Role-Shifting and Real Estate
With e-commerce taking a larger chunk of shoppers’ dollars and omni-channel retail quickly becoming the norm, retailers are looking at the most efficient ways to get product into the hands of consumers, including re-evaluating shipping methods and distribution centers.
This is creating new opportunities for companies like The Shopping Center Group, which chairman and co-CEO David Birnbrey describes as the nation’s lone retail-only real estate service provider. The Shopping Center Group represents some 300 national and regional retailers as tenants; it leases about 55 million sq. ft. of retail space and manages another 10 million sq. ft.
About three years ago “we started realizing the degree of the impact e-commerce was having on the bricks-and-mortar side of retail,” Birnbrey says. “We wanted to take advantage of the relationships we’ve built and help retailers with decisions regarding distribution centers and freight fulfillment.”
There was just one problem: They weren’t qualified to do that. The site location analytics for the industrial side of retail — a distribution center or freight fulfillment facility — are dramatically different from those involved in locating a store.
“We’re looking at the customers around the store site to determine what the area is like in terms of sales potential,” Birnbrey says. “They’re looking at the property in terms of location, access to rail and air transport, logistics and employment analytics.”
In August 2013, The Shopping Center Group and industrial real estate firm Binswanger International launched a joint venture, the Retail Logistics Group, under the leadership of Birnbrey and Binswanger president Jeff Binswanger.
A changing world
The mission of the Retail Logistics Group is to offer retailers a similarly integrated approach both to store properties and distribution/fulfillment centers. “We said, ‘Why don’t we come together and really, for the first time, offer a sort of turn-key approach to help retailers be more cost-effective?’” says Binswanger. “We feel that with our combined knowledge, we can help drive efficiencies through the supply chain.”
At the same time, the Retail Logistics Group is working to help its clients align their store and distribution center strategies to the realities of today’s retail marketplace.
“The analytics of store and distribution center location are becoming somewhat more alike,” says Birnbrey. “What’s driving this is the need to provide next-day or in some cases same-day delivery. When you do that, you do care about customer analytics around the distribution center. You want to know what the customer base looks like within a five-hour or 10-hour drive … so you can deliver product the same day or next day.”
All of which seems to point to a new way to look at a retail company’s entire real estate portfolio. “We aren’t the ones who created this new model,” Birnbrey says. “The retailers created it. They are … omni-channeling, which allows them to combine the processes of phones, iPads, PCs and bricks-and-mortar shopping.”
In response, retailers have turned parts of their stores — and in some cases entire stores — into distribution centers. Macy’s, for example, is using stores as fulfillment centers for e-commerce. “You’ve already got inventory in the store, and you can ship it from there and cut out some of the transportation and stocking costs of a normal warehouse,” Birnbrey says