Robert K. Futterman, founder, chairman and chief executive officer of Robert K. Futterman & Associates, and who has more than $10 billion in real estate deals under his belt, said for retailers and shopping malls to survive in the current landscape, deploying a successful digital and brick-and-mortar strategy is essential.
But it’s not going to be easy, Futterman told WWD. Retailers, mall owners and brands need to completely rethink their approaches to doing business. Moreover, Futterman said the transformation of the retail market will offer opportunities for new types of retailers that aren’t seen today.
WWD: Can you briefly offer your perspective on the current state of retail?
Robert K. Futterman: You have to separate the urban streets from the regional malls. They’re two different platforms for retailers to sell products. In the urban markets, brick-and-mortar is vital for any retailer merging a digital platform and a brick-and-mortar platform, and is the only way you’re going to be successful today. Many retailers have to play catch-up and figure it out. In the meantime, when you see all these vacancies, all these closings, you’ll see more entrepreneurial-type tenants.
And you’re going to see a lot of food, wellness, fitness, quick-serve restaurants, organic, juice guys like Joe & the Juice and Juice Press, and coffee guys like Bluestone Lane. This is who’s taking space. Now they’re able in the cities to fill spaces that are vacated that have quite a bit of infrastructure like air-conditioning and bathrooms. So the cost of opening is not as great. It’s an adjustment and correction.
WWD: When you say correction, you mean retailing being overstored?
R.K.F.: When I say correction, I’m talking more about rent correction. In terms of store-sizing for a chain, yes, I believe there needs to be a correction in that, too.
WWD: With experiential retailing such as yoga and fitness, do these types of businesses garner the same square-foot pricing?
R.K.F.: They can afford to pay less. All these workout studios, they can’t pay the same rents as fashion.
WWD: For the consumer, though, it’s what they want. The market is responding to consumer demands, no?
R.K.F.: Look at SoulCycle. The model is to keep the butts on the bikes. That’s the model. How many classes can they squeeze into a day? It’s true. That’s the business model, and it works. And it’s also guys like Sweetgreen, Dig Inn and Chop’t. People want to be eating more healthy food, traceable food, organic, and also know who cooked it. How was the chicken grown on the farm? How were the pigs fed? It’s a key trend. And it’s appealing to consumers that are urban. Where the Internet comes in is more about the suburban housewife with her kids screaming, and thinking that she doesn’t really want to go to Toys ‘R’ Us and put herself through that experience — especially when it’s just as easy for Christmas or Hanukkah to buy the gifts on Amazon.
WWD: What about regional malls?
R.K.F.: I think there has been an overexpansion of regional malls, and there’s been an overexpansion of retail in the United States, without a doubt. If you look at some densely populated cities or suburbs, you could have an H&M and Victoria’s Secret in the mall, and three miles away is another mall that also has them. So where’s the differentiation there, where’s the exclusivity?
I think retailers have to rethink their strategy. And you are going to see many of these “B” and “C” malls go away. They’re going to be reused, repurposed. They’re going to be purchased for a price where they might exist for a certain period of time, but the land is worth more as an alternative use and development.
WWD: If you could gaze into your crystal ball and paint a picture of the U.S. retail market — including regional malls, and “A” and “B” markets as well as urban centers — what is that going to look like in five years?
R.K.F.: In five years, I think you’ll see a lot of absorption of space at lower rents, and landlords contributing greater amounts of money for tenants’ construction of the space. You are going to see retail in five years that doesn’t exist today, that’s how fast I think the pace is going to increase in terms of retail of the future.
I do envision retailers where the whole entire customer experience will be better — a blending of technology and bricks and mortar. The socialization process of people physically going out and eating and shopping, walking the streets, is not going to stop. It’s not going to stop in the mall, either. But [the industry will need to ask]: How much better can everybody make that experience? Streets take on a life of their own.
Still, the regional mall guys have a much bigger issue on their hands, I think.