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VIEWPOINT


wrote: “A revolution is under way in the store-dominated world of retailing. The instigators are non-store retailers who are appearing in new forms, proliferating in numbers and gaining market share from store-based retailers.” As contemporary as that might sound, these authors wrote the statement in a 1980 article.2 The seeds of this rise of the non-store, the authors correctly observed, were due to: (1) Increased emphasis on consumers’ self-identity and need for items more individualized—which was more than most stores can maintain on their shelves; (2) A higher proportion of women entering the workforce and having less time to shop; (3) A desire for more leisure time—which is borne out by the Consumer Expenditure Surveys3 in recent years; (4) Heightened interest in specialty items that may be hard to get in most stores; (5) Increasingly rapid consumer acceptance of technology; and (6) People have become “psychologically prepared for new forms of shopping.” So, what did the authors recommend to retailers to do


strategically? One suggestion they offered has a uniquely modern sound for downtown retail. The non-store, those professors opined, will “force store developers to enhance the attractiveness of urban centers. This can be done by emphasizing a unique shopping experience, more akin to entrainment than shopping.” Although many retail real- estate people seem to think that the omni-channel or multi-channel consumer buying is new and revolutionary, it is not. Retailing—as is true for most industries—always is evolving, retail technology is transforming and societal drivers still are shaping those trends. This retail evolution has changed the competitive


landscape. It should not be feared, but understood.4 Witness the fact that Sears once—not that many years ago—was the nation’s largest retailer, but no more. It is also important to heed the words of Milton Cooper—the founder of Kimco—about the distinction between a retailer and the property they lease. Cooper opined in his letter to shareholders in his 2003 Annual Report that:


Retail is a tough, dicey business! Rather than set forth


all of the reasons why it so risky, I thought I would save some time and space and just show a PARTIAL list of retailers or concepts that have "bit the dust." I emphasize "partial" since I am sure I have omitted many other retail casualties, and I am also sure that the list will grow between the date of this writing and the time of your reading. W. T. Grant, Bradlees, Caldor, Ames, Jamesway, Daylin,


Service Merchandise, Phar-Mor, Hills, Venture Stores, Montgomery Ward, Korvettes, Clover Stores, Zayre, Hechinger, HomeBase, HomePlace, Builders Square, Uptons, Jacobson Stores, Zany Brainy, Kids “R” Us, Big Bear Supermarkets, The Wiz, Drug Emporium, Grand Union, Hit or Miss, Lechters, Just For Feet, One Price Clothing Store and MJ Designs… If a modern Rip Van Winkle were to wake up after a


twenty-year slumber and stroll down Fifth Avenue, he would no longer find W. J. Sloane’s, E. J. Korvette, Arnold Constable, Russek’s, or a number of others. These retailers are gone, but the real estate in which they dwelled is thriving. And there are still many weak retailers occupying strong real estate locations.5


An Old Paradigm Revisited A century ago, Joseph A. Schumpeter—a Harvard


economics professor and once Austria’s Minister of Finance—wrote about this growth process in his Theory of Economic Development.6 Schumpeter constructed his paradigm as an innovation-wave theory. Put simply, Schumpeter argued that economic development is a discontinuous process of change, appearing in clusters of entrepreneurial activity that create changes in the structure of the economy: new production or delivery techniques, new products, new markets, new materials and so forth. The process of that technological change begins slowly


and often is depicted as an “S-curve” as shown in Figure 10-2. The change in that S-curve itself often is depicted as a bell-curve—as shown in Figure 10-3—that shows the stages of diffusion of technology, which begins from the


2 Larry J. Rosenberg and Elizabeth C. Hirschman, “Retailing Without Stores,” Harvard Business Review (Vol. 58, Issue 4), July-August 1980, pp.


103-112. 3 “U.S. Shopping Time Continues to Dwindle,” Retail Real Estate Business Conditions, International Council of Shopping Centers (Vol. 9, No. 14),


June 22, 2012. 4 It is also useful to recognize that “showrooming”—another often “feared” retail development—has been part of the retail industry for a long, long time and will not, in and of itself, eliminate the retail store need. Indeed, in 1971, Service Merchandise’s business model was based on a catalog “showroom” concept with a warehouse connected to the store to fulfill the orders. Consumers responded positively to this showroom concept, but ultimately the catalog showrooms were not adjusting to the market fast enough and declining profitably set in to end the store’s experiment. But Service Merchandise understood the need for a state-of-the-art inventory replenishment system and invested heavily in that technology. Today retailers are responding to that “showrooming” with technology to close the sale on one’s smartphone or in-store kiosks and provide the product to


the consumer in the store or ship to one’s home. 5 Kimco Realty Corporation, 2003 Annual Report, p. 6. 6 Joseph A. Schumpeter, 1912. The Theory of Economic Development. Leipzig: Duncker and Humblot. Translated by Redvers Opie. Cambridge:


Harvard University Press, 1934. Reprint. New York: Oxford University Press, 1961. 49


INTERNATIONAL COUNCIL OF SHOPPING CENTERS 2 RETAIL PROPERTY INSIGHTS VOL. 20, NO. 2, 2013


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