Retail is a Catalyst for Economic Development Retail’s Impact 1 in 4 jobs are retail Source: National Retail Federation sales tax revenue average fast food restaurant annual sales exceed $1M Top 10 Retail Per National Retail Federation States by Impact Retail is 15% of GDP retail IS economic invest time & development resources in retail We started in 2011, when we saw communities who needed a retail advocate, someone who understood real estate and could negotiate connecting retailers and brokers. We now serve over 200 communities, maintaining a 5 client to 1 employee ratio. Experience + Team work “The high level of confidence reflects a sturdy economic expansion in the U.S. that’s about to Consumer Confidence turn nine years old with no end in sight. Job openings are at a record high and unemployment is at a 17- year low.” The Conference Board 18 Year High ® Consumer Confidence Index retail is not dying it’s changing Jeff Bezos, Eddie Lampert, Founder Amazon President, CEO & top shareholder of Sears Holdings Catalyst Apocalypse ADAPT or DIE Radio Shack in 1991 13 products advertised $3,055 $6,000+ Today Economic Apocalypse Twitter: @BeasleyLacy [email protected] = Twitter: @BeasleyLacy [email protected] 9% of overall Retail Sales are conducted Online US Census Bureau 80/20 RULE Number of U.S. cities, towns, villages by population size UNDER 10,000 16,470 10,000 TO 24,999 1,555 25,000 TO 49,999 726 50,000 TO 99,999 452 100,000 TO 249,999 220 250,000 TO 499,999 48 500,000 TO 999,999 24 1,000,000 OR MORE 10 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Debunking the Retail Apocalypse What We Know Retailers Close Store Every Year • Rebalancing Store Portfolio’s is Normal • “Fail Quickly” – Mantra from the Great Recession • Macro Events, like Anchor Closures, Effect Everyone Bad News Sells Amazon is the Villain • Amazon is a Threat but Not the Cause for Struggling Segments Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Overstored Since 1970, Retail Mall Space Expanded at 4x the Rate of the Population Growth Low Interest Rates Allowed Retailers to Grow Quickly Many Retailers Expanded Beyond Their Ability to Service Customers Retail Competition is so High that Any Hiccup Causes Problems Source – Cowan Research Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Fast Fashion & Beauty Department Stores Were Lazy and Relied on the Strength of Their Brands Fast Fashion Brands (Zara / H&M) Bringing Clothes to Stores in 3 weeks Versus 6 Months Fast Fashion & Over Expansion Have Had a Higher Impact than Online Competitors TJ Maxx & Ross Stores have Equally Impacted the Market as Consumers Hunt for Bargains Cosmetics, a High-Margin Staple of Department Stores, have Broken Out to Standalone Categories Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Income & Price Changes From 1996 – 2016 Core Consumer Goods have been Inflated by 55% Significantly Higher Cost: • +200% - College Tuition and Textbooks • +125% - Childcare • +120% - Healthcare Necessities • +65% - Food and Beverage • +60% - Housing Costs More Affordable: • -45% - Cellphone Service Luxury Items • -70% - Software • -72% - Toys • -95% - TVs 40% of the US Population Incomes have not Kept Up with Inflation Result: Consumers Cannot Keep Up with Inflation and are Shopping at Lower Cost Retailers and Less at Higher Image/Brand Stores Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Shrinking Middle Class Over the last 40 Years the Middle Class has Shrunk from 61% to 50% Upper Class has Grown by 50% in Numbers Lower Class has Grown from 25% to 29% Over the last 30 Years Malls were Built in Areas thought to be Middle Class Source: Pew Research Center Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Other Issues Student Loan Debt • Over the Last 9 Years Student Loan Debt has Increased by 105% • Student Loan Debt has Become a Major Concern over the last 10 Years Rise of Online Retail • Before, Consumers HAD to Shop in Store • Now, Retailers Must Make Consumers WANT to Shop In Store • 70% of US Households now have Amazon Prime Retailers Look in the Mirror • Retailers Prioritized Store Growth Over Customer Experience • Lack of Associates Training Yielded 25% of Customers Leaving Their Store Without Buying at Least One Item They Intended to Buy Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 The Real Story The Real Story 2017 Year End • Retail sales +$232b in 2017 > +4.5% growth C-stores, Mass Merchants, DIY, Furniture, Men’s Clothing and Toys all doing well • Online sales were up 18% over the holidays 75% of growth was traditional retailers 10.2% of total retail is pure play • Amazon’s Online Sales contribute to about $29b of the overall growth Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 The Real Story 2018 Year so far – Through July • Retail sales +$5.5% US Economy grew extra $190.6b in first 7 months Retail Growth Projected +4.4 to 4.6% in 2018 The equivalent annual sales of these retailers combined has been added to the US retail Economy Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Retail Sales Up Retail Sales are Up $190.6b through the First 7 Months of 2018 • That is the Annual Retail Trade for The Netherlands. This is just US Growth in 7 Months Fastest Growing Retail Segments • +29.0% - Mass Merchants, Supercenters, Off-Price • +14.8% - Convenience/Gas • +5.5% - Restaurants • +5.5% - Specialty Softgoods • +4.3% - Drug Stores, Cosmetics, Vitamins • +3.9% - Food and Beverage Stores • +2.9% - Specialty Hardgoods Declining Retail Segments • -0.3% - Department Stores The struggle is in the malls. They must focus on discount and off-price retailers to replace the department store anchors that are closing. Malls must focus on churches, medical facilities and other retail formats to be the traffic drivers for their centers to succeed. Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Online Sales Online Sales Represents 10% of Total Retail but 18.7% of Total Retail Growth • Critical to note that in 2017, E-Commerce sales growth represented 25% of total retail sales growth, but only 18.7% in 2018. So traditional retailers grew their businesses off and online, faster than online retailers. Amazon’s Online Business is Estimated to be 13.9% of US Retail Growth YTD • This Does not Take in to Account the Whole Foods Acquisition Conclusion: This is all Still Retail and Retailers who Focus on the Consumer Will Succeed Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Retail is Growing 2017 • 2,354 New Openings • 558 New “Core Retail” Stores (Core Retail is chains with > 50 Stores) • 1,787 New Restaurants Opening in 2017 2018 • 3,835 New Openings • 2,012 New “Core Retail” Stores • 1,823 New Restaurants Source: IHL Group, Company Reports Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Retail is Growing % Net Opening Stores vs Net Closing Superstores/WH Clubs 17% 83% Bar / Restaurants 21% 68% Convenience Stores 3% 85% For each company Specialty Softgoods 36% 40% closing stores Specialty Hardgoods 23% 49% 2.7 Fast Food 16% 54% are opening stores Mass Merchandisers 24% 44% Drug Stores 30% 34% Source: IHL Group, Company Reports Department Stores 36% 26% Food / Grocery 14% 34% % Banners Closing Stores % Banners Gaining Stores Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Retail is Growing Convenience Stores Superstores/WH Clubs Fast Food Bar / Restaurants Food / Grocery Specialty Hardgoods Mass Merchandisers Source: IHL Group, CompanyReports Drug Stores Specialty Softgoods Department Stores 1.0 is breakeven number of opening vs closing Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Retail Growth Plans for 2018 Retail Store Count Growth Walgreens 7-Eleven Dollar General Couche-Tard Dollar Tree O’ Reilly Great Clips Autozone Fantastic Sam’s Five Below Ulta Beauty Sherwin Williams MINISO Marathon Oil Harbor Freight Tractor Supply Source: IHL Group, CompanyReports • Fastest Growing Retailers: Dollar, C-Stores, Beauty, and Specialty Hardgoods • What’s Growing Mirrors the Incomes of Consumers: • More Discounters • Less Mid-Range Luxury Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Retail Decline Plans for 2018 Retail Stores Decline Rite Aid Stripes C-Stores Toys R Us Mattress Firm Best Buy Radio Shack The Bon Ton Sears/Kmart Signet Jewelers Ascena Retail Charming Charlie Gymboree Payless Shoesource The Children’s Place Orchard Supply Perfumania Source: IHL Group, CompanyReports • Many of these Retailers Have been Shrinking for a Decade • Outdated Business Models or Market Issues? Source: Lee Holman & Greg Buzek, IHL Group, Beyond the “Retail Apocalypse” to a bright Future, August 2018 Restaurant Growth Plans for 2018 Restaurant Count Growth Starbucks Freshii Jersey Mike’s Wendy’s Domino’s Chick-Fil-A MOD Pizza Taco Bell Tim Horton’s Noble Romans Dunkin’ Donuts