Northeast Real Estate Business

MAY 2018

Northeast Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Northeast United States.

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36 • May 2018 • Northeast Real Estate Business www.REBusinessOnline.com rience-based concepts such as in-store cooking schools and bars to keep cus- tomers engaged. One other effect of Amazon's Whole Foods move could be its impact on commercial real es- tate. If shoppers begin ordering gro- ceries online the way they have done with other retail categories, what are the implications for the strength of grocery-anchored centers? Separately, Amazon could impact commercial real estate simply by in- creasing the number of Whole Foods stores. The grocery chain utilizes a relatively small footprint of roughly 460 locations, while Kroger operates nearly 3,000, Albertsons/Safeway has about 2,300 and Ahold Delhaize has about 2,000 in the U.S. The large gap between the size of Whole Foods and its competitors may shrink over time. "Amazon has been clear that they want to compete against the biggest grocers," Brown says. "To go head to head with players like Kroger, Walmart and Albertsons, they'd need to add at least 500 new stores, and I think there's plenty of room for the company to achieve that 1,000-unit mark within Whole Foods' traditional urban and dense suburban markets. I wouldn't be sur- prised to see 500 new Whole Foods stores within the next five years." Brown and oth- ers have speculat- ed that some new Whole Foods loca- tions could backfill former Toys "R" Us stores. The toy and gaming chain is one of several high-profile retail brands to file bank- ruptcy in recent years as e-commerce becomes more popular. The Amazon Effect Perhaps the most talked-about as- pect of Amazon's effect on the grocery sector is the technology angle. Ama- zon is widely respected — even feared — for its role in disrupting retail and contributing to the demise of previ- ously prosperous retail brands. But whether or not Amazon or any other grocer proves disruptive with respect to online grocery technology remains to be seen. Attempts at e-grocery de- livery date back to the days when Amazon itself was brand new. Web- van, for example, was an early online grocery business founded in 1996 that filed bankruptcy in 2001. As recently as 2017, a Nielsen sur- vey found that just 9 percent of North American respondents said they had purchased fresh groceries online. Still, grocers have been more aggressive in promoting online ordering and de- livery in recent months in anticipa- tion of growth. Kroger, for example, is rapidly expanding its ClickList or- dering service to new markets. For a fee, the service allows customers to reserve a pickup time up to three days in advance and have associates load groceries into their cars in the store's parking lot. Brown points out that several think tanks have forecast 10 percent annual growth for e-groceries in the foreseeable future. He says the number could be even higher, reach- ing 15 percent year-over-year growth. "If you are a grocer, this should keep you up at night," he says. Amazon itself is investing in several grocery technology concepts. One of those is AmazonFresh, a grocery de- livery service available in parts of the U.S. and in Europe. The service was rolled out prior to the Whole Foods deal and could get a big boost from the added infrastructure. Another in- novation is that Amazon has begun allowing customers to pick up small online orders using in-store lockers. Once an order is placed, customers re- ceive a special code to open the locker and retrieve their items. According to a report from digital marketing firm inMarket, short "mi- cro visits" of three to five minutes at Whole Foods stores with the lockers are up 11 percent since last August, compared to about 7 percent for stores without lockers. The hope is that shop- pers will make additional impulse purchases during their short stop inside the retail location. One clear advantage Amazon gained through Whole Foods is a tremendous amount of local infrastructure in acquiring a grocery chain. "What Amazon has essentially done in the Whole Foods deal is purchased roughly 460 distribution centers," says Brown. The big question is whether those "distribution cen- ters" continue to serve mainly in- store customers or shift toward e-gro- ceries. Cushman & Wakefield senior managing director Ben Conwell has called effective de- livery of groceries, particularly deli- cate items like fruits and vegetables, the "holy grail" of online delivery. Fresh Competition There's a good reason that so many companies are looking to boost their e-grocery offerings. A joint study from the Food Marketing Institute and Nielsen found that 20 percent of all grocery sales will take place online by 2025. By that same year, roughly three- fourths of all shoppers will get at least 25 percent of their groceries online, according to the study. However, e- grocery delivery is like to play out much differently in urban and dense suburban markets versus exurbs and rural areas, with online purchases ex- pected to catch on much faster in more populated, dense markets. According to Cushman & Wake- field, none of Whole Foods' current locations are in areas where there are less than 200,000 residents within a 10-mile radius, and there isn't an ex- pectation for that strategy to change under Amazon. Thus, there is consid- erable overlap between the location of a typical Whole Foods customer and a typical online grocery customer. In 2017, more than 52 percent of all on- line grocery sales in the U.S. came GROCERY CHAINS EMBRACE TECHNOLOGY GROCERY from page 1 "Petersen is a manufacturer we usually specify. The Snap-Clad roofing panel performance specs met all of our requirements for wind uplift, UV protection, ease of application and warranty." -Joe Dougherty, Principal, Dougherty Architecture + Design Performance Excellence 30Ave Retail Center, Inlet Beach, FL Owner: Corr Group US Architect: Dougherty Architecture + Design Installing contractor: Ameritech Roofing Distributor: Roofer's Mart Profile : Snap-Clad Color: Cityscape PAC-CLAD.COM | INFO�PAC�CLAD.COM Case study at PAC � C L A D.C O M � 3 0 AV E IL: 800 PAC CLAD MD: 800 344 1400 AZ: 833 750 1935 MN: 877 571 2025 GA: 800 272 4482 TX: 800 441 8661 Some Walmart stores are adding drive-through lanes with electronic check-in for customers to pick up groceries that they ordered online. Garrick Brown Cushman & Wakefield Ben Conwell Cushman & Wakefield

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