CSA-May/June 2021 by ensembleiq

May/June 2021

Last-Mile Delivery Strategies Top Priorities for Retail CFOs Real Estate Readies for 2022

FM: Retail’s New Critical Priority

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from the editor’s desk

On the Level: A real estate column

Contents

tech viewpoint: a retail tech column

VOL. 97 MAY/JUNE NO. 3

COVER STORY

FM: RETAIL’S CRITICAL NEW PRIORITY New best practices evolve since the pandemic pushed facilities management into the spotlight.

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STORE SPACES

Bankruptcy expert explains why October will be a crucial month for retailers — and their lenders. Four top priorities for retail CFOs as retail begins to emerge from pandemic.

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UV-C lighting can add an extra layer of protection for shoppers, employees. Trending Topics: Whole Foods Market adopts next-gen refrigerant; Walmart ups commitment to wind-based energy.

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Post-pandemic large-format store design trends include localization, expanded fresh offerings, cheerier surroundings and more in-store manufacturing and automation for an increasingly hands-free experience. Shop Talk: Harry Potter flagship opens in New York City; new entertainment/ dining concept in U.S. expansion. Vendor Q&A: Orion Energy Systems’ Greg Green discusses LED lighting trends and the advantages of turnkey management for LED projects.

CSA (USPS 054-410; ISSN 0193-1199), is published bimonthly by EnsembleIQ, 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631, on a controlled basis to qualified retailer titles and architects. Real estate and shopping center owners and developers $75 per year. All other non-qualified in the United States: $80 one year; $155 two year; $14 single issue copy; Canada and Mexico: $105 one year; $185 two year; $16 single issue copy; Foreign: $115 one year; $215 two year; $16 single issue copy. Digital edition subscription: $55 one year digital; $105 two year digital. Periodicals postage paid at Chicago, IL and additional mailing offices. POSTMASTER: Please send address changes to CSA, Circulation Fulfillment Director, 8550 W. Bryn Mawr Ave, Suite 200, Chicago, IL 60631. Subscription changes may also be emailed to contact@chainstoreage.com, or call 1-877-687-7321. Vol. 97, No. 3, May/June 2021. Copyright ©2021 by EnsembleIQ. All rights reserved.

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Contents VOL. 97 MAY/JUNE NO. 3

TECH

REAL ESTATE

VIEW ’22: Retail Returns! One of the nation’s leading assessors of risk says retailers need not fret about 2022. People will be filling malls, shopping centers, and mixeduse gathering spaces.

REGION REPORT: The Southeast New retail construction paced downward while new residents flocked inward to hot spots in this growing region, so waste no time searching for prime locations in Atlanta, Jacksonville, Nashville, and Raleigh. 4

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Vendor Q&A: Marcus Shen, COO of B-Stock, talks about how retailers can meet the challenge of e-commerce returns.

Three tech-enabled strategies being deployed by retailers to ensure efficient and speedy last-mile delivery

Menswear retailer Destination XL Group uses machine learning technology to combat unauthorized online ads. MAY/JUNE 2021 CHAINSTOREAGE.COM

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D U S T BA R R I E R SYS TE M

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FROM THE EDITOR’S DESK

Experiential Retail Rebound

Retailers are making up for lost time. The past couple of months has brought a flurry of openings, particularly in experiential retail. It’s a brick-and-mortar sector thought to have been dealt a crippling blow by the pandemic — at least that’s what retail doomsday purveyors would have you believe. Turns out they were wrong. The openings come as pandemic-weary consumers appear ready for some in-store shopping as COVID restrictions loosen and vaccination rates increase,. Nearly 50% of consumers surveyed in the first quarter by 451 Research said they plan to “immediately” start shopping at retail stores once COVID-19 restrictions are lifted. Another 22.7% said they will start spending in stores within three months after restrictions lift. “People still like to have that personal touch, that human exchange,” stated Sheryl Kingstone, head of customer experience & commerce at 451, an offering of S&P Global Market Intelligence. “There’s still the ‘I want to try it on, I want to look at it, I want to browse.’” After a year of relative inactivity in the store development area, companies are once again reinvesting in brick-and-mortar and launching new formats or revamping existing spaces with experiences that can’t be had online. It could herald the beginning of a new era of experiential retail. “I do think that retail is going to be completely reimagined in the future to be much more experiential than it ever was in the past,” said Kingstone. Many retailers apparently agree. Take, for example, Dick’s Sporting Goods. The sporting goods powerhouse has been on a spree of sorts, launching new banners and updating its existing stores with new experiences. The new banners include the retailer’s first truly experiential concept, Dick’s House

CHAIN STORE AGE

of Sport. Located at Eastview Mall in Victor, N.Y. the 100,000-sq.-ft. store offers customers a hands-on shopping experience, complete with an indoor rockclimbing wall, a high-tech batting cage and virtual golf bays. An outdoor turf field is open yearround for events and for customers to use, and will even feature an ice-skating rink in the winter. The store also puts a premium on service, with a dedicated area for things such as stringing lacrosse sticks and repairing bikes. Dick’s is using House of Sport as a testand-learn center, with plans to roll out the most successful elements to its core stores. (A second location will open later this year, in Knoxville, Tenn.) The retailer is also revamping existing stores, opening experiential in-store soccer shops in select Dick’s locations. Along with an expanded assortment, the shops include employees specially trained to help customers find the equipment they need and the right fit for their cleats. In addition, Dick’s is elevating the customer experience in its Golf Galaxy stores. The redesigned locations feature experiential elements such as state-ofthe-art hitting bays, custom fittings, golf lessons from certified professionals and expanded technology offerings. And if all the above wasn’t enough, Dick’s is continuing to expand in its newest channel — off-price — with the launch of a new banner dubbed Going, Going, Gone! It follows the debut of two discount concepts, including a pop-up format called Warehouse Sale, last year. It’s important to point out that Dick’s balances its investments in brick-andmortar with an equally strong focus on — and investment in — its digital capabilities. It’s a fine balancing act but one that, for many retailers, will be crucial to success in a post-pandemic world.

Marianne Wilson mwilson@chainstoreage.com

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CHANNELS chainstoreage.com > COMMERCE > CUSTOMERS

An EnsembleIQ Publication

Corporate Office: 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631

Vice President, Group Publisher, CSA, SPECS Chairman Gary Esposito (212) 756-5118, gesposito@chainstoreage.com

Editor Marianne Wilson

(212) 756-5261, mwilson@chainstoreage.com

Technology Editor Dan Berthiaume

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Real Estate Editor and Manager Al Urbanski (646) 957-5224, aurbanski@chainstoreage.com

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U off lo p

Corporate Officers Chief Executive Officer Jennifer Litterick Chief Human Resources Officer Ann Jadown Chief Financial Officer Jane Volland Chief Innovation Officer Tanner Van Dusen Executive Vice President, Events & Conference Ed Several Senior Vice President, Content Joe Territo

MAY/JUNE 2021

Im A Yo en lo st

F N O

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BEFORE

AFTER

This is the result of three months of fitting-room traffic at a major clothing retailer, prior to SCUFF-X® application. This fitting room was re-touched as part of a weekly maintenance schedule.

This is the result of three months of fitting-room traffic at the same major clothing retailer, following SCUFF-X® application.

Representative results. Actual results may vary.

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FOR MORE INFORMATION ABOUT SCUFF-X AND OUR NATIONAL ACCOUNTS PROGRAM, VISIT benjaminmoore.com/nationalaccounts OR CALL: 888-236-9962, (option 4). ©2018 Benjamin Moore & Co. Benjamin Moore, Paint like no other, Scuff-X, the triangle “M” symbol, and Ultra-Spec are registered trademarks licensed to Benjamin Moore & Co.

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COVER STORY

FACILITIES MANAGEMENT IN THE SPOTLIGHT Pandemic thrusts FM to center stage; new best practices emerge

By Connie Gentry

he pandemic, which shifted priorities at home, work, retail stores and other public spaces, has shone a spotlight on facilities management and elevated the need for informed decision-making across retail portfolios. COVID-19 thrust FM into the spotlight, transforming its traditional, behindthe-scenes role to center stage as in-store customer priorities shifted to a health and safety first mindset. Retail facilities and maintenance leaders have stepped out of the shadows and now play key roles getting retail back to its “new normal” and meeting shoppers’ (and employees’) heightened expectations for clean and safe environments. “Facilities management is front and center as a core to the customer experience and the philosophy to emphasize FM should remain that way long-term,” said Rob Almond, CEO of NEST. Historically, Almond noted, FM has been viewed as a negative expense. “Before the pandemic, retailers would look to cut corners in the areas of FM, resulting in practices that would leave the store in a less desirable condition, hoping they would be overlooked by the customers,” he said. “Those days are over. The priority put on FM isn’t just for the next six months to a year. It’s permanent. It’s proven that FM ties directly to the customer shopping experience.”

Best Practices What constitutes best practices for health and safety has evolved dramatically, and 8

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as restrictions are lifted and consumers return to in-store shopping in greater numbers, industry experts are offering new insights for managing retail facilities while doubling down on recommendations that have proved most effective. The consensus among all the experts: Follow the science; forget the politics and approach facilities management with a renewed purpose and commitment that starts at the top of your organization and trickles down to every location and every professional engaged in maintaining the health and safety of employees and consumers. Consumers’ comfort level for returning to public settings is largely based on perception. As a result, many retailers have responded by cleaning excessively, as much in the spirit of inspiring consumer confidence as protecting against the virus. While there remains zero tolerance for public spaces that are unkept or dirty, the correlation between dirt and exposure to the virus was overstated in the early days of the pandemic, according to most experts. “Science is telling us now that Covid-19 is not easily transferred via inanimate objects,” said Dave Frank, president of the American Institute for Cleaning Sciences (AICS). “Over the last 12 months, facilities have been over-performing. Cleaning every hour on the hour is unnecessary.” That said, experts strongly recommend keeping retail spaces clean and making sure surfaces have been adequately cleaned before they are disinfected. The overarching goal for operations is to be effective in keeping retail facilities clean and safe while also managing MAY/JUNE 2021 CHAINSTOREAGE.COM

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COVER STORY

the cost of cleaning. “We have to focus on best practices, and that means defining how frequently we perform cleaning tasks,” Frank said. There really doesn’t have to be cleaning over-kill because of Covid,” Frank says. “After all, there’s a labor shortage and the cost of excessive cleaning is very expensive — what we need are well-defined, well-executed cleaning practices.” The CDC concurs. In updated standards for cleaning and disinfecting that were released in April, the CDC stated that cleaning once a day is usually enough to sufficiently remove virus on surfaces and to help maintain a healthy facility — unless there are mitigating circumstances such as a person known to have Covid-19 in the space. Priority should always be given to high-touch surfaces, which are prevalent in retail settings, and these should be cleaned at least once a day as well as disinfected when conditions warrant. High-touch surfaces are easily identified and run the gamut from door handles to shopping carts to point-of-sale tools and counters. Protecting employees from cleaning and disinfection products, which can trigger asthma or other health-related reactions, is another key consideration for facility management — one that is as important as protecting the consumers who shop in the stores. It all comes back to proper training, well-defined processes and paying attention to details. “A lot of hygiene theater needs to be replaced with fundamental cleaning, training and verification,” advised J. David Krause, a senior toxicologist and certified industrial hygienist at HC3 (HealthCare Consulting and Contracting). “It’s been my observation that most cleaning and disinfecting in public facilities is uninformed and ineffective. We tell people to go clean without giving them any formal training or effectively monitoring or supervising them.” To help illustrate that philosophy, HC3 uses a simple demonstration: It puts a fluorescent powder (representing a pathogen) on a surface and, after people have cleaned the surface, it shines a blue light to show where the powder still remains. “As for sanitizing, you don’t stop an airborne virus by washing your hands or disinfecting surfaces,” Krause said. To mitigate airborne spread, the facility has to address air control and ventilation.

Simple Air Supply Solutions In the early months of the pandemic, recommendations ranged from simply opening the windows and doors to bring in more fresh air to completely overhauling HVAC systems with costly UV-C lighting added to the ductwork or installed in the air-handling units. Barry Wood, director of operations for JLL Retail, said it’s not necessary to make expensive changes to HVAC systems, instead he encourages improving air quality by increasing the air exchanges in retail spaces and managing the fresh air coming into the facility. “The best thing a retailer can do is seek recommendations from a mechanical engineer or professional [consultant] to develop the scope on the air exchanges needed in their space,” he advised. “A professional can advise how much outside air is needed to recirculate across the space and they can help create a standard for all the store locations.” In his experience, Krause has found the most effective and practical solutions to be standalone in-room air cleaners. “They literally plug into the wall, can be placed in the most

appropriate area in the building or room, and can operate 24/7 without substantial changes to the existing structure or operations of the building,” he explained. “It’s what health care spaces are using and if it works in health care it will work in retail.” Krause said his biggest concern with the carte blanche statement of saying “just open the windows and increase the outside air,” is that this is not a feasible option for most commercial facilities. “The vast majority of buildings, especially retail establishments, are not designed to handle that much outside air Increasing or modifying your HVAC system to accept that much outside air is a capital improvement project, and those are often six- or seven-figure projects,” he cautioned. “Depending on the size of the building, it can take months — if not years — to order the equipment and have it constructed, installed, tested, balanced and verified. And within the confines of a pandemic, that is not a practical solution.” His recommendation for retail facilities is that more than one standalone air cleaner may be needed, and these need to be positioned within the space to work “in concert with, rather contrary to, the HVAC system.” Krause advised that the exhaust flow from these air cleaners should not flow into a supply diffuser or a supply duct. “In some instances, we’ve positioned them so the exhaust from the air cleaner flows into a return duct that actually takes air back to the air conditioner, that way it is working in concert with the HVAC system,” he said. Often the standalone units are placed in the center of the room and some are designed to be hung or installed in the ceiling. In selecting units, Krause cautioned against using any air cleaners that generate ozone. Some manufacturers have suggested that ozone, which can be toxic or irritating, can kill viruses. “While it can potentially do that,” Krause says, “it can also harm people. Ozone is something we try to control and regulate in outdoor air, so there is no common sense that says put it inside a building.”

Preparing for Tomorrow Best practices across a retail enterprise, from corporate offices to distribution centers to each store location, come down to consistency in execution and practice, and flexibility in adjusting to whatever comes next. At JLL, Wood says they have rolled out the same program across all the centers they manage, and he recommends that retailers do likewise.

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COVER STORY

“We give tenants information updates to tell them what we’re doing, but it’s not to say that’s what they need to do,” he said, adding that processes and guidance for how each store addresses health and safety should come from their corporate office. “We speak to the common areas in retail centers, but [tenants] don’t need to hear one message from the property manager and another from their corporate office,” Wood said. “The biggest thing is being flexible; we need to adjust as needed to the most current information at hand, that is always going to be critical.” In addition to staying flexible, retailers have to be forward-thinking and apply lessons learned during Covid to the design and layout of new stores. Wood expects to see wider doors, more space to allow for social distancing at check-out and a shift in allocation of space to accommodate inventory for curbside pick-up, a pandemic phenomenon that is expected to remain the norm. Materials used for high-touch surfaces will also be re-thought, probably veering to surfaces that are easier to clean and maintain, and more resilient to chemicals used for disinfecting. “Even if the virus mutates, we’ll use many of the same cleaning and disinfecting products we’ve used in the past,” Wood said. “There was quite a swing in price point for a lot of those products, and facility managers have decided why spend more when they can use something that achieves the same result and is just as effective, but costs less.” At Its properties, JLL relies on expert guidance from the CDC to determine which products and processes to use. Owners and managers of public spaces across industries realized during Covid that they needed professional guidance on best practices and they wanted third-party validation that they were complying and maintaining healthy spaces.

Robots keep it clean – on the front and back end Since the outbreak of the COVID-19 pandemic, maintaining a hygienic environment has become a much higher-stakes proposition. Some retailers are using robots to automate some repetitive, cleaning tasks across stores. Walmart has expanded the rollout of autonomous, self-driving floor scrubbers in select Walmart and Sam’s Club locations. The discounter uses Tennant Company T7AMR autonomous mobile robot floor cleaners, equipped with Brain Corp.’s BrainOS self-driving operating system. The units can navigate autonomously, avoid obstacles, adapt to changing environments, manage data, generate reports and seamlessly interact with end-users and other robots. Meanwhile, grocery conglomerate Delhaize is piloting an automated solution for disinfecting air and surfaces in two of its U.S. supply chain facilities. Retail Business Services, the services company of Ahold Delhaize USA, is testing ultraviolet robots from Ava Robotics to support enhanced COVID-19 cleaning procedures. The fully autonomous robots feature applications that disinfect both air and surfaces, with integration of screens and speakers for disinfectionrelated announcements. The robots also provide remote access for facilities managers or other users, and automatically send managers email reports that confirm appropriate dosages for assigned areas. RBS can integrate the robots with its cleaning best practices and existing protocols.

In June 2020, the International WELL Building Institute augmented its WELL Building Standard that had been in place since 2014 with a Health-Safety Rating (HSR) that details guidance for upgrades and improvements to address the acute health threats posed by the pandemic. Jessica Rose Cooper (LEED AP, NCIDQ), who is the chief commercial officer at the International WELL Building Institute, said the adoption of the Health-Safety Rating guidelines has been impressive, with more than 1 billion square feet of real estate certified within the first year. “It’s been exciting to see the enterprise-wide commitment within the retail sector,” Cooper said. “Some of the major retail commitments include JP Morgan Chase, which enrolled all of its retail branches across the globe, about 6,000 locations, in the HSR, and T-Mobile is rolling the rating out across 3,100 retail locations this summer. Brookfield Properties and Simon Malls have achieved the HSR across all of their centers in the U.S., and in Brookfield’s case, in Canada as well.” Flexibility remains the watchword, for addressing the concerns that exist today as well as being prepared to meet new challenges tomorrow. “The HSR enables retailers to have policies in place to turn to in the future; these are not all policies that remain in place; instead they ramp up and ramp down as needed,” Cooper explained. The holistic approach to health and safety that is at the heart of the WELL philosophy empowers corporate retailers to provide guidance to individual stores and franchisees across their portfolio. “There is flexibility for regional or local nuances,” Cooper said. “In general, policies can be written to support both office and store.” The HSR is being adopted most widely across corporate offices and individual stores, although in some cases retailers are looking at it for their warehouses as well, she added. Reflecting on the pandemic’s impact on facilities management, NEST’s Almond said, as an industry, the FM community needs to offer retailers the ability to provide feedback in real-time from the frontlines. “The more we work together as a unified front in the FM space, the higher the customer satisfaction will be across the industry and the more likely consumers will continue to shop in person,” he said. “A strong and healthy FM community leads to a thriving retail industry.” — Connie Gentry is a business writer based in Raleigh-Durham, N.C.

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ANALYSIS

Retail in Holding Pattern

October will be a crucial month for retailers and their lenders By Jeffrey Cohen For the second straight year, COVID-19 is upending how things go in retail. But this time, it’s not all bad news. At least, not yet. The cyclicality of retail bankruptcy — a pause late in the year around the holiday shopping season that extends into January, followed by a surge in filings late in the first quarter and early in the second — hasn’t happened in 2021. After a rash of filings in 2020, there’s a definite wait-and-see mentality this year. What’s behind that mentality? With more than 3 million Americans now getting vaccinated each day, retail executives and their lenders and private equity sponsors are trying to see how long they can last before things get brighter. Bankruptcy and reimagining their products are ways they’re getting by along with some tried-and-true approaches to cut costs and raise money. But there are also new and adaptive ways of making decisions. The fact is we’re in a moment that makes the pre-pandemic calculus around retail look like basic arithmetic – with questions that would have been unthinkable even 14 months ago. Here’s how retailers are trying to cope — and why we should all have a strong grasp of things come October. Many retailers that have succeeded since March 2020 are filling specific and sometimes unique needs, such as above-ground pools. Others are like Tailored Brands, parent company of Men’s Wearhouse and Jos. A Bank. The company exited bankruptcy in December but is seeking a $75 million emergency loan as a company spokesman said in March “to execute its strategic plan through a number of different economic recovery scenarios.” [At press time, Tailored Brands had secured the loan.] Other retailers are reinventing themselves — Brooks Brothers filed for bankruptcy and then pivoted to athleisure. With so much uncertainty about the immediate future and questions about when life will look like 2019 again, the wild card for these and some other

retailers is the rapidity and efficacy of vaccinations in the United States. But bankruptcy and reinvention aren’t the only ways retailers can give themselves financial breathing room while waiing for a return to normality. They can seek rent relief from landlords who might prefer getting less money each month than no money at all or looking for new tenants in the current climate. Retailers can also reduce staff, either by layoffs or temporary furloughs, to save operating expenses. Liquidating inventory is an age-old way to generate cash, but it’s an option that is less appealing than it might have been during other downturns. During the Great Recession, selling sofas and recliners for 40% off might have hurt a company’s bottom line, but it was a viable strategy. That’s not the case when getting people into the store in the first place is the main challenge.

The ‘Pain Tolerance Cliff’ In bankruptcy circles, the term is “liquidity cliff ” — i.e., the date at which time a company decides it will pull the plug if things don’t turn around. But in the pandemic environment — as retailers and those who work with them try to outlast the pandemic — the more appropriate term is probably “the pain tolerance cliff.”

Liquidating inventory is an age-old way to generate cash, but it’s an option that is less appealing than it might have been during other downturns. There are also approaches of the once-in-acentury variety. For retailers with large regional or national footprints, staying attuned to the latest virus outbreaks in the coming months will be crucial. It will help retailers project which stores will see the return of consumers, and which ones won’t. Circle October on Calendars When vaccination momentum picked up early this year, retailers and their lenders seemed to come to an agreement. With the light at the end of the pandemic tunnel — even if the distance to it was unclear — both sides settled on waiting a few months for the dust to settle. That sets up back-to-school shopping late this summer and the third quarter generally

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as key inflection points. If vaccinations continue and outpace new COVID variants, if the country is at or near herd immunity, and if offices and schools are back or close to prepandemic settings, the third quarter could be a time when there’s a rush to buy more than above-ground pools. But the reverse is also true. Slowing vaccine momentum, new COVID variants and other factors could slow down reopening and retail’s bounce back.

For m.any retailers and their lenders and sponsors, that cliff is likely October. It is then that they can decide — based on backto-school shopping and the state of the general economy — whether business has recovered or whether they need to commence liquidation in time for the holiday shopping season. The October cliff could be further delayed by another round of government stimulus. But at some point, retailers and their lenders will likely be unable to endure more pain. And some difficult decisions will need to be made. — Jeffrey Cohen is chair of the bankruptcy practice at Lowenstein Sandler, a national law firm with more than 350 lawyers working from five offices in New York, Palo Alto, New Jersey, Utah, and Washington, D.C. MAY/JUNE 2021 CHAINSTOREAGE.COM

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EXPERT OPINION

Top Priorities for Retail CFOs By Antony Karabus and Farla Efros As we all know, the impact of the COVID-19 pandemic on retail has been asymmetrical, with some sectors having their best year and others their worst year. One recently-retired retail CEO said to us that “a 5% increase or decrease in comparable satles was a huge change in any year prior to March 2020. Leading through a 15 to 20% reduction or increase in 2020 is an unprecedented challenge.” For some retail sectors, the pandemic has produced the biggest increase in sales, earnings and stock prices. These “COVID beneficiaries” include grocery, drug, pet, convenience, extreme value, auto parts, home improvement, home décor, outdoor, fitness and of course Amazon. For other sectors, often known as “discretionary”, the pandemic had a negative effect, specifically for specialty apparel, department store and luxury stores in enclosed malls. The impact on the discretionary sectors has been compounded for those with significant debt. While the pandemic was not the primary cause of creditor protection, it was a major contributing force. Many retailers that filed

said “you never go out of business for having too much cash. Cash is king”. Fortifying liquidity/balance sheet strength was the single most crucial priority in 2020 and remains important in 2021 for the numerous retailers that took on more debt during the pandemic. The reality was that no one knew when “to call the bottom” and how long the trough would endure. Priority No. 1 for the retail CFO was to ensure their company had the ability to finance operations and debt service. CFOs at leading department stores took decisive, successful action to fortify balance sheets early in the pandemic. Other discretionary retailers bolstered liquidity using a combination of stock offerings (even at low stock prices), while others introduced FI-LO debt to obtain additional liquidity. 2/Rigorous capital allocation: The rapid growth of digital and omni-channel sales (mostly cannibalizing store sales) has created a need for much increased capital spend.

Fortifying liquidity/balance sheet strength, the single most crucial priority in 2020, remains key in 2021 for the retailers that took on more debt during the pandemic. for creditor protection did so to accelerate the transformation of their businesses to focus on their digital transformation and to shed debt. For numerous retailers, the transfer of sales from stores to digital has been massive. It is not unusual for retailers to report 2020 store sales at negative 25% and digital sales up 80%. The implications of this shift are significant and will require much disciplined planning to adapt. Taking into consideration all of the above, here are five top priorities for retail CFO’s moving forward. 1/Fortifying liquidity/balance sheet strength. was the single most crucial priority in 2021: A former retail CEO once

Priority No. 2 for retail CFO’s is to ensure capital is directed, allocated and prioritized towards the most important strategic and operational value-drivers to ensure adequate funding for the most important new and/or enhanced capabilities. 3/Zero-based budgeting and resource optimization: Retailers must make rigorous, fact-based resource prioritization decisions given the significant capital and operating investments needed to enable digital, omnichannel, customer relationship management and other growth initiatives — as well as to keep customers and employees feeling safe in the stores and distribution facilities. The retail CFO is well-positioned to oversee

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these decisions in partnership with the CEO and other key C-suite executives. Zero-based budgeting is an excellent tool (rather than incremental edits to head-count and other budgets) to ensure the right focus on the right, prioritized investments to achieve the desired near and longerterm business benefits. 4/Investing in facilities and systems to effectively engage with customers: The pandemic has moved much of retailer revenues from stores to e-commerce/omnichannel. Much of this trajectory will be retained after the pandemic as new customer habits have been formed. As a result, many retailers will need to invest in closing, downsizing and/or relocating some physical stores and distribution centers whose locations no longer align with the way the digital customer is engaging with the company. They will also need to invest in new technology to profitably engage with customers (such as mobile POS, order management systems, inventory optimization and CRM/loyalty). These investment decisions must be disciplined and carefully prioritized. 5/Effective near-term and longerterm steady state planning: Retail CFOs will need to play an essential role in business scenario planning to align on the right revenue and infrastructure base-line. This is important given the significant change in consumer spending since March 2020 and the anticipated re-balancing of consumer spend and pent-up demand in sectors that suffered during the pandemic The retail CFO has gradually taken on a key operational partner role to the balance of the C-suite during the past decade in ensuring effective allocation and deployment of capital and optimization of operating resources via zero-based budgeting. The pandemic has accelerated this partnership — Antony Karabus and Farla Efros are CEO and president, respectively, of HRC Retail Advisory, a leading retail consulting firm in improving retailer profitability and working capital, while effectively managing the organizational implications. MAY/JUNE 2021 CHAINSTOREAGE.COM

5/12/21 1:41 PM

SPECS20

2021

AUG. 22-24, 2021

Gaylord National Resort & Convention Center National Harbor, MD

REIMAGINE. INNOVATE. EXECUTE. Join us for the 57th annual SPECS Show! SPECS, the premiere event for store planning and facilities professionals, brings together leaders from the nation’s top retailers and suppliers to learn, collaborate, develop business partnerships and solve problems across the physical retail space. With its laser focus on brick-and-mortar, SPECS provides innovative ideas and solutions that give companies a competitive advantage to navigate the ever-changing retail landscape — now and in the years to come!

JOIN US FOR:

• • •

BEST-IN-CLASS CONTENT INTERACTIVE ROUNDTABLE DISCUSSIONS DYNAMIC KEYNOTE SPEAKERS

• • •

NETWORKING OPPORTUNITIES EVENING RECEPTIONS AND MUCH MORE!

Learn More and Register at www.SPECSshow.com Produced By

16-17-CSA_expert SPECS2021_ThemeDesign_Final_0421.indd opinion.indd 17 1

5/12/21 5/5/21 11:23 1:41 PM AM

STORE SPACES

The Power of Light

UV-C lighting adds extra layer of protection for shoppers, employees By Keith Eagle Lighting can be used to enhance the visual appeal of products, create an inviting atmosphere and distinguish your brand for shoppers. It also offers the power to protect against viruses and bacteria. Ultraviolet lighting is not a new technology – it’s been around commercially for more than 40 years. But it has recently come back into the spotlight with the COVID-19 pandemic, as it’s proven to be a fast, effective disinfectant for air, surfaces and objects. UV lighting can play an important role in retail, enabling retailers to continue store operations while providing service in an environment designed with shoppers’ and staff’s well-being in mind. Before we dive into the technology’s broad range of applications, from improving stores’ air flow quality to disinfecting shelves and counters, let’s start with a little bit of science. Ultraviolet light is part of the electromagnetic spectrum, a range of frequencies encompassing radio waves all the way to Xand gamma-ray imaging. The UV spectrum spans 100-400 nanometers (nm) and has three different bands:

• UVA (long-wave) from 315 to 400 nm • UVB (medium-wave) from 280 to 315 nm • UVC (short-wave) from 100 to 280 nm UV-A and UV-B are found in sunlight and responsible for giving you a suntan or burn from over exposure. UV-B assists in vitamin D production and is common in medical applications. UV-C from the sunlight is filtered out by the earth’s atmosphere — but has been found to be a highly effective form of disinfection, specifically at the 254 wavelength. UV-C light can break down the DNA of bacteria, viruses and spores, rendering them harmless and preventing them from replicating. A UV-C dosage formula has even been developed against a wide range of pathogens for direct, surface disinfection applications based on guidelines from UL, Occupational Safety & Health Administration (OSHA), American

Society of Heating, Refrigerating & Air Conditioning Engineers (ASHRAE) and other proven research studies. Safety First When installing and using UV-C lighting, safety should always be prioritized. People and animals should not be directly exposed to the light source, as it is harmful to the skin and eyes. The Global Lighting Association, for example, has developed guidelines to ensure that UV-C products are manufactured, installed and supplemented with instructions to ensure safe use at all times. The effective and proper usage of a UV-C disinfection solution also relies on the right planning, application design, and maintenance and upkeep. There are three key methods of disinfection using the power of light. 1/Upper-Air Disinfection Upper-air UV-C systems can help supplement a retailer’s disinfection strategy, especially if options for increasing ventilation and filtration in the company’s stores are limited. This solution can be used when people are present since the installation height of the fixtures, combined with their indirect, angled light source, shielding and optics, radiates UV-C towards the ceiling or high on walls, places where it does not reach people. It is designed to continuously disinfect the air that flows through that upper area of the store, and mechanical ventilation and/ or natural convection moves the disinfected air back into the lower part, where shoppers and employees are located. The fixtures are environmentally-friendly and do not generate any ozone emissions during or after use. 2/Surface Disinfection Ceiling-mounted UV-C direct luminaires are another solution to supplement existing overnight cleaning processes for highcontact areas like shelves, counters and restrooms. Depending on the dose, disinfection can be done in a matter of minutes. This lamp-fixture combination can be controlled

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German grocery retailer Edeka Clausen disinfects hand scanners shared among employees by placing them in a UV-C disinfection chamber that resembles a microwave oven.

automatically to come on after operating hours. Because it radiates UV-C directly without shielding, it can only be used when no people are present. Control systems with safety features can help operate the solution. It can be preconfigured to incorporate audio warning alarms and motion sensors to trigger shutoff, for example. 3/Object Disinfection For small objects like phones, walkie-talkies and keys, UV-C disinfection can be applied through an enclosed chamber that looks something like an industrial microwave oven. German supermarket chain Edeka Clausen is using a chamber to quickly disinfect hand scanners shared among employees. All it takes is a press of a button, and the exposed surfaces of items placed inside the chamber are disinfected in a matter of minutes. Like the surface disinfection solution, the chamber is equipped with additional safety measures, such as door sensors and magnetic locks, to prevent it from being accidentally opened. UV-C lighting is truly an unsung technology and an important investment to protect and reassure shoppers and staff. It’s lasted for 40 years and can make an even bigger impact as part of retailers’ disinfection strategy as we transition to the next normal and prepare for what’s to come in the future. — Keith Eagle is VP and general manager, U.S. professional channel, Signify, whose brands include Philips. MAY/JUNE 2021 CHAINSTOREAGE.COM

5/12/21 1:42 PM

SPECS20

2021

AUG. 22-24, 2021

Gaylord National Resort & Convention Center National Harbor, MD

REIMAGINE. INNOVATE. EXECUTE.

Produced By

See why your peers are joining us LIVE at the 57th annual SPECS Show: “It has been a long year for all of us, and one of the things I missed the most was being able to gather and network and enjoy the company of my peers and friends in the industry. This is why I am looking forward to the SPECS show so much, just the chance to return to face-to-face interaction has me excited for this event!” JOSHUA WITTE Director of Store Operations, Brand Maintenance and Repair Ross Stores, Inc.

“I’m super excited to see all my peers face-to-face

again! I’m looking forward to interacting with them, catching up after this crazy year we all had, and of course talking about what is next and how to prepare [our businesses.]”

ISYOL CABRERA Director, Real Estate and Construction Edible Arrangements, LLC

“The industry collaboration that takes place during SPECS is second to none. I have no doubt that the past year’s challenges will bring forth some amazing content for all attendees!”

“ I am so excited about seeing all my long-time SPECS friends in person in August! Thanks to the team for keeping us connected while we could not be together.”

CASEY FITZPATRICK Construction Project Controls Wegmans Food Markets

MONICA MUÑOZ, RID Director, Capital Programs, Facilities & Asset Management DaVita, Inc.

Learn More and Register at www.SPECSshow.com

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5/12/21 5/4/21 11:40 1:42 PM

STORE SPACES

Trending Topics By Marianne Wilson

WALMART GOES FULL SAIL WITH NEW WIND PROJECTS Walmart is now generating more than 500 megawatts (MW) of wind energy in three states. The discount giant, which has committed to powering 50% of its operations with renewable energy by 2025, is collaborating with renewable energy services company Engie North America to supply wind-based energy annually to hundreds of stores, warehouse clubs, and distribution centers across Texas, South Dakota and Oklahoma. The Engie North America partnership allows Walmart to purchase offsite power from three separate windfarms in Texas, Oklahoma and South Dakota. Together, the facilities are expected to help avoid as much as 1.3 million metric tons CO2e of greenhouse gas emissions per year. According to the American Clean Power Association, as a result of these transactions,

Walmart procured the most wind energy of any company in the U.S. in 2019. As of the end of 2020, Walmart had more than 550 onsite and offsite projects in operation or under development in eight countries, 30 U.S. states and Puerto Rico, producing over 4 billion kWh of renewable energy. “Securing innovative, scaled energy transactions is another solid step toward our goal of being powered by 100% renewable energy by 2035 and achieving zero emissions across our operations by 2040,” said Mark Vanderhelm, VP of energy and facilities management, Walmart.

WHOLE FOODS MARKET ADOPTS NEXT-GEN REFRIGERANT Whole Foods Market is switching to an alter- hydrofluoroolefin (HFO) technology, Solstice N40 has a global-warming potential that is native refrigerant with a lower global-warming potential. The natural and organic foods approximately 68% lower than legacy hydrofluorocarbon (HFC) refrigerants such as retailer is adopting Honeywell’s Solstice N40 (R-448A) lower global-warming-poten- R-404A. (At press time, the EPA announced a new regulation that would dramatically decrease tial refrigerant in its U.S. stores to help meet production and use of hydrofluorocarbons, or its sustainability goals and also to reduce HFCs, during the next 15 years.) refrigerant emissions under the U.S. EPA’s Refrigeration systems that use the alternative GreenChill program. refrigerant also consume less energy than their Whole Foods will retrofit its commercial counterparts that cool using HFCs, according refrigeration systems at more than 100 stores to Honeywell. The refrigerant can be used in with the Honeywell alternative refrigerant, new installations and to retrofit existing systems replacing high-global-warming-potential using high-GWP refrigerants such as R-404A refrigerants R-404A and R-22. Based on and R-507. “In the past decade, we’ve implemented several innovative measures to reduce our CO2 emissions, and the use of Honeywell’s refrigerant to retrofit our stores will contribute significantly to this goal,” said Mike Ellinger, principal program manager-engineering, compliance and sustainability, Whole Foods Market. “After reviewing all of our available retrofit options for our refrigerated cases, R-448A was the clear winner, based on its performance, energy efficiency, reduced GWP and ease of conversion.” 20

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BEST BUY, WHOLE FOODS MARKET TOP COVID-19 STORE SAFETY MEASURES RANKING Best Buy and Whole Foods Market were the big winners in Ipsos’ Health and Safety Best Brand Awards, based on the results of its third “Consumer Health & Safety Index,” an in-store benchmarking study that assesses how retailers are operating more than a year into the pandemic. In spring 2021, Ipsos surveyed 2,000 Americans to understand which health and safety attributes are most important to consumers in the current COVID-19 retail environment. Ipsos then conducted mystery shops to measure brand compliance on health and safety attributes across more than 25 brands in four key industries, including big-box stores and supermarkets. Best Buy retained its spot as the top performer in the big-box industry, winning the Best in Industry. The consumer electronics retailer also led the big-box sector across several categories, including social distancing measures, sanitizer offerings and employees wearing masks and gloves. Target showed improvement in its focus on health and safety, ranking second in the big-box industry and winning the Best in Category award for cleanliness. Costco Wholesale Corp. came in at No. 3, and won the Best in Category award for restrooms and barriers to enforce distancing. Whole Foods and Food Lion led the grocery industry, with Whole Foods retaining its No. 1 spot from previous Ipsos studies and winning the Best in Industry. Food Lion ranked No. 3 in the sector but emerged as a Best in Category winner for the presence of sanitizers at various points in stores, including at entrances, checkouts and in restrooms. In addition to winning Industry and Category awards, Whole Foods, Best Buy, Target, and Costco emerged as the Best Overall Brand award winners. MAY/JUNE 2021

CHAINSTOREAGE.COM

5/12/21 1:42 PM

SPECS20

AUG. 22-24, 2021

Gaylord National Resort & Convention Center National Harbor, MD

2021

REIMAGINE. INNOVATE. EXECUTE.

TWO BIG NAMES AT ONE MUST-SEE EVENT! BARBARA CORCORAN Founder of The Corcoran Group, investor, author, entrepreneur, and TV celebrity

KEYNOTE: Monday, at 8:00 AM A leading Shark on ABC’s Emmy-winning show Shark Tank, Barbara Corcoran is much more than a TV personality. As the SPECS 2021 headlining keynoter, the real estate mogul will talk about her journey to create a $5 billion real estate empire from the ground up. Corcoran will also share insights about what it takes to drive growth and succeed in business.

RON INSANA

CNBC senior analyst and commentator, business journalist, author, and ﬁnancial professional

KEYNOTE: Tuesday, at 8:30 AM

Produced By

As a senior analyst and commentator for CNBC, Ron Insana reports on the events and trends impacting the economy. He will delve into his three decades of covering business and economic news to provide a snapshot of the economic landscape, and what’s to come for business.

Learn More and Register at www.SPECSshow.com SPECS2021_KeynoteSpeaker_HA_0421.indd 20-21-CSA_Trending.indd 21 1

5/4/21 11:38 5/12/21 1:42 PM

STORE SPACES

Change of Scene Out-of-the box (big ones) design thinking By Mark Landini Better designs for large-format stores are essential for success during the pandemic recovery phase in 2021 and long after. That’s one reason new retail setups and renovations are such a strong focus now. First, note that about 80% of shopping is still in store, so store design still matters a lot. Second, many retailers find that targeted store renovations and redesigns can contribute to increased online sales, up by 60% as shown in some cases. What’s driving new designs? The post-pandemic comeback will include more localization, expanded fresh offerings, cheerier surroundings and more in-store manufacturing and automation for an increasingly handsfree experience. Better ideas for store operations, planning and layout, signage and customer processes show the bottom-line benefits of “reinventing normal” rather than falling back on stale formulas and outmoded purchasing experiences. Examples include: • Swapping checkout areas with fresh food displays and onsite manufacturing: In a recent revamp, Esselunga, Italy’s oldest supermarket chain, moved the cash registers to the side and located bread baking and food production in a prominent spot by the store entrances, creating a glasswalled display that shows arriving shoppers where their where food is coming from. • Automating picking and packing: New ideas in hands-free, contactless store operations, including shopping with integrated smartphone apps, have emerged as a trend that analysts predict will grow widely in the post-pandemic retailing scene. Alibaba’s Hema was among the first to pick up on this, debuting app-based product scanning and conveyor-belt delivery, along with robotic table service, in its Shanghai restaurants. • Mixing in local brands with global product brands near storefronts: In this way, old-style groceries are coming back, but with the new twists of technology and localization.

As part of a redesign, Esselunga, Italy’s oldest supermarket chain, located baking upfront in a glass-walled area.

Ultimately, however, the best reinventions will consider the shopper’s time and convenience first to guide investment in store redesigns. The physical shopping trip can be a relief, an enjoyable break from home with pleasant stimulation and discovery. The outing should be rewarded with a friendly, curated experience that not only presses the right buttons but that also shows how easy it can be — fewer steps needed and layouts that speak for themselves. Aldi did just this with its Asian and Australian reinventions. Realizing that the typical discount store environments are generally uninviting and cold — reinforcing consumer perceptions of low-cost shopping as a dreaded chore — Aldi boldly upgraded the store environment and made a hero of the quality of the products. The floor layout was changed to articulate certain categories for greater consistency, with key items placed at aisle entries next to appealing messaging. Also, the produce, bakery, alcohol, and health and beauty departments were redeveloped. A palette of budget-minded yet real materials such as concrete, plywood, oriented-strand board (OSB) and rough sawn timbers bolster the perception of freshness throughout the store. With new, glare-reducing LED lighting and witty, on-brand graphic illustrations reinforcing core themes of great value at low prices, quality and freshness, the new setup encourages customers to shop across the whole store while respecting the brand’s positioning as a low-cost budget option. The

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experience is moody, warm and modern, a pleasant and immersive customer journey guided by handwritten, illustrated signage rather than the shouty, noisy marketing one associates with discount chains. Bigger changes demand vision. Retailers that are brave enough to adopt tomorrow’s winning design ideas have embraced a focus on “reinventing normal,” which is ultimately all about applying common sense. It’s a rational process that starts by articulating a desired outcome, then challenging whether history is the best way to achieve it. Esselunga’s new floor design rotates the standard supermarket layout by 90 degrees, allocating payment to a cheaper zone and replacing the most prominent floor space with a glass box of production, previously hidden in multiple unseen places. The prices didn’t change but now the shop’s window expresses what the grocer does best: making great-value fresh food. Also, moving the on-site manufacturing teams into one place also makes the operations more efficient. The Esselunga project team adopted the redesign proposal, created by Landini Associates, and dubbed it Dimmi, Italian for “show me” or “tell me.” The phrase drove everything in a brave redesign. The results challenged normal and then “reinvented normal” — for the better. — Mark Landini is creative director of Landini Associates, which works across all aspects of retail (including food) and hospitality. Previously, he was creative director of the Conran Design Group and Fitch RS. MAY/JUNE 2021 CHAINSTOREAGE.COM

5/12/21 1:42 PM

SHOP TALK

Harry Potter

Trending Stores: “Retailtainment” is alive and well at the Harry Potter flagship in mid-town Manhattan. Featuring the largest collection of Harry Potter and Fantastic Beasts merchandise under one roof, the three-floor 21,000-sq.-ft. store has 15 different themed areas, each one designed to bring the magic of the “Harry Potter Wizarding World” to life. More than 1,000 props are on display, including some authentic items used in the movies. The flagship boasts an array of photo ops, a personalization area and two multi-player virtual reality experiences, including one in which visitors can fly on brooms and join a magical wand battle against Death Eaters over the skies of London and around the grounds of Hogwarts Castle. … Puttshack, an entertainment concept that combines tech-infused mini-golf with food and drink, has made its U.S. debut, at The Interlock, a new mixed-use development in Atlanta. The 25,000-sq.-ft., upscale-looking space has four “highly-competitive” mini-golf courses, complete with custom-themed holes, interactive leaderboards and a digital prize wheel. Each customer is assigned a ball with a chip that automatically records their shot and registers their score on the board. Puttshack also offers customers an upscale menu, a full bar and an indoor-outdoor rooftop patio. More U.S. sites are in the works, with openings in Chicago and Miami later this year. With three locations in London, Puttshack’s creators

include the original founders of Topgolf and World Golf Systems. … Gap Inc’s Athleta brand plans to open between 20 and 30 stores annually across North America in line with its goal of doubling the business by 2023. As part of the expansion, Athleta will open its first-ever Canadian stores this fall, at Yorkdale Shopping Center, North York, Ontario, and Park Royal Shopping Centre, West Vancouver, British Columbia. … Chipotle is on the fast track, with plans to open 200 locations this year — assuming minimal construction and permit delays related to COVID-19. … Amazon has opened its first-ever hair salon, in London’s Spitafields district. Amazon Salon is designed as a testing ground for the “latest industry technology,” including augmented reality hair consultations that allow customers to see what a new hair color or style looks like on them before they make the change. It also features new “point-and-learn” technology that allows customers to point at a product on display and view related information on a display screen. To purchase a product, customers can scan the QR code on the shelf which takes them to a product page on Amazon.co.uk, with delivery direct to their home. Amazon says it currently has no plans to open additional salons.

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5/12/21 1:42 PM

STORE SPACES Q & A

Turnkey LED Project Management

More and more retailers are implementing energy-efficient LED lighting. Greg Green, divisional VP, national accounts, Orion Energy Systems, spoke with Chain Store Age about LED trends including advanced controls, and the advantages of turnkey management for LED projects. By Marianne Wilson

What trends you are seeing in LED lighting applications? Energy savings continues to be the main focus as reductions in utility costs fund a large share of the projects. Other trends are high-color definition lighting and advanced lighting controls, including IoT technologies. How have lighting controls grown more sophisticated? Implementing an advanced lighting control system that includes the Internet of Things can provide valuable insight into your facility operations, with the data that is collected used to manage your business. An IoT lighting controls system can help you understand customer traffic patterns, develop safety measures, analyze facility space management, asset tracking, employee utilization and HVAC cost reductions. It can also help enhance the customer experience. What are the other benefits of using a control system? By installing a control solution that complements your lighting application, you can achieve several additional benefits that will help you manage your business. This includes additional energy savings which lower your utility bill and you will receive higher utility incentives for using an advanced lighting control system. Has the pandemic impacted your customers’ needs? The pandemic has affected different business sectors in varying degrees. Some of our customers paused to evaluate how the pandemic would impact their business performance, capitol budget spending and daily protocols needed to keep their customers and employees safe. Some customers put their lighting projects on hold. Others continued with their

energy-efficient lighting projects to improve the quality of the lighting in their facilities. As the pandemic protocols made a positive impact on controlling the spread of COVID-19 and the number of vaccinated people increased, customers who put lighting projects on hold started to re-engage our staff and make plans to get the projects back on track. Sanitizing airborne pathogens to reduce the spread of COVID-19 has become a key priority of retailers. Can Orion help in this regard? Orion has developed the ISON PureMotion UV-C product, which can be easily placed into a T-bar recessed ceiling grid or with a surface-mounted bracket. It was designed with air motion and UV-C to sanitize air, eliminating various airborne viruses, bacteria, mold and fungi. Fans draw room air into LED UV-C chambers where LED UV-C chips sterilize the air and return it to the room. The unit can can resemble existing ceiling tile to provide a discreet method to sanitize the air for a safer and healthier working environment. Third-party testing has confirmed effectiveness in sanitizing airborne pathogens to include COVID-19 (SARS-CoV-2) coronavirus. Tell us a little about Orion and its services. Orion is a Wisconsin-based LED lighting manufacturer that manufactures almost all of our products in Wisconsin. We also provide turnkey services including audit, design, project management, installation, controls commissioning, recycling and rebate coordination and ongoing facility maintenance for our customers throughout North America. You make one phone call for all your energyefficient LED lighting projects.

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What’s involved in Orion’s turnkey project management? We offer a cradle-to-grave approach from manufacturing the fixture with the latest in LED components and lighting controls to installing the fixture and providing ongoing lighting maintenance. Orion’s nationwide footprint enables us to handle any size lighting rollout project, and we have a long history of completing some of the largest lighting retrofits in the industry. Orion manufactures its LED lighting products in Wisconsin so you can count on faster delivery times. Our team of professional engineers and project management/ installation staff have years of experience to assure a successful project. We make a commitment to communicate with our customer on a weekly basis, and we offer instant access to online secured project data for daily project details including project timelines, completion information and logistics schedules. Our goal is to have a positive impact on our customers with excellent communication and bottom line ROI results while providing them with confidence that we have their project objectives in clear focus. COVID-19 impacted the supply chain for the lighting manufacturing industry. What about Orion? Orion made a large investment to purchase the components we needed to meet our project forecast when the pandemic started to be a concern. This allowed us to deliver our standard product offering on a timely basis, which is typically three to four weeks. There are some product components in our supply chain that are delayed. For that reason, it’s important to communicate and plan so that all parties know what to expect for their project timelines. MAY/JUNE 2021 CHAINSTOREAGE.COM

5/12/21 1:43 PM

At the Curb or the Window, We’ll Guide the Way. Grab-and-go isn’t just convenient, it’s also a safe way for customers to interact with your brand. Whether at the curb or at the window, we’ll handle the entire pickup program from layout and design to installation.

Mobile Pickup

Plus we can fill in any other holes while we’re there. • Program Layout • Wayfinding Signs/Stencils • Manufacturing & Installation • Line Striping & Specialty Markings • Asphalt, Concrete, & ADA Reconfiguration

Curbside & Digital Pickup Window Programs

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5/12/21 1:43 PM

ON THE LEVEL

DTCs will ride to profitability in brick-and-mortar

NYSE: RPAI | rpai.com

One Loudoun | Ashburn, VA Mixed-Use Development

Surely you know the names Peloton, Wayfair, and Blue Apron. The direct-toconsumer fitness, furniture, and mealsin-the-mail companies that rode the pandemic to massive sales are poised on the crest of new retail. Did you also know, however, that all three are unprofitable? Marketing and mailing costs are making Blue Apron go hungry on their bottom line. Peloton rode its popularity faster than it managed to create a scalable business platform. Wayfair’s sales have risen by double-digit percentages the last three years, but so have its operating expenses. One of the best ways to control operating expenses such as the high cost of product delivery and returns online is to open stores--something Wayfair and other DTC brands like Allbirds and Everlane are doing. A whitepaper from the foot traffic analytics company Placer.ai suggests that more and more e-coms will be wending their way into malls and mixed-use centers. Locations in the physical world of retail lower the cost of returns and double as online fulfillment stations, as we all know. But they also broaden the customer knowledge and engagement of these DTCs with chest-bulging brand recognition but sagging liquidity. Many of these brands are tiptoeing into brick-and-mortar using pop-up retail specialists like Lionesque Group or omnichannel empowerers like Leap. Placer. ai focused its lens on two sites where Untuckit fielded pop-up shops—Freehold Raceway Mall in New Jersey and Fashion Fair Mall in California—and found that

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they extended the brand’s interaction with different age groups. Untuckit’s most important customer group is males under 18, who form 23% of the online shirtmaker’s traffic. But they found they did an even better job of attracting them at Fashion Fair, where 30% of their visitors fell into this group. At Freehold, Untuckit did a much better job introducing their styles to men 45 and older than they do online. Using this information, Placer.ai pointed out, will greatly aid online brand’s site selection strategies as they roll out more physical locations. The traffic-tracker also observed that more brands will be opening stores because it is working for the ones that have tried it already. Checking the store traffic of some members of the first wave of e-commerce’s brick-and-mortar movement, Placer. ai learned that their visits rose significantly since 2019. The upshot is that online brands able to design unique in-store experiences can manufacture more customer loyalty and greater sales than they could with an online presence alone. E-commerce moved its percentage of consumer sales beyond the 20% mark during the pandemic, but few researchers or investment analysts believe it will extend much farther than that when the masks come off and the shops, restaurants, theaters, and entertainment centers are thronged with people freed from their kitchens and living rooms. Why would successful—in product popularity, at least—online sellers not want to extend their presences into the place where 80% of sales will continue to take place? 2021 Top 10 Retail Center Experiences. Last year, we named them the Top 10 Comeback Centers, but now the comeback’s on! If you own, operate, lease, or just visit a retail center that you think rocks everybody’s socks, watch for the nomination ads in our newsletters and on www.chainstoreage.com and tell us about them.

Al Urbanski aurbanski@chainstoreage.com @AlUrbanski (Twitter) MAY/JUNE 2021 CHAINSTOREAGE.COM

5/12/21 1:45 PM

development lifestyle grocer mixedduse

THE BEST IN RETAIL FROM EVERY ANGLE

Circle East | Towson, MD Mixed-Use Development

NYSE: RPAI | rpai.com

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5/12/21 1:45 PM

REAL ESTATE

Post-Pandemic Opportunity Experts see a return to normal — but normal will have new meaning. By Al Urbanski

heldon Jacobson is a computer science professor at the University of Illinois at Urbana-Champaign who uses artificial intelligence to aid risk assessment and decisionmaking under uncertain conditions. Doing so in the field of public health is one of his specialties, so he’s been very busy ever since word got out about a deadly coronavirus spreading in Wuhan, China. Since then, he’s written more than 35 articles and op-ed pieces for newspapers like the Indianapolis Star, the Chicago Tribune, and The Detroit News. He’s commented on how college sports should weather the pandemic, why blocking out middle seats in airlines makes little medical sense, and why something called “clique immunity” will return us to normalcy whereas herd immunity is a tough go. None of his writings, though, addressed

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the outlook for people congregating inside stores, malls, or shopping centers. So we asked him, “What should retailers plan for at the dawning of the post-pandemic year of 2022? “Retail has to start planning for holiday season 2021,” Jacobson quickly replied. “Twenty-one?” we asked, “not 2022?” “Twenty-one,” he said. “Everything is setting up right. It’s going to be spectacular.” Jacobson thinks herd immunity is not a condition that can be attained in the United

States. It requires anywhere from 60% and 90% of the population to be immune, and vaccinations have stalled due to the significantly large group of Americans who refuse to be vaccinated. He also thinks that’s not a concern, because clique immunity will do the trick. In graph theory, a clique is a set of vertices all connected to each other by edges in a graph, and every vertex has one degree of

“Retail has to start planning for Holiday 2021. It’s going to be spectacular.” —Professor Sheldon Jacobson, University of Illinois

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Your customers have returned. Meet them where they are! visit preit.com to learn more about our distinctive real estate opportunities.

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REAL ESTATE separation from every other vertex. Now think of a clique as the family you’ve lived with safely at home for the past year, the neighborhood where socializing without masks has increased, the small towns that have relaxed mask regulations. Then think of the mall or the power center. Jacobson is confident that, come November 2021, groups that frequent malls and shopping centers will become cliques. The more immune people who begin shopping, frequenting restaurants, and going to the movies, the quicker cliques will form to break down the spread of COVID-19. “You may still continue to have a thousand to 5,000 cases a week,” Jacobson said. “but that adds up to only 135,000 a year and begins to look like a seasonal flu.” Mall and shopping center cliques are already in the process of forming. The foot

traffic analytics company Placer.ai handpicked 52 viable Class A malls of similar caliber and followed their customer flows. Traffic across the malls in April was just 19% below what it was the same month in 2019, a stat indicating that normalcy has been reinstated. Compared to April 2020 when shutdowns were in force, it was nearly 4000% ahead.

“That’s the best traffic report we’ve seen in this group of malls since the pandemic began,” said Placer.ai’s VP of marketing Ethan Cherofsky. “Still, there are some big questions that need to be answered before we can get back to the way things were. A big consideration is what’s going to happen in California, New York, Texas, Florida, and Illinois. Those are the biggest states and

5Qs for Greg Goldberg on RPAI’s formula for mixed-use centers In the years ahead, new retail developments most likely will be mixeduse projects offering stores, offices, and apartments in a bustling, open-all-day environment. One company that’s been busy creating these communities for years is RPAI, so we asked Greg Goldberg, its VP and leasing director, how this sector will blossom as the pandemic fades. The “M” word in retail real estate these days is “mixed-use,” not “mall.” How is RPAI is addressing the increase in demand for multi-family and office space? Most of our projects reside in desirable suburban locations, like our One Loudon mixed-use development in Virginia. Loudoun County has 400,000 residents and is the wealthiest county in the country. It has the largest concentration of tech data centers in the nation. Amazon put a new headquarters in northern Virginia. There’s a huge tech boom going on there with strong office demand, and companies are looking to recruit top talent. After designing a Class A office experience, we think how will office tenants feel about the surroundings when they come to the center. This is a combination of excellent merchandising, diverse restaurants and bars, places to work out, and inviting outdoor seating. But it also goes to the special touches that separate us from other projects. We focus on the experience in the lobby, hallways, and parking for the office building. In the center, we incorporate parks, wide sidewalks, and create an experience that makes you want to spend more time at the center outside of work. Finally, adding onsite multi-family is huge benefit. Having the retail eye gives us an advantage to create special modern office environments. Name some other key features of your live-work-play design. Our latest office building at One Loudoun includes groundlevel retail and two levels of office above. We outfitted the entire roof with a sunroof to add natural light throughout the building. We recessed the hallway from the side wall to allow Greg Goldberg 30

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natural light to shine down to the second floor. We also made the experience touchless. You can go from your car to your office and not have to touch a thing. You use your phone to call elevators and open doors. Will the office space you build take a different shape in 2022 and beyond? There are two big shifts that will remain post-COVID. One, employees will want some flexibility. It will be easier to have this if the office is closer to where people live, which will drive the demand in the suburbs. Offices will want the best experience that a suburban mixed-use project can offer. And two, employees are not going to want designs that stress communal tables and seating. There will be a need for private offices, smaller mini conference rooms for smaller meetings, and more openness. What about retail? The increase in online ordering has increased the need for pick-up areas. The pandemic just accelerated the evolution. Brands will continue to become more oriented to people living and working in the suburbs. We just opened Shake Shack at Circle East in Towson, Maryland, that put in a carry-out window. It is not a drive-through. It’s a true open-air walk-up window. This helps to separate the mobile order customers from the people ordering in the restaurant. Will some form of social distancing be enforced after Covid-19 goes away? It is regional. Different municipalities have different mindsets as to when things will adjust back. But I don’t see it continuing in a regulated fashion once retailers and restaurants return to 100 percent capacity. What will continue is more outdoor seating for restaurants. People feel more comfortable being outside versus inside, and I see that trend continuing. MAY/JUNE 2021 CHAINSTOREAGE.COM

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some of them are off-pace in re-opening. We expect that retail will be making its way through some peaks and valleys over the next few months.”

ne thing’s for sure. Getting shoppers back to the mall in ’22 won’t be the same as it was in ’20. Joseph Coradino, the CEO of PREIT, who for several years has been closing malls that don’t meet his sales per square foot minimums, calls the mall business a “winner take all” game. Developed markets where one or two malls fail will cede the market to the A mall that does the best job of rejuvenating itself with restaurants, events, entertainment, medical centers, casinos—whatever it takes to keep it active and alive 18 hours a day with customers beyond just teenagers and seniors. (See box on page 34.)

Last August, Coresight Research released a study saying that 25% of malls—mostly B, C, and D properties—would close within the next three to five years. But now, even A properties are falling by the wayside. In May, Brookfield Property Partners executed “friendly foreclosures” of three of its malls, returning them to their creditors., Queen Ka’ahumanu Center, the top mall in Maui for 50 years, had net operating income that was less than its debt service and was struggling to survive. The retail centers that take in the biggest crowds and the most cash during a “spectacular” 2022 and beyond will be the ones that throw out their old operating manuals and marketing strategies in full comprehension of the fact that American consumers have changed, according to Michael Brown, a partner in Kearney’s consumer and retail

practices. “When the malls were built, they were the chief destination. It was all about bringing more goods closer to consumers. But now, the goods will come to people--come to them for free and quickly,” Brown said. Shopping center owner-operators and their tenants must cast aside just about everything they’ve known and done in the past and learn a new business, according to “The Future of the Mall,” a report Kearney released in April. They have to stop thinking of consumers as buyers that will consume anything they’re advertised about and presented with, said the report. Shoppers today are driven by emotion and are eager to be surprised when searching for products and experiences on their smartphones. They’re turned off by cookie-cutter malls that all have the same stores.

Banks will be key players in post-pandemic retail centers By Annette Healey

etail’s evolution has been accelerated by the pandemic. However, as we emerge into a “new normal” and more consumers return to stores, many retailers will be poised to reposition themselves in the traditional brick and mortar setting, driving more activity and creating new opportunities. One segment that could be a leader in this environment is financial services. Consumer banks, wealth management firms, and credit unions have often been an overlooked segment of the retail market. They are viewed as more commercial in nature and not major drivers of foot traffic. However, these national and regional brands have become a mainstay in retail locations across all markets, offering landlords the option of a strong, creditworthy tenant. While electronic banking has gained traction especially over the past year, financial institutions still see great value in having physical locations near consumers and residential populations. They offer quality branding and signage, giving them excellent visibility to potential customers— who rarely leave once they open an account. Having a physical location is one of the best ways to attract new customers. They come back often to access cash and banks also want these locations to upsell services like mortgages and home equity loans. Retail banks will look at the post-pandemic world as an opportunity to expand their market share, albeit with a new model and targeted growth in certain regions of the country. Financial institutions will realign their physical footprints to meet the changing demands of their customers. A given trade area will host a flagship that will be the market’s

largest location and then several, smaller satellite locations that can operate in neighborhoods and residential markets. These locations may be smaller than in the past, but will remain viable tenants for landlords. Drive-throughs have regained popularity during the pandemic, but many banks prefer a higher touchpoint with their customers. We will see them target a variety of locations to serve the market. Most of the actual locations that these users will target will be street-level retail in suburban town centers and strip centers in highlytrafficked areas. Malls are not typically a target for these occupiers as many mall owners want to operate on percentage rent deals and they don’t see financial institutions as major traffic drivers. That being said, financial institutions may target malls that are performing well for the increased visibility and we may see some transactions, at rental rates that compensate for the lack of percentage rent. Let’s not forget the urban market either. As office users come back to major metro areas, ground-floor retail space at commercial properties will offer ideal locations for banks and wealth management providers. They have been in this market for some time and will likely approach it in the future with a smaller floorplan, but the locations remain very viable. All of this adds up to financial institutions being big players in post-pandemic retail and a main driver of activity. They will have a different look and feel, but they will rely on physical locations to drive new customer growth and provide a sense of stability that is critical for customer confidence. CBRE Executive VP Annette Healey was the global real estate service’s company’s top retail producer in 2019 and 2020. Annette Healey

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REAL ESTATE

Fillogic fills the fulfillment gap in malls Online sellers took retail’s center stage during the pandemic, forcing many brick-andmortar retailers to get more serious about omnichannel. The tough part for specialty retailers in malls was the fulfillment. They have neither the space, the trucks, nor the help to pack and ship online orders locally. In steps Fillogic. This startup headed by former Loehmanns and Century 21 logistics chief Bill Thayer and e-commerce entrepreneur Rob Caucci has deals with Simon, Taubman, and Tanger Factory Outlets to form hubs in malls and centers that can manage e-commerce, store inventory, pack orders, and performs ground shipping ranging from bulk to next day. Mall and center operators give Fillogic the backroom space it needs to serve their tenants and Fillogic shares a portion of its revenue with them. “In-line mall retailers don’t have direct access to docks. Neither do they have enough people to do the things that have to get done to ship online orders,” Thayer said. “They need us now because e-commerce is not just something you do, it’s where all the growth is.” Fillogic just received a second round of funding and is rolling out operations to Miami, Atlanta, Phoenix, and other major markets. “We can set up a new retail customer in as little as two weeks, “ said Caucci. –Al Urbanski

“The mall is no longer the place to shop, it’s the place to engage with brands and with other people,” said Brown, and that means re-thinking another aspect of the business that has always been difficult—hiring capable associates. “There has to be a retail talent reinvention,” Brown said. “Instead of hiring minimum-wage salespeople, they have to invest in labor that can influence a consumer to make a purchase and then connect it to their online shopping experience. Take anything basic an associate now does and automate it.” COVID-19 forced people from gathering in public marketplaces, but many intend to steer clear long after the pandemic subsides. Nearly half of the 7,164 consumers in nine countries surveyed in March by the global consulting firm Alix Partners said their buying habits have been permanently changed by the pandemic. Interestingly, the people who vowed post-pandemic prudence spread fairly evenly across all demographic profiles. Alix chose a survey pool that was balanced by age, gender, income, education, and location, and the “permanently changed” respondents ranged between 43% and 51% in each audience variant. “Yes, it was a fairly prevalent attitude--old or young, rich or poor, U.S. or international. People would say, ‘I found I could do more shopping at home, more home entertainment, and it’s going to be a permanent

ithout question, the pandemic made many baby boomers and Gen Xers start buying groceries online and finding they liked it. But the pace of change was sped up long ago for everyone in a world where a thin, rectangular, phone-camera-computer in your pocket could get you a streaming movie, a vacuum cleaner, a pizza, or an ambulance with little effort. Malls and shopping centers abiding within the same property designs and the same plans of consumer interaction, says Denz Ibrahim, remind him of his father going to the record store in London, searching through discs, finding the Wayne Shorter record he was looking for, then coming home and putting it on the turntable. “Now I can get it on Spotify and be listening to it in five minutes,” he said. Ibrahim, a designer and urbanist, was hired in 2019 by Legal & General, a London-based financial and asset management company, as head of retail and futuring at the company’s real estate assets division. The press release announcing his hire said that Ibrahim had been hired as an important player in the company’s strategy to ensure that it continues to “challenge retail market conventions.” Legal & General stated that it sought to quit being “librarians” of space that collected rents and managed properties and become

Next to its big mall in Poole, England, Legal & General opened Kingland and gave free rent to local artisans, bakers, and shopkeepers to fill it.

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change for me,’” said Joel Rampoldt, a managing director in the retail practice at Alix Partners.

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“editors” who’d ensure that the content of their properties responded to fast-changing consumer expectations. Ibrahim is in agreement with Kearney’s Michael Brown that today’s consumers want something special instead of something mass-produced. “Luxury retailers did well with people with good jobs who had money during the pandemic,” Ibrahim said. “I think the luxury of tomorrow is not a Rolex watch, but a local maker doing a line of 20 jumpers that makes them special.” Nearby its 500,000-sq. ft. Dolphin Shopping Centre in Poole, Legal & General installed what it called a “curated shopping street” called Kingland, where it gave a group of innovative local retailers shops rent-free for two years. The roster includes a coffee roaster, a gin and bar store, a perfumer, a restored furniture shop, and a zero-waste grocer. At Dolphin, it has added an amphitheater where events are run almost daily plus 70,000 sq. ft. of work space that has made making students from local Bournemouth

“You have to drive new experiences through social media. Start people’s experiences at your center on their phones on their desks at work.” —Denz Ibrahim, Legal & General

University more regular visitors Ibrahim thinks that even long-established centers and malls can re-create themselves to appeal to the new consumer, but that they must make their leasing and management structures more flexible in order to adapt to changing consumer wants and needs. Variable leasing standards—say offering leases ranging from three to 36 months in some cases—makes space availability more fluid to adapt to consumer trends. “To do this, though, you must have the data—insights into customer journeys, dwell times, transactions,” Ibrahim said. “And you have to drive new experiences through social

media. Start their experiences at your center on their phones at their desks at work.” University of Illinois professor Sheldon Jacobson is sure that brick-and-mortar retail is going to ramp up by the end of this year, but he’s also in agreement with the findings of the Alix Partners’ survey finding that the shopping habits of a significant portion of consumers have been changed forever by the vagaries of COVID-19. “We’re going to see some emerging methods of retail. Not everyone wants to run back into restaurants,” Jacobson said. “This virus is somewhat unstable, and it will continue to mutate as long as it’s alive.”

THE PREMIER GLOBAL DEVELOPER AND OPERATOR OF FLAGSHIP DESTINATIONS RESHAPING HOW PEOPLE SHOP AND PL AY

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5/24/21 12:38 PM

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REAL ESTATE

It Comes Down to Being in the Right Place By Joseph Coradino

s the country emerges from the panA Winner-take-all portfolio that is winning demic, there is growing evidence suggestthe battle for key tenants and attracting cusing a strong recovery for brick-and-mortar tomers in excess of pre-pandemic levels. One experiences and a scaling back of online sales example of this is Capital City Mall in Harristo normalized levels. Vaccines have been burg, Penn. A few years ago, we proactively administered nationwide from big cities to recaptured a Sears store and reconfigured urban villages, household incomes and savthe space with a collection of tenants that ings have reached record highs, and a pent-up included Dick’s Sporting Goods, Fine Wine demand for discretionary goods and services & Spirits, Primanti Bros., and Blaze Pizza. has already brought traffic pouring back to our Serving a trade area of more than half a milcenters. lion people, the property is home to the only Visits to malls in March this year were just Macy’s and Dave & Buster’s within 50 miles 23.9% below visits to the same malls in March and boasts the only Victoria’s Secret, DSW, 2019, according to the digital traffic-tracking Hollister, and Build-a-Bear in the region. With company Placer.ai. That’s the biggest return occupancy levels nearing 99%, the property we’ve seen in the business since the pandemic has consistently delivered customer traffic began, and the numbers are rising with each ahead of portfolio averages. week in our portfolio. In other words, customers are clearly of the mindset that it is time to get dressed and go out to eat! Some retail destinations won’t survive the pressures of the pandemic. But many will adapt, re-create their experiences, and flourish. The basis for success in this space Winner-take-all-mall: PREIT’s Woodland Mall in Grand Rapids, Mich. rests on the nature of one’s portfolio and, at PREIT, we’ve persistently worked to keep Strong and steady results that continue to improving it long before the arrival of this flow from our Winner-take-all segment, which pandemic. Our portfolio is uniquely posialso includes Patrick Henry Mall, Woodland tioned with a distinctive set of assets that Mall, Dartmouth Mall, Viewmont Mall, and will continue to attract a broader customer Willow Grove Park. During the month of base into the future. It is comprised of: March, when retail activity skyrocketed across the country, sales at these properties for High barrier-to-entry market properties comparable reporting tenants grew by a stagavailing themselves to a broad array of uses, gering 19%. Customers are back with pent-up as evidenced by the arrival of Cooper Univerdemand for our goods and services and we are sity Health Care at our Moorestown Mall, Aldi happy to be here to greet them as they return at Dartmouth Mall, a self-storage facility at in full force! Mall at Prince George’s, and several thouCoresight Research reports that retailers are sand apartment units across our portfolio. In expected to open more stores than they close markets where competitive retail centers have this year. This gives us an opportunity to emfallen by the wayside, we are finding that we ploy our wealth of marketplace knowledge to have captured the undivided attention of the help our retail partners launch new brands and consumer. We call these our “Winner-take-all” concepts that will thrive in the future-ready properties. They will normalize the per-capita marketplace we are building together. ratio of retail space post-pandemic and gain Joseph Coradino is the chairman and CEO of market share as other properties lose tenancy PREIT, owner-operator of 19 super-regional and relevance. and regional malls.

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REGION REPORT: SOUTHEAST

Was the Southeast hurt the least? The region that shut down slowly and re-opened quickly posts low retail vacancy rates and probably will for some time. New retail construction paced downward while new residents flocked inward, says Marcus & Millichap research. By Al Urbanski Orlando

ATLANTA Though 150,000 jobs were lost in Atlanta last year, payrolls in key business sectors rebounded and employment was back on track with a 3.2% increase in Q2 2021. With Microsoft investing $75 million in a new facility and bringing 1,500 jobs to the market next year and Google expanding in Midtown, employment figures to trend upwards for some time. Home sales in suburban Atlanta were already up by 9% in fourth quarter of 2021 compared to the year earlier period.

Marcus & Millichap forecasts a decline in both retail occupancy rates and rents this year, though it expects market fundamentals to stabilize by Q4 as store closures are offset by new openings. Only a single submarket has more than 500,000 sq. ft. of retail space under construction, and the combination of rising demand and little supply will aid entrenched retail operations.

Atlanta’s Q2 2021 Key Numbers Vacancy rate: 5.8% Avg. cap rate: 6.7% Avg. single-tenant price per sq. ft.: $380 Avg. multi-tenant price per sq. ft.: $223 Avg. asking rent per sq. ft.: $15.28

CHARLOTTE Charlotte’s economy quickly bounded back to pre-pandemic levels by the end of 2020. Every industrial sector restored 90% of its positions except for leisure and hospitality. Apartment vacancies increased through June of last year, though leases paced upward when landlords decreased rents after they rose by more than 6% in the previous five quarters.

Retail space completions have been on a downtrend since 2018, when 1.6 million sq. ft. of new GLA came on the market. That dropped to about half a million square feet in 2020, and 591,000 sq. ft is expected to be completed this year with net absorption close to zero.

Charlotte’s Q1 2021 Key Numbers Vacancy rate: 5.3% Avg. cap rate: 7.2% Avg. single-tenant price per sq. ft.: $389 Avg. multi-tenant price per sq. ft.: $255 Avg. asking rent per sq. ft.: $17.91 FORT LAUDERDALE Marcus & Millichap predicts it will take several quarters to backfill the space vacated by retailers whose tourist tap was cut off during the pandemic. Soft tenant demand dropped asking rents by 2% in 2020, though leasing activity gradually re-awakened. Supply-side pressure, however, is expected to prolong a rise in the vacancy rate to about 6.6% this year. Ground was broken on few new projects during the past year. About 800,000 sq. ft. was underway at the outset of 2021, a 40% reduction from a year earlier. Plantation is the hot spot, where the former site of Fashion Mall is being redeveloped as Plantation Walk, a mixed-use project with 130,000 sq. ft of retail space.

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Fort Lauderdale’s Q4 2020 Key Numbers Vacancy rate: 5.2% Avg. cap rate: 6.3% Avg. sale price per sq. ft.: $381 Avg. asking rent per sq. ft.: $23.67 JACKSONVILLE Retailers, stick some tacks in Jax on your expansion maps. Space is plentiful as the vacancy rate there rose to 6.4%, 200 basis points above 2019’s record low. What also rose higher in Jacksonville than in other Florida vacation spots in early 2021 was tourism. Northerners flocked to Jacksonville metro beaches where restrictions were eased early and inoculation levels have been high. Though new construction paced downwards, a half million new square feet of retail is expected to be delivered by the end of 2021 Jacksonville’s Q2 2021 Key Numbers Vacancy rate: 6.4% Avg. cap rate: 6.6% Avg. sale price per sq. ft.: $336 Avg. asking rent per sq. ft.: $15.16 35

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REAL ESTATE MIAMI-DADE Miami and Dade County, like Fort Lauderdale, suffered when the pandemic stanched South Florida’s vital flow of tourists, and leasing looks to be slow to recover this year. Marcus & Millichap estimates the retail vacancy rate to be 5.2% at the end of 2021, the highest it’s been since 2010. Meanwhile, expected retail construction of 1.5 million sq. ft. by the end of this will be a million sq. ft. more than was delivered in 2020. Much of that space will be taken up by mixed-use centers, the largest project under construction being Miami Worldcenter, which will add 300,000 sq. ft. of retail along with restaurants and hospitality. A 300,000 sq. ft. expansion of Bal Harbour Shops is underway, and a 215,000-sq.-ft. expansion of Aventura Mall should be complete by year’s end. Miami-Dade’s Q4 2020 Key Numbers Vacancy rate: 4.5% Avg. cap rate: 5.8% Avg. single-tenant price per sq. ft.: $492 Avg. multi-tenant price per sq. ft.: $450 Avg. asking rent per sq. ft.: $33.12 NASHVILLE Nashville was engaged in rapid growth when COVID-19 interrupted it last year. Amazon and Mitsubishi were opening up large operations in the metro along with several other companies seeking lower-cost alternatives to the coastal states they were moored in. Employment in Music City climbed at an annual rate of 3.4% in the five years prior to 2020, more than double the national average.

Asking rents ticked up to $20 in the July to September period last year and have since

Raleigh

risen above $21. As tourism rebuilds this summer and conventioneers return, Nashville is expected to be one of the healthiest survivors of the pandemic.

Nashville’s Q1 2021 Key Numbers Vacancy rate: 4.5% Avg. cap rate: 5.9% Avg. single-tenant price per sq. ft.: $421 Avg. multi-tenant price per sq. ft.: $261 Avg. asking rent per sq. ft.: $21.24

ORLANDO Coronavirus or no, new residents continued to stream into Orlando. More than 36,000 people moved into the metro in 2020 and the forecast is for 40,500 more to arrive in 2021. And where there’s more rooftops, there’s more retail.

Construction activity will be heaviest in the southwest Orlando Tourist Corridor, where

Jacksonville

O-Town West is under development. About 125,000 sq. ft of retail is expected to go up in The Village and The Crossings sections off Interstate 4 as part of a master-planned community that will also include multifamily housing, office space, and a hotel.

Orlando’s Q2 2021 Key Numbers Vacancy rate: 5.2% Avg. cap rate: 5.5% Avg. single-tenant price per sq. ft.: $429 Avg. multi-tenant price per sq. ft.: $279 Avg. asking rent per sq. ft.: $19.49

RALEIGH At the conclusion of 2020, Raleigh’s retail vacancy rate was just 3.4%, the second lowest among major U.S. metros. With 515,000 sq. ft. of retail space delivered last year and another million currently under construction, the rate ticked up to just over 4%. But that’s liable to settle down some as employment continues to rise at a 4% clip after dipping by7% last year.

Retail real estate investment has remained bullish in suburbs surrounding Raleigh and Durham, with single-tenant asset deals closing in the $1 million to $5 million range. In April of 2022, Hines plans to open its 92-acre Fenton mixed-use project in the Research Triangle that will include 348,000 sq. ft. of specialty and experiential retail.

Raleigh’s Q2 2021 Key Numbers Vacancy rate: 4.1% Avg. cap rate: 6.8% Avg. single-tenant price per sq. ft.: $320 Avg. multi-tenant price per sq. ft.: $230 Avg. asking rent per sq. ft.: $19.48

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REAL ESTATE

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TAMPA-ST. PETERSBURG A rash of store closures caused net absorption to fall slightly below deliveries of 1 million sq. ft., which expanded inventory in this sprawling market by less than 1%. Construction will remain at about the same level in 2021, most of it concentrated in submarkets. That pushed the vacancy rate up to 5% at the end of 2020—still just 70 basis points above the 15-year low.

Pasco County has received more inventory over the past five years than any other submarket with the addition of roughly 1.5 million sq. ft. and now posts the metro’s highest vacancy rate of around 7.5%. Central Tampa, meanwhile, maintained the metro’s tightest vacancy rate of 2.9% at year end. Availability in that submarket has been below 3% since 2016.

Tampa-St. Petersburg’s Q2 2021 Key Numbers Vacancy rate: 4.9% Avg. cap rate: 6.2% Avg. single-tenant price per sq. ft.: $320 Avg. multi-tenant price per sq. ft.: $247 Avg. asking rent per sq. ft.: $17.05

WEST PALM BEACH Retail center construction hit the brakes in the second and third quarters of 2020. Less than 150,000 sq. ft. was finished from January to September, a significant drop from the half million square feet delivered during the same period the year before. Net absorption of negative 262,000 sq. ft. lifted the vacancy rate 40 basis points to 5.5%, and the multi-tenant rate shot up 70 basis points to 5%.

Neighborhood and outdoor centers in suburban sectors of West and North Palm Beach, plus Royal Palm Beach/Wellington continued to merit attention from investors during the downturn. A strong consumer base in these neighborhoods kept the fires of essential retailers stoked during the pandemic.

West Palm Beach’s Q2 2021 Key Numbers Vacancy rate: 5.6% Avg. cap rate: 6.2% Avg. sale price per sq. ft.: $374 Avg. asking rent per sq. ft.: $24.51

MAY/JUNE 2021 CHAINSTOREAGE.COM

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TECH VIEWPOINT

Visit the ‘Store of the Future’ Today The technology-enabled “store of the future” is happening now — and it’s developing in several different directions. The rapid shift to digital commerce caused by COVID-19 during the past year-plus is only accelerating the transformation of the traditional physical retail format into a digitally connected “store of the future.” Here are four examples of store of the future concepts customers can shop today. 21st Century vending machine The last few years have seen the development of omnichannel vending machines that function as automated mini-stores. Hurried airport travelers are a natural target customer for this store model. Travel retailer Hudson is rolling out an automated airport store concept it envisions as a miniature shopping mall. Interactive touchscreens showcase merchandise images and provide product information, while personalized augmented reality (AR) technology provides eyewear customers with a fully immersive, virtual try-on experience. In addition, several airports let customers stand in front of robotic stores equipped with Swyft technology and use their mobile phone to complete their purchase. It is also worth mentioning the eight-story automated “car vending machines” offered in at least 30 locations across the U.S. by fast-growing online used auto retailer Carvana. The colorful, glowing glass structures stand between eight and 11 stories high and hold 27-29 cars. Customers receive a commemorative, oversized Carvana coin to insert into the machine, activating the automated vending process, and then watch their vehicle descend. Digital-only stores Several quick-service food retailers have been experimenting with digital-only stores geared toward online and mobile orders. Taco Bell recently opened its first digital-only U.S. location in Times Square, where customers can use one of 10 selfservice digital menu kiosks or order ahead digitally.

A separate entrance allows order-ahead customers to head directly to the pick-up area, where they can enter their order number on a touchscreen and grab their meal from a designated cubby. Meanwhile, Chipotle is piloting a store concept called “Chipotle Digital Kitchen,” which does not include a dining room or front service line. Instead, customers must order in advance via the Chipotle website, app, or third-party delivery partners, and pick up their food from a lobby. Starbucks was a pioneer in digital-only stores, opening its first-ever Starbucks Pickup store in New York City’s Penn Plaza in late 2019. This location uses the mobile order & pay feature of the Starbucks app as the primary ordering and payment method for customers, and features a digital status board that tracks the progress of customer orders. The store comes to you Another interesting future store concept comes from Northeast grocer Stop & Shop (an Ahold Delhaize USA banner), which has piloted driverless vehicles from Robomart that act as stores on wheels. Shoppers summon the Robomart vehicles with a smartphone app, head outside, unlock its doors and then personally select the grocery products they would like to purchase. The vehicles’ RFID and computer vision technology automatically records what customers select to provide a checkout-free experience. Receipts are e-mailed within seconds. Only the hairdresser (and smartphone) knows for sure Hair care company Madison Reed is testing an interactive digital swatch panel to boost in-store sales of its signature hair color product. Founded online in 2014 as a direct-to-consumer business, the company has expanded with salon locations nationwide. It is deploying the OnQ Converge digital engagement platform, integrated with 46-inch Elo touchscreens, at several test stores. By tapping through a series of questions, customers arrive at an optimized color. They can have full details about their chosen shades sent to their phone so they can take the digital sample home, review and complete their purchase. Madison Reed’s digital swatch panel experience also includes a library of informative videos that can either be viewed on the display or sent directly to the customer’s phone for later viewing.

Dan Berthiaume dberthiaume@chainstoreage.com

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TECH Q & A

Meeting the Challenge of e-Commerce Returns

There are plenty of customers for returned e-commerce purchases — if retailers can find a way to connect with them. Chain Store Age recently interviewed Marcus Shen, COO of B-Stock, a platform that assists e-commerce retailers by directly connecting them to online auctions for liquidations, returns, and overstock. The company’s network includes dozens of online liquidation marketplaces with thousands of listings open for bidding across all product categories. Shen described how B-Stock’s “recommerce” marketplace model enables both buyers and sellers of returned e-commerce merchandise to effectively and sustainably redistribute it. By Dan Berthiaume

In a post-pandemic landscape, what are the potential negative effects of the e-commerce boom? Returned merchandise. It’s sometimes easy to forget that for consumers, buying something sight unseen is a big ask. And a big part of the growth in ecommerce has been thanks to the flexible return policies that give consumers the confidence to try and buy online. However, those policies do require companies to effectively manage and optimize the huge influx and complexities of returned merchandise. How can returns be handled to minimize environmental impact? Given the unprecedented rate of returns, companies must have an intelligent and sustainable solution in place to handle this rapidly growing facet of their business. Best-in-class businesses have adopted new technologies and services in their operations to ensure that most, if not all, of their returns get resold or reused as opposed to ending up in landfills. How does ‘recommerce’ play a part in sustainability? If you consider the circular economy model as opposed to the traditional take-make-waste linear model, keeping products in use and out of landfills is one of the major tenets. Recommerce [aka resale] does just that. Consumers today, especially the younger set, are having a big influence

on the retail industry. Not only are they very comfortable buying recommerce goods, but they also tend to be more loyal to brands that publicly embrace sustainability as well as “walk the talk.” What is ‘Uberization,’ and what benefits can it offer retailers? Uberization is the application of technology to enable valuable services to customers while creating flexible economic opportunities for individuals. It obviously refers to Uber, the company that applied marketplace technologies to transportation, matching drivers looking to make some extra money with riders open to an alternative to traditional transportation. Brands and manufacturers know that there is an enormous army of retail entrepreneurs who would love to have their own store to market and distribute merchandise. The brands get more distribution, while the entrepreneurs get the opportunity to create small businesses via unprecedented access to valuable products. B-Stock applies marketplace technologies to excess merchandise, matching sellers and buyers of returned and overstock inventory, which is then sold to end consumers who are increasingly open to an alternative to traditional retail. As with Uber, B-Stock has two sets of customers: sellers and buyers of merchandise. Sellers who partner with B-Stock, effectively hand off the management of these transactions to our technology and veteran teams. For our buyers, we provide access to quality inventory directly from

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reputable brands and retailers to help power their resale businesses. There are other auction sites and liquidation marketplaces; what differentiates B-Stock? Scale matters in this industry. Ultimately, sellers want to improve cash flow, and buyers want a one-stop-shop to help power their entire resale operations. Satisfying the needs of the rapidly growing recommerce market requires considerable investment in technology, data, and market expertise, which we believe you can only find at B-Stock. B-Stock’s recommerce platform provides retailers and manufacturers with the technology and service to distribute their returned inventory to a vast network of entrepreneurial buyers, who resell the merchandise to end consumers — keeping this merchandise in use and out of the landfill. For sellers, our data provides transparency to how their inventory is performing in the secondary market. Through our online auction dynamic there is increased competition driving higher pricing and velocity. With an expansive network of buyers, you can move inventory as needed — regardless of volume, time of year, or product category. For buyers, we are continually leveraging data to improve our efforts in personalization and fulfillment, so that we are matching buyers with the right merchandise for their business needs. MAY/JUNE 2021 CHAINSTOREAGE.COM

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TECH

Last Mile Delivery By Dan Berthiaume Retailers are increasing their investment many forms. CVS Health is just one retailer Loblaw, H-E-B, FreshDirect and goPuff are in technologies that support “last mile” that has piloted robotic cars from Nuro. The all utilizing micro-fulfillment technology. In delivery. drugstore giant tested the self-driving autos addition, the “customer fulfillment cenThe last mile refers to the stage of delivfor home shipment of prescription items, ter” (CFC) automated warehouse concept ery where a product is shipped to its final with customers needing to confirm their Kroger is developing in partnership with destination. Frequently, retailers will route identification to unlock their delivery. U.K. online grocer Ocado essentially takes items from multiple “middle mile” delivery The Nuro cars must navigate street traffic. the micro-fulfillment model and applies it at locations within their own supply chains to a a macro scale. Some autonomous delivery vehicles avoid dedicated sortation center, where orders are roadways altogether. Amazon, FedEx, and The CFC model leverages artificial intelbatched and loaded into vehicles for last mile ligence and advanced robotics and automaPostmates have all piloted smaller robots fulfillment. which traverse sidewalks, rather than streets, tion to create more seamless and efficient According to data from Capgemini for short-range deliveries. fulfillment, picking and delivery capabilities Research Institute, last mile delivery acIn addition, aerial delivery drones have for enhanced digital commerce capabilicounts for 53% of total shipping received quite a bit of attention, costs. The last mile is a highly comeven if they are not yet in wideplex process involving the precise spread use. Retailers ranging in coordination and integration of size from Amazon, Walmart and numerous workflows. The rapid Walgreens, to regional grocer growth in popularity of omnichanRouses Markets, have all tested or nel features such as on-demand deare testing drone-based deliveries. livery and ship-from-store has only increased the challenges associated Dark Stores with effective last mile execution. The “dark store” model uses a Here are three technology-endedicated brick-and-mortar store abled strategies retailers are using to fulfill the last mile of online to ensure all of their efforts in movorders for local deliveries. No ing products through their supply customers are allowed to shop the Kroger’s new “customer fulfillment center” automated warehouse chains don’t falter in the last step. store; instead, pickers (who may concept essentially takes the micro-fulfillment model and applies it at a macro scale. be employees of the retailer or of a Micro-fulfillment third-party delivery service) rapidly One of the hottest current trends in autofill online orders from the shelves for sorting ties. Kroger recently opened its first CFC, mated distribution technology is microand placement into delivery vehicles. a 375,00-sq.-ft. facility in Monroe, Ohio. fulfillment. Primarily found in the grocery Dark stores provide the convenience and It fulfills thousands of orders per day and and CPG verticals, micro-fulfillment uses immediacy of ship-from-store without has the capability to support fulfillment of small-scale warehouse facilities located in negatively impacting the brick-and-mortar pickup orders. urban areas to operate same- or next-day customer experience by creating extra store The supermarket giant plans to open as delivery order fulfilment. traffic or affecting shelf availability and many as 20 across the U.S. in the next few “Micro-fulfillment centers allow for highstock levels. years. density product storage and use shuttle sysMany retailers responded to pandemictems or other forms of material handling au- Autonomous delivery related store closures and surging home tomation to put away and retrieve products delivery orders in spring 2020 by converting While self-driving delivery vehicles are still for consumer orders at high speed,” Tom temporarily shuttered or underperforming in early pilot stage, more retailers are starting Enright, VP and analyst with Gartner, told brick-and-mortar locations to a dark store to test them out. Autonomous delivery by Chain Store Age in a recent interview. “The model for a few months. But some retailers nature is quick and contactless, two features model is a goods-to-person style of automaare using dark stores as a standard element of which have become even more prized in the tion and robotics, where the human stays in their last mile strategy. For example, Whole COVID-19 era, and will likely continue to one place and automation delivers the goods grow in popularity among consumers even as Foods Market opened a permanent dark to be picked to them.” store dedicated to fulfilling online orders in they emerge from the worst of the pandemic. Retailers including Walmart, Albertsons, Brooklyn, N.Y., in September 2020. Autonomous delivery “vehicles” come in CHAINSTOREAGE.COM MAY/JUNE 2021

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TECH

Combatting Online Ad Fraud DXL uses machine learning tech to ID unauthorized ads By Dan Berthiaume Destination XL Group, the nation’s largest retailer of big and tall clothing for men, has applied machine learning technology to solve what had been a big challenge: the “hijacking” of shoppers online journeys. Ujjwal Dhoot, chief marketing officer at DXL, which operates stores under the DXL and Casual Male banners and a website, spoke with Chain Store Age about how the company is using MLbased technology from Namogoo to identify unauthorized online advertisements (often from affiliate networks) and prevent the ads from appearing in customer web sessions. What types of issues was DXL having with unauthorized ads? Our customer engagement center was asked several times by customers about why there were ads for other brands on our site. While we were aware of customer journey hijacking, we had no way of knowing exactly how many customers were affected by the issue. As a result, we could not fully appreciate the impact it was having on our bottom line. When we saw the variety of ads injected onto our site, we were stunned by how relevant they were to what each affected customer was searching for. Not only did the ads negatively affect the aesthetic of our site, but it was very obvious how easily these ads could direct our customers elsewhere. While our user experience team diligently works to provide the very best customer

The consistent results delivered by this technology have made Namogoo a reliable, top rung partner of DXL.

journey, many of our customers did not get to experience the customer journey that our team so diligently created. Consequently, our A/B testing results were skewed as well. What made DXL select Namogoo? After exploring possible solutions, we tested Namogoo’s Customer Journey Hijacking Prevention solution to not only quantify the issue, but to see the injected ads for ourselves. We were expecting the impact to be measured in the single digits. But we were shocked to find out that 21.22% of all visitors to DXL.com were being shown unauthorized ads. How did DXL implement the solution? Namogoo doesn’t require a lot of our time or effort, as its software is completely autonomous. It’s a relatively quick integration and there is minimal ongoing maintenance.

Not only did the ads negatively affect the aesthetic of our site, but it was very obvious how easily these ads could direct our customers elsewhere. 42

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What benefits have you received? Once we implemented Namogoo’s software to remove ad injections, our overall site conversion rate rose by 8.91%, and our RPV has improved by 9.97%. We learned that the customers targeted most by the unauthorized ads were the more engaged site visitors, meaning they had a higher propensity to make a purchase, not just to browse. It became even clearer that these ads were impacting not only our conversion rate but also lifetime customer value in a significant way. The solution has been a game-changer while facing all of the challenges brought forth by COVID-19, when more than 300 of our stores were closed throughout the country, and the digital team was driving most of the business impact. Going forward, we expect the considerable inflection in the digital business to continue along with our partnership with Namogoo. Are there any future plans with online ad security? I don’t believe the problem of ad fraud is going to slow down, and it might only accelerate with consumers spending more time digitally post-pandemic. Along with our partnership with Namogoo, we continue to plan to understand and devise our media strategy around preventing ad fraud and truly know the impact of bots on all our marketing efforts, not just on our site, but across all digital mechanisms we leverage across the internet. MAY/JUNE 2021 CHAINSTOREAGE.COM

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