The Amazon Effect…And Why We Love Nail Salons And Chinese Restaurants
I am guilty of it myself, I need tooth paste and rather than taking the elevator down 10 floors to the Duane Reed that I literally live above, I jump onto Amazon prime and order a tube to be delivery for free the very next day. This convenience factor has caused a domino affect in our industry and the result is a shift in the entire way we look at tenants. National, credit rated tenants were who you wanted in your centers 5-10 years ago, however, due to Amazon that is no longer the case. These tenants are going under faster than you can say the word Amazon causing landlords to have to reevaluate the way they look at their centers. The Amazon effect is not just Amazon itself taking over tons of market share, it is other web-based providers for books, clothing, medicine you name it. One of the first indicators of this was when Blockbuster went out after Netflix came to be. No longer where people walking up and down the isle of the local Blockbuster on a Friday night, but rather they had ordered their DVD direct to their mail box. Now Netflix has moved online but the idea remains the same. The retailors who once stocked their shelves with books, sneakers and toiletries are now crumbling under the competition their online counterparts are causing. People can not only save time but also money by buying their goods online, so can we blame them?! No, but as Landlords we must look to the future and focus on service oriented tenants. These service-oriented tenants are where the future is. People still will have to go out to the nail salon, the hair salon, to the Chinese take out. These walk in the door services, although not the sexy tenant mix, are the way of the future. Retailers cannot compete with the deals people see online but they will still have to walk through the door to get their hair cut or their favorite fried rice, that will never change.
Big box retailers and even street level high-end retail space has had to evolve in order to stay afloat. Consumers are going into stores looking for an experience. They can easily buy those pair of sneakers or sunglasses online but retailers such as Nike and Coach are providing an added layer of service by upping the anti on the consumer experience. There is in store monogramming being done as well as road testing new sneakers on one of the many high tech contraptions being used to provide an optimum user experience.
Every industry evolves so this is nothing new, however it is how landlords adapt to the shift that will determine how successful they will be.