This is an interesting proposition to say the least, essentially shifting the mindset of its consumer, and raises a very thoughtful debate of the consumer seeking fair priced sale items versus the actual hunt for a good deal. Resultantly, consumer reaction has thus far been mixed with some loving the idea, while others not understanding its merits.

JC Penney has said that they will continue to offer sales from time to time, but one has to admire a company that has taken quite a beating over the past few years, even recording deep losses for the most previous fiscal quarter, making a concerted effort to reinvent the way they do business. It may in fact be evolutionary, and interesting to pay attention to nonetheless.

So here are the updates to cross off the list.

This is the news article appearing in today's National Post.

100-year old businesses we lost

Boxing Day in Canada, which has ultimately become boxing week, not to mention the boxing week sales that are extended until January 7th, has long been a way for Canadians to scour for remaining shopping deals and bargains, and the final chance for retailers to unload the remaining inventory from the passing year.

It is still too early to gauge percentages regarding sales from Boxing Day, however all indications are that it was quite successful, with retailers now quite optimistic for 2010.

One interesting thing I saw though that is definitely worth mentioning as it no doubt will shakeup marketing and product positioning for the future, is the continued exponential increase in Internet sales during Christmas, as compared to last year, reported to be somewhere over 15%. Naturally without an explanation of this statistic it is tough to determine exactly what store or stores are doing well, and what consumer apprehensions are dissipating among certain product types. It is though easy to pay attention, that more and more consumers are enjoying and taking advantage of Internet convenience where suited.

I can think of several challenges and opportunities this creates, not only for retailers, but for brick and mortar shopping center owners and developers such as TGS, in that the manner of getting a customer to your center may indeed be different in a few years, not to mention convincing a new retailer why a tangible site is necessary. Ultimately the shopping center experience and the Internet experience should complement each other not compete with each other, and several new concepts have been developed by TGS already.

The key that this blog has discussed over and over holds true especially now: Service.

Retailers and landlords should be asking themselves what have they done to improve service, and differentiate the service at their store/center to keep the customer coming back.

The 2009 market correction will be well served if we all sharpen our pencils and become more efficient in 2010.

Happy New Year to us all!

So what should we make of Walmart saying that profits are better than expected with earnings per share up 77 cents a share from a year ago and sales up 1.1% from a year ago? Namely that these statistics quantify our consumer spending expectations, and that Walmart is a direct benefactor of consumers looking to better stretch their dollars in their daily quest for value. The only problem is that Walmart also reported same store sales declined 0.4% in the quarter, and when net sales are nearly $100 billion, that indicator can be quite telling in measuring store performance in existing markets.

This tells us that consumers are still exercising caution in their spending, and are perhaps not spending at Walmart beyond necessity. One could look at this and spell doom for other retailers, but realistically we are not seeing those types of stories, or figures to back that up; so spending is not at a standstill.

Rather, retailers should look at this and be as optimistic as ever, that perhaps the consumer is looking for something else not merely the bottom line. Most industry professionals are of the mindset that this economic downturn has only accelerated failure in retailers that were headed down that path anyways. I can't tell you how many times I have met someone at an ICSC event over the past year who loves to cite the example of Circuit City, and drawing on their poor customer service when times were good, as the principal reason for their failure, and not a weak economy.

What this means, is now is the opportunity for retailers, including Walmart, to figure out how to create, redefine and re-establish their consumer connection, and it is not only price. Things like customer service, timely response, product selection, cleanliness, knowledgeable staff, pleasant shopping experiences, and availability to name a few are now more important than ever. It is absolutely easier to sell a product when there is an obvious market need, but things need to be done to maintain that brand recognition and brand loyalty when demand fades. Hopefully what we end up with are stronger retailers invested in consumer capital.

Short-term thinking is how the market evolved into what it is today. Long-term planning will help all our shelf lives.

Who is it this time? Only a retailer we have heard about many times as a perceived weak store. Not only has recent history shown us that this was perhaps never really true, it seems that the creativity and actions being put forward now show off quite the opposite character. Which retailer you ask? Toys R Us.

Yes all the discount retailers are seeing sales go up, and we know consumer luxury goods spending is down, so how do we combat this problem? Toys R Us has wisely been snapping up luxury toy and baby product retailers at a discount, and increasing their market coverage at the same time, picking up e-retailers, and most prominently FAO Schwarz of Manhattan fame. The success of FAO Schwarz, aside from their movie debut, has always been about the exclusive nature of their products, which now Toys R US will make exclusive in all their stores by putting a FAO Schwarz boutique in their stores. At a time when people are traveling less and looking for new and exciting things to do, why not bring FAO Schwarz to a Toys R US near you. Sure the products may lose some of their allure in terms of exclusivity, but it will keep the brand and the brands they sell popular for a long time. After all successful retailers find a way to create brand loyalty, and keep giving customers a new reason to come back.

It is refreshing when most companies are clearing their balance sheets of debt, that Toys R US, is putting its resources to good use, for with the Christmas shopping season practically here, it may be a quicker economic recovery for them compared to those retailers too conservative to give something else a try.

What makes things interesting now, is that prominent retailers, are using these Pop-Ups as launching sites for new product lines to create a buzz and then intentionally closing the store down after studying market reaction, or creating certain incentives to shop a temporary site either for unique sale opportunities or limited selection in attempts of creating a bit of positive PR and a mini following.

Sure consumer spending hit some lows recently, but maximizing profitability always holds true. Landlords want to increase revenues, tenants want to minimize loss exposure, and consumers want to save money. Eventually I think the same principles will apply, landlords want stability, tenants want to know there is stability around them, and customers like to shop in the same places, and really that has always been the case regardless of economic surroundings.

So are Pop-Ups really a fad or merely a generational shift in the way we define temporary space? When all is said in done, perhaps what we will have is not a revolutionary concept, but terminology that is much easier to sell.

There is however, no disputing the basics and the influence retail real estate has on the overall economy. According to ICSC (International Council of Shopping Centers), the US shopping centre industry provided 13 million jobs in 2008 coupled with shopping mall owners investing $25 billion to build or renovate centers. How many did US car manufacturers provide? Not even 1 million jobs.

The key to the future will be deciding what to do with all the debt put on retail real estate as industry estimates there will be some $400 billion over the next five years in need of being refinanced, of which more than 40% is CMBS debt. Clearly solutions will need to be some sort of mix of government aid, restructuring, and loan extensions on performing loans to prevent widespread defaults.

These loans were largely based on future projections, and planned developments, goals which should be realistic not merely an exercise for obtaining cash. Retail real estate takes hard work, dedication, and solid backup plans. When the market provides natural instruments for solidifying and re-establishing the core of an industry the process may be frustrating, but the results are equally exciting. Interesting times ahead.....

(Please also take a look at the archived section for previous posts)

With our warmest regards,

The TGS Management Team