2PM - No. 383: Mall's Pain / Amazon's Gain

Malls dragged into bankruptcy by carnage among retail tenants

A. Core Study / Bloomberg: This rundown summarizes the eCommerce industry's relationship with the commercial real estate (CRE) market. As middle-class retailers continues to struggle, we're seeing the first signs that B and C class malls will struggle sooner than later. The bankruptcies of Pennsylvania REIT and CBL are foreboding for the rest of the mall ownership REITs that do not over-index in Class A malls. 

Speaking of B and C. In "B", we are seeing technology companies (Amazon, especially) are the darlings of CRE today. And in "C", you will better understand how debt crippled many of the specialty retailers that mall owners count on for revenue. The second of three sections is devoted to eCommerce and its role in the shift to digital agglomeration. 

Pennsylvania Real Estate Investment Trust and CBL & Associates Properties Inc., two massive retail landlords, joined the lengthy list of significant players in the American mall ecosystem to file for bankruptcy, this year. With brick-and-mortar increasingly struggling — a causality we’ve seen runs concurrent through much of the present narrative — this move feels like one of both strategy and desperation by these property owners.

From J-Curves and Agglomeration: it's happening. 

Cities may physically change or they may not. But the agglomeration that should concern city managers and politicians is no longer representative in physical spaces. The shift to online education, remote work, gaming, live conferencing, and leisure is a new form of agglomeration. A leading indicator, consumers have contributed to the first period of inflation for electronic products in over a decade. Over quarantine, these purchases provided gateways to work, socializing, and play. But if these behaviors become more permanent, cities will struggle to account for it. [2PM, 1]

2PM Data: Coronavirus impact on retail eCommerce website traffic worldwide

Manhattan emptied out during the pandemic. But big tech is moving in

B. Real Estate / New York Times: As the mass-migration away from the office has taken place this year in cities like New York, big tech is buying space in bulk, a motion that is much opposite the trend. These companies are expanding capacity and workforce, even given the great ambiguity surrounding a timetable for the utilization of these spaces. It signals confidence and ambition in both their pandemic, and post-pandemic trajectory.

How years of investor-friendly finance left retailers vulnerable to crisis

C. Retail / Retail Dive: Over the past decade, dozens of retail companies have been acquired by private equity firms, which finance those buyouts, and dividends for themselves and their investors, with debt left on the retailer's books. Publicly traded companies over the same period have spent many billions of dollars buying their own stock, a practice that benefits investors by reducing the total number of shares on the market and boosting earnings per share. That, too, is often financed with debt.

The suburbs are the future of post-COVID retail

Retail Real Estate / The Conversation: With both commercial and residential rents remaining relatively stable outside CBD zones, and more people choosing to work from home, we can expect to see a growth in “localism”. Shopping mall owners have invested heavily in refurbishing and increasing the floor space of their centres to provide retail, hospitality, entertainment, leisure and recreation activities under one roof.

US holiday shopping is moving online. How can brands prepare?

eCommerce / Vogue Business: As online shopping becomes the preferred way for many to make their purchases, retailers plan to meet their customers where they are. Traditionally, Bloomingdale’s and Saks Fifth Avenue draw large crowds at their New York flagships to view their holiday windows. That’s not the case this year because of the pandemic, and retailers are hosting virtual holiday events instead. 

eCommerce continues China boom

eCommerce / WWD: With Chinese eCommerce sales up drastically, year-over-year, the beauty industry and its biggest subsidiary — skin care products — follow the upward trend. It’s been the product of an amalgamation of new media practices, such as ‘social commerce’, and suppressed abilities to travel and shop brick-and-mortar. As the nation’s ‘Singles Day’ nears, this eCommerce activity is far from slowing.

Software is eating the markets

Deep Generalism / Packy McCormick: Software has fundamentally altered nearly every industry. Netflix put a dent in cable’s long standing dominance, and already TikTok and Fortnite threaten Netflix. Newspapers are dying. Millions of people now earn livings in the Gig Economy or the Passion Economy. A private company, SpaceX, is doing things that NASA can’t. The list goes on.

The keys to a successful brand collaboration

Brands / Adweek: Even during a pandemic, 2020 has shown that brand collaborations aren’t going anywhere. Brands teaming up on campaigns or products to gain new customers can be met with fanfare — or apathy, and even straight up ridicule from consumers.

How brands are preparing for the logistical nightmare of holiday shipping

eCommerce / Glossy: The major carriers — UPS, FedEx and the United States Postal Service — are already delivering so many packages that they’ve been forced to turn away new customers. One report from FedEx said it expects to deliver as many as 7 million packages a day during the holiday season. Data from Salesforce said the total packages expected to ship during the holidays, around 700 million, is 5% more than the delivery ecosystem of the U.S. is capable of handling.

Shopify could own Black Friday

Resilient Retail / Wall Street Journal: With another pandemic wave already hitting the U.S., the fourth quarter holiday season should be Shopify’s for the taking as consumers steer clear of physical shops. The company said it has already seen evidence that the traditional Black Friday/Cyber Monday weekend is extending and “becoming an entire season.” It expects most consumers to do the majority of their holiday shopping online this year.

Apple TV Plus secretly won the streaming war of 2020

Streaming Economy / Fast Company: Apple TV Plus may not have a specific prestige aesthetic yet, the way HBO shows once felt like HBO shows and AMC shows felt like AMC shows, but what it does have is momentum and potential. While the must-see Disney Plus original content beyond Mandalorian still seems stalled in a galaxy far, far away, Apple TV Plus has a treasure trove of decent-to-great programming to tap into right now.

The gallery artist making direct-to-consumer art

DTC / GQ: Saltarrelli has built his career within the gallery system, elevating his profile most recently with an exhibition of collaborative paintings with Danish wunderkind Farshad Farzankia at Turn Gallery in New York. His paintings sell for many thousands of dollars. But he discovered a newfound freedom in the direct-to-consumer model. 

Ahead of what will likely be one of the more tumultuous weeks in America’s recent history, I decided to take a different approach to this week’s memo. There will be little room to care about eCommerce as a percentage of retail, TikTok’s or Pinterest’s role in corporate demand generation, or how the shift to working from home will impact the streaming economy. By November’s end, things will again resemble our new normal. Colleagues will return to Zoom conferences and children will finishing up their fall semesters. Millions of service workers, public servants, and other essential personnel will have carried on as if America’s federal elections were any regular week.

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