery store formats or new stores to the marketplace, we’re typically looking at the
remainder of the center and to see the tenant mix and traffic counts.
FRUMKIN: I agree that consumers today expect more from their
food—and from their retailer. The tremendous growth in the natural/organic space is being fueled by the macro-shift in consumer
behavior towards health and wellness and their gradual move away
from the highly processed foods offered from the supermarkets. At
Sprouts, we prioritize service and education, because there’s a lot
to know about natural foods, so engaging the customer is key to
our success. And our Healthy Living for Less philosophy appeals to
a broad segment of consumers from varying demographics and
income levels—not just an affluent segment of the market.
RITTER: So can the middle-market grocer compete, or is it
getting squeezed out?
ROSE: You’ve got a traditional grocer, Kroger, and now a Safeway-Albertsons. They represent 10% and 6% of the current marketplace, while Walmart combined is about 29% of the marketplace.
The nice thing is we now have these specialty grocers that provide
gourmet, fresh whole-food-type, fresh-to-market and vitamin/
health-oriented products. That’s really where the growth is in the
business, and it’s really great for landlords who want to continue to
improve upon their merchandising mix in their open-air centers.
PHILLIPS: The new concepts that address the diversity in the customer base are the ones that are successful, and that’s through the
entire spectrum of price-to-quality to service. Retailers are looking
at what the customer wants, and the customer is looking at the
retailer and saying, “this does not meet our needs.” So it’s a cycle
that is healthy for the industry. One of the things about retail is if
you don’t keep up, and you’re not strong with the customer and
meet their needs, you probably won’t be around very long, and
that’s what has happened in the migration toward specialty.
De LEON: The middle-market grocers need to define their iden-
tity and update their brand or risk losing market share. Trader
Joe’s, Whole Foods and Sprouts have cult-like followings, and it
makes it hard to compete for the grocers that have commoditized
the food-distribution business. People are growing concerned
about the quality of food that they consume. They’re not blind to
obesity rates and the lifetime of health problems. The education
process will take a while, but long term, I don’t know how you can
reverse this new consciousness.
RITTER: Coldwater Creek is liquidating. There seems to be a
lot of concern about some of the mall apparel chains not
doing enough to draw in customers. Is this true?
ROSE: If you’re not reinventing and constantly pursuing the trends
in the market, you’re going to dry up. One of my favorite examples
in apparel is Bonobos. This concept is directed toward men who are
very busy: “Measure me, and then, when I need product, sell it to
me.” It’s very experiential and meets the demand curve. Most importantly, it’s a multichannel delivery. It has both bricks and mortar and
e-tailing, and that combination is paramount for any landlord to
have in their shopping center. If the retailer doesn’t have a multichannel delivery system, they’ll probably go by the wayside.
PHILLIPS: The traditional retailers, particularly in men’s ready to
wear, are missing the blending of technology and the product at
the actual site. One of the secrets for Apple, and the reason they’re
so successful, is that it blends social networking with bricks-and-mortar presentations. Right now a lot of the retailers are close to
that. Macy’s has been spending a lot of time understanding and
incorporating it into the stores. It doesn’t necessarily mean that
you’re going to cater to a younger customer. It just means that
you’re going to address what the customer wants and how the customer is actually shopping in the 21st century.
RAHUL SEHGAL: We’re looking at things from a slightly different
perspective. I spend a lot of time focusing on the retail-sales index,
and clothing has done well. When you look at certain sectors like
electronics, appliances stores, building materials and garden
equipment, we still haven’t seen a recovery. We’re looking at a
more permanent shift in the way consumers are spending, as
there’s a mesh between social media and brick and mortar. For
those items that tend to be more of a commodity, there is less of a
chance that they will recover with the overall economy.
ROSE: Everybody seems to be over-concerned about the impact of
the Internet. It’s the exact opposite. The Internet is spurring retail-sales growth. It’s making it possible for us to buy a product online,
and if we don’t like it, return it in the store and find something
better. The Internet will continue to drive retail sales and be a
greater impact for more store growth. In open-air shopping centers, the greatest thing is that we’re providing goods and services
that predominantly can’t be delivered over the Internet.
“We see a more permanent
shift in the way consumers
are spending, as there’s a
mesh between social media
and brick and mortar.”
Inland Private Capital Corp.
grocers need to define
their identity and update
their brand or risk losing
FERNANDO DE LEON
Leon Capital Group