There are numerous nay sayers out there. Stating, maybe even hoping that the big box is bye-bye. I say it’s an opportunity to make some real money in real estate.
The headlines read.
Macy’s closes 100 of the 728 stores it owns. Then we see, J.C. Penney, Sears, Ralph Lauren, and others struggle with poor holiday sales, announce hundreds of store closings, and lay off thousands of workers. Then Credit Suisse predicted that 2017 would see the “highest number of closures since the Great Recession.” Then, nearly 7,000 store closures were announced last year, a 200 percent increase over 2016. The trend seems on pace to continue, with CNBC reporting that 2018 is set to break a record of store closures.
This is due to key differentiators that benefit online retail, such as more consumer-focused technology and lower prices. The situation is changing consumer buying patterns. According to the Pew Research Center, most Americans now make purchases online. In addition, 15 percent say they buy online on a weekly basis and 28 percent buy online a few times a month. I am not certain I believe this statistic because it puts me way behind the curve. As a touchy-feely guy, I like to touch it, feel it, and see the quality of it before I buy. Plus I enjoy a little spontaneous interaction with people I do not even know, like the store clerk. Again, I know, I am showing my age. Technology is coming.
Technology is upending the retail industry.
Digital platforms are becoming available to everyone making the barrier to entry lower allowing for more players. Accessing thousands of willing buyers has become as easy as setting up an account on Amazon. The items on Amazon, like my book Pure Profits, are sold by any seller. These on-line stores are able to operate on smaller margins, giving them an advantage over brick-and-mortar stores. Clearly, e-commerce is winning. Times are a changing. It is comparable to the industrial revolution of the late 1700’s to the early 1800’s. It is surely a new trend.
Define the real problem and make money.
I am a real estate guy with a ton of experience in this sector. I built my business on seeing the problem and solving the problem. My partners and investors tell me I see things quite differently. So what is the real problem for me to solve, given my experiences?
I am not a retail operator. Quite honestly, I do not understand how any retailer can pay the bills of their big box. Having built a few, well a few is relative, numerous is a better word, I know what it costs to operate and unless these retailers do a huge, and I mean huge number of gross sales, I am not certain how they make it. My only other thought is in the words of Mr. Wonderful, Kevin O’Leary, himself, these big box retailers “…must crush their suppliers like the cockroaches they are.” Not my words, but fitting.
So, the problem as I see it is not with the retailers, and not with the internet sales revolution, at least it is not the problem for me. While the “Big Boxes” have the problem, I see it as an opportunity for any real estate guy that thinks out of the box. Sorry, no pun intended.
Ask the right questions.
Start by asking the question, what to do in order to reposition these big boxes that are going out and they will go out? Do not fight the trend. The locations are usually very good and the property size is usually big enough to provide opportunity. So just think. This is my suggestion to you. It is what I do when I am evaluating any property to buy. It is what I wrote in my book.
If you run across anything, have a question or a comment, good or bad, I am open for all suggestions.
The key is to get creative, see something that someone else cannot. It has always worked for me.
I look forward to hear from you.