As the operator of North America's largest portfolio of neighborhood shopping centers, Kimco Realty president Conor Flynn knows a thing or two about the direction of retail. Here are the five top trends he predicts will mark the industry in 2016.
1. Deals, deals, deals! (And keep 'em coming back.)
Conor says American shoppers love brands, but care even more about good deals—which is good for two retail strategies. The first is stores like T.J. Maxx that use the “treasure hunt” method: sprinkle high-end merchandise among rapidly changing inventory, keeping consumers coming back.
The second strategy is department stores adapting to consumer habits by opening discount variants of their flagship stores, like Nordstrom Rack and Macy’s Backstage.
2. A premium on wellness
It's going beyond New Year's resolutions; people want to stay fit. Athletic retailers, like Nike and Under Armour, are "just doing it," and doing really well—along with gyms, health stores and beauty shops, like GNC and Sephora.
Despite some troubles, specialty grocers like Whole Foods and Trader Joe's are going strong—showing consumers are getting their health on.
3. Stickiness effect of the primary market
Conor isn’t worried about the rate hike or cap rates, saying the high demand from REITs and institutions for "high-quality real estate in the primary markets" means they'll "keep [their] valuation premium" and cap rates will stay steady.
He also says once real estate becoming a separate GICS sector next year investors trying to diversify will throw more cash into real estate.
4. Mom-and pop recovery will continue
With the consumer confidence index up, Conor says folks will be willing to open more mom-and-pop shops, expanding the service sector in 2016. Wage growth will also mean more consumer cash in retail generally.
That cash will be going to unique stores—like those family-owned ones—as people want what Conor calls "the farmers market experience," having "a cheese specialist and a local honey vendor" to chat with and create a one-of-a-kind, full-service shopping spree.
5. Property revival with redevelopment
Shopping centers can boost traffic without new development by chucking their old looks and putting some of these trends to work—which is exactly how Conor plans to revive Kimco's assets, creating a mix of tenants that will attract consumers throughout the entire day. [KR]