Merry Christmas From the Family

Courtesy of www.stockvault.net

The boxes are back underneath the basement stairway. Decorations tucked away for another year and the credit card bill is due. As I reflect over the years of my youth distant holiday seasons seemed so simple. As family scatters, expands, and unfortunately contracts, it gets a bit more complicated – or so it seems to me.

One thing I notice upon reviewing my credit card bill is that my gift giving is actually a lot simpler. All of our gifts for out of town family, which are numerous, were purchased on the internet – a few from Amazon or direct from companies like Patagonia; even one from as far away as Kenya, that darling (as his Nana would say) giraffe sweater for grandson Miles.

All the gifts delivered for free of course and direct to the recipients. And the bill comes due in mid-January. At least that part of Christmas is a bit easier. Bill paying not so!

But, what does my shopping pattern mean to brick and mortar retailers, their employees, and most significantly to those of us in commercial real estate, retail landlords? One interesting phenomenon is the “retail clerk as logistics worker” as noted in WSJ’s “Retail Store Clerks Become Web Shippers”.

This past holiday season Sears’s website would send a message via iPhone to a clerk at a store in Atlanta to fill a chain saw order for a customer in Alabama. The order having been received, it is loaded on a pallet with a variety of other type goods headed west to be picked up by UPS at 5 PM that day.

According to WSJ reporter Laura Stevens, “Retailers ranging from Macy’s to Wal-Mart stores to Office Depot have all embraced shipping to compete against Amazon. They are shuttling merchandise on demand from store to store, warehouse to store, store to customer – often both quickly and free.”

With the Amazon logistics building currently under construction just east of us, it is interesting to note how major retailers are handling the competition.

According to Jeff Starecheski, vice president of logistics services with Sears Holding Corp.  “If you want to go head-to-head with Amazon, you go out and build a bunch of distribution centers.” But Sears and its sister retail chain Kmart blanket the country with about 2,000 stores. “We’re already close to the customers,” he says. They just needed a delivery strategy. The chain saw is in Atlanta and the customer picks it up at the store in Alabama, thus no need for another mega distribution center.

So, if you are a landlord to Sears, Best Buy, or other large box retailers to mid and small shops as well, perhaps the increase in online sales is not all doom and gloom for brick and mortar. The risk, I suspect, is that the big box becomes a showroom/distribution shipping point. What that will mean for square footage leased and price per square foot? Time will tell as it is clear that package delivery is becoming a competitive weapon in the holiday retail season.

NOTE:   My column was written before the surprise announcement by J. C. Penney that it would be closing its Janesville store. Also of interest, Sam’s Club is laying off employees nationwide. Could be the handwriting on the wall?