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Retail's great struggle is a team sport, not a deathmatch

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Retail's great struggle is a team sport, not a deathmatch

If retailers and retail landlords are to emerge from the ongoing downsizing and disruption in the sector stronger than they were before online platforms began eating into their business models, they will do so together and in a spirit of cooperation rather than one-upmanship, industry leaders said May 19 at the International Council of Shopping Centers' RECon conference.

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Simon Properties' Las Vegas North Premium Outlets property.
Source: S&P Global Market Intelligence.

There was plenty of enthusiasm on Sunday, the first day of the retail industry's big annual conference in Las Vegas, but a kind of grim determination also seemed to have carried over from the previous year's event. One panel moderator asked the crowd if they thought Sears Holdings Corp., the struggling department store stalwart, would be around in five years, and no one raised his or her hand.

The industry is still redefining itself, and speakers and panelists exhorted the 30,000-plus in attendance to keep pushing beyond well-worn business models and test new ideas around social media strategy and lease-up. "Less traditional. More innovative," read the conference's marketing materials — again this year in a muted black and red instead of the typical carnival-esque range of color.

The day was dominated by a new spirit of cooperation. Rather than game each other at every turn for the best deal — more or less concessions, more or less favorable co-tenancy clauses — retailers and landlords should work together to optimize operations on a property-by-property basis in the nascent omnichannel paradigm, participants said.

Instead of seeking lower rents across its fleet of stores, for example, a struggling retailer should study the productivity of every store, and the dynamics of every market, before defining a path forward for its portfolio or any given storefront. The goal should be long-term health, not temporary relief, industry leaders said. Detailed analysis and transparency will improve relations, and set both retailer and landlord on a course to healthy operations.

"It's got to be a partnership," Chris Weilminster, COO of Urban Edge Properties, said on a panel. "I think retailers have this perception nowadays that, when they do get in trouble, it is the landlord's responsibility to fix it. ... A lot of times you need to look within the four walls of what you're doing as an operating business. The rent is just one small piece of whether that retail will be successful or not."

Weilminster said it is necessary now for every player to understand the inner workings of other players' business in order to fashion proper solutions.

"It's a relationship business," he said.

The day's keynote speaker, Tony Romo, the former Dallas Cowboys quarterback, similarly compared retail to a team sport. One player will not succeed when it seeks to maximize every incremental advantage at the expense of the health of every other player in the market, he said.

"So much of [one's success] is about how you handle people and relationships," Romo said. "Football is the ultimate team sport, and for you guys, it's the same."

On the field, retail real estate investment trusts and other landlords still have work to do on redevelopments and lease-up. In a presentation on "Nine Creative Ways to Lease Your Vacancies Faster," Beth Azor, president of Azor Advisory Services, recommended that landlords, above all, be more proactive. They should be making phone calls and not waiting for prospective tenants to take the initiative, she said.

"If we wait for the phone to ring for those [tenant] prospects, how long would we be waiting for? A long, long time," she said. "Therefore we must go out and be proactive. ... This is a game of offense, except our industry is an industry of defense."