The Urgent Need for a New Strategic Playbook in Retail and Real Estate

In recent years, the retail landscape has undergone tumultuous changes, leading to a series of chainwide liquidations among once-thriving brands. Doug Greenspan, a seasoned strategy consultant from AG Real Estate Partners, emphasizes that landlords and tenants must abandon the outdated strategies of the past and adopt a more proactive approach to navigate this increasingly challenging environment. In an advisory column for Shopping Center Business, he outlines the pressing need for a new playbook that will empower both retailers and landlords to thrive together amid adversity.

Over the last year, we’ve witnessed the closure of notable retailers such as Conn's, Joann Fabrics, Forever 21, Big Lots, Rue 21, Bargain Hunt, Party City, and Rite Aid. Many of these brands faced lengthy struggles, including previous bankruptcies and attempts to reorganize, only to succumb to the pressures of a rapidly evolving market. The implications of these failures are significant; they underscore the urgent need for change, especially as Greenspan notes, "the old playbook of waiting to address leases in bankruptcy is over."

The Shift in Strategies

Greenspan asserts that landlords must take an active role in engaging with their tenants, better understand their financial situations, and be prepared to adapt lease terms accordingly. This proactive engagement can be crucial in helping struggling retailers avoid the pitfalls of bankruptcy. He advocates for earlier interventions that allow retailers to make strategic adjustments while remaining out of court, which can ultimately enable them to retain essential capital and goodwill amongst their stakeholders.

"Mere cost-cutting is not enough," Greenspan points out. He argues for a comprehensive reevaluation of various elements including a retailer's brand perception, promotions, back-of-house operations, customer experience, inventory management, and both store and non-store real estate. Notably, he cites examples of companies such as Dick's Sporting Goods, Chili's, and Barnes & Noble, illustrating how smart strategic moves can lead to vibrant business successes even in tumultuous times.

The Balancing Act

Yet, this environment demands that operators across sectors maintain a careful balance. Greenspan elaborates that as consumer spending tightens, the criteria for dining out or shopping will evolve. When individuals can only afford to eat out sparingly, they will naturally gravitate toward establishments that are trendy and provide value, coupled with a pleasant experience. Furthermore, when it comes to retail, consumers are becoming more selective, preferring stores where they know they can find clothing that not only fits well but also lasts. This consumer shift leads to a pronounced disconnect between companies that thrive and those that struggle, creating a pronounced 'strategy and execution gap'.

Collaboration for a Sustainable Future

As the retail landscape continues to shift, both challenged and healthy operators can benefit significantly from collaboration with a multidisciplinary team of real estate advisors focused on sustainable strategies. Greenspan aptly summarizes, "Weak operators and dark spaces benefit no one." This emphasis on strategic collaboration should guide tenants in exploring refinancing options, sourcing additional capital, and reevaluating whether their real estate holdings align with both the company’s strategies and financial realities.

In particular, he highlights that calculations related to occupancy costs must include all types of locations, such as offices, showrooms, and distribution centers—not just traditional retail spaces.

In closing, Greenspan reveals that adopting the right strategies will provide valued tenants with the runway necessary to regain their competitive edge, boost customer traffic, enhance sales, and ultimately retain their ability to pay rent and renew leases in the long term. This call for action underscores the need for a fresh, strategic playbook in the retail sector, one that embraces cooperation and foresight to weather the storms of change.

To read more from Doug Greenspan, check out his article in the October issue of Shopping Center Business at Shopping Center Business.