14.2 Billion Square Feet
Was doing the Google-dive a few days ago in preparation for a customer presentation.
Two numbers popped out. Amazon sales were up 40% in 210, to $34 billion. And the current vacancy rate in US shopping centers is at 10.9%.
At first glance, it’s easy to see that online sales are eating into store-based sales. Morgan Stanley reports that online is now more than 10% of all revenues in a number of product categories, from consumer electronics to jewelry.
It’s also painfully obvious that the greatest creators of new retail real estate vacancies in North America (Borders, Hollywood Video, and Blockbuster) have digital tire tracks on their chests.
Hmmm . . .
But let’s take a moment, and look beyond the obvious. And specifically at the future of the 1.22 million stores in the USA that occupy 14.2 billion square feet of gross leasable area. Which calculates out at 46.6 square feet of total retail space for every man, woman, and child in the country.
What retailers are learning – all too slowly, in many cases – is that the opening of more stores is not the end-all, be-all path to revenue growth. In certain categories, comp-store revenues in status quo stores will decline faster than good stores can be opened. Revenue is now a question of channel optimization. Store operation is more a question of net margin.
Second, the store’s not dead. But the store must evolve rapidly – probably into smaller footprints, with virtual selections and services. Probably into living-breathing web sites, where net-based experiences offer the transparency, speed, abundance, and expertise that shoppers find on the web. Probably into interactive, educational, experiential zones, where shoppers learn and play. Probably into a tri-furcated structure of large, full services-experience stores, small footprint urban-and-fast stores, and down-sized low-cost stores.
Status quo just won’t work. Big changes ahead