IRVINE, CA—Both retailers and developers are stretching their wings as the sector continues to evolve post-recession and in the advent of e-commerce, Passco Cos.‘ VP Alan Clifton tells GlobeSt.com. As we reported earlier this month, Clifton has been appointed Western divisional operations chair for ICSC. GlobeSt.com spoke with Clifton about his new role and trends he sees in the Western retail market.
GlobeSt.com: What will your main goals be in your new appointment with ICSC?
Clifton: My role will be two-tiered: to be a resource and to serve as a mentor to the members in the Western states. I’m trying to make sure that what they’re trying to do on an international level gets down to the state and local level. This industry is so diverse. A program that may benefit San Diego may not benefit Seattle or San Francisco or Portland. So my job is to be a resource, to communicate with the state operations chairs and help them put together programs that the membership feels are beneficial.
Going to ICSC events costs money. People have to make a decision as to whether the program provided is worth the money, so we need to put together programs they want to see so they can determine that attending is worth the money. Also, while ICSC is great for professional designations and education on the state and federal level, it’s also a great networking and relationship-building vehicle, and relationships are an important part of our business.
GlobeSt.com: How will your position at Passco help you to achieve these goals?
Clifton: The nice thing is I’ve been at Passco since day 30; I’m one of the longest employees here. During that time, I was VP of leasing and in charge of property management and asset management for the company for a while. So, I’m able to take what I’ve learned and use that to talk to other people and give them ideas based on my mistakes and successes.
On the other side, my position with ICSC will allow me to travel in the Western US where Passco has a presence in retail and multifamily. I’ll meet new people, get new ideas and bring them back to share what I’ve heard with the people here. So I’m not only serving as a conduit between the international membership and the states and local regions, but I’m also an information conduit between the people I meet and Passco, which can be enhanced by what I’ll learn. If you can ever go and do business and have it mutually beneficial to everybody, it’s a good thing. If you can go in and trade ideas and everybody wins, you can’t go wrong with that. ICSC has done a good job with that, and it’s going to continue to prove true.
GlobeSt.com: What do you see as the major trends in the Western retail market?
Clifton: You have retailers moving into areas that they may not have moved into two, three, four, even seven or eight years ago. I’ve talked to a couple of development friends of mine who are building a strip center in a small town, and they have Chipotle and Five Guys that want to lease there. It’s encouraging. Everybody wants to be in Irvine or Santa Monica, but they’re also discovering the secondary cities on the West Coast and think it’s worthwhile to be there. This bodes well for those towns, but it also creates jobs, and so there again is a mutually beneficial situation. Also, level B+ tenants are moving into cities that weren’t on their radar five to seven years ago—not overall, but in spots here and there. More retailers are taking the opportunity be in different markets.
Developers are also starting to do different things. In Vegas, there has been a lot of retail shopping-center turnover, and as a result there’s a new ownership with fresh ideas. Phoenix projects that were on the shelf are coming back to life. Developers have to be cognizant of not being cookie-cutter.
You also have to know your market and listen. When I was operations chair in Southern California, I found that what works in Southern California doesn’t necessarily work in the Bay area. You need to l listen to these people and bridge the gap. You need to see what’s going to work best for that membership group.
GlobeSt.com: What are some new ways that brick-and-mortar shops are reacting to e-commerce’s impact on the retail sector?
Clifton: Everybody in retail talks about the experience. I’m pretty tech savvy and my friends, too, but if you were to ask them if they’d wait a day to get something 5% cheaper, they’d say no. If they can get it right now, why not? I’m not going to go buy a suit online and hope it fits right and is tailored properly.
Nordstrom is a perfect example. They’re priced higher for the same item than other outlets, but their demographic pays because the stress level of shopping there is lower. This is even true in the Apple stores: kids are tech savvy, but the Apple store is always packed with younger and older people. Why? They want to touch, feel and have the experience.
As more people become tech savvy, there will be more online sales, and the brick-and-mortars are cutting down on their footprint. But do I need to choose between 18 different types of laundry detergent? Trader Joe’s looks at their bottom 20% SKUs and asks what brings in revenues. If a SKU brings in between 1% and 3% of their revenues, they get rid of it. They say, ‘This is what sells, so this is what I put on the shelf.’ It’s a way to get the footprint down because they don’t have to carry as much inventory. Also, if retailers drop 50% of their square footage, they also drop 50% of their rent and electric bill, which allows that retailer to be more competitive. I’m a proponent of the theory that once everybody figures out what their maximum profitability footprint is, it will make them more competitive price-wise, which will stem some of the tide from online sales.
Also, you can’t shop for big-ticket items like a house or car completely online. Would you buy a car without driving it or bid on a house without walking through it first?
The big-box people, when the lease comes up, will find themselves needing less space, but owners are finding creative uses for that excess space, like for sports teams or a civic eating area. People are getting creative, but there’s a finite amount of that stuff available, so it’s a challenge.
GlobeSt.com: What else can you tell us about ICSC?
Clifton: One of my goals in working with Mark Schurgin and other people at my level at ICSC is trying to get a good understanding of what the membership needs so we can go out there and help. We’ve been entrusted by those members in the Western regions, so we don’t just volunteer. There’s an approval process and nominations, so we have a sense of duty. For a lot of people in retail, it’s about family—it’s a matter of will they be able to afford to put their kids on the dance team or send them to college. It’s a win/win for everybody when we do it right, but we really want to make it worth the money for membership. We want to help them make that money back and then some.