Philly Retail Space Update: The Struggle for Balance between Online and New Store Growth

new Jason graphic - 6-3-15Retailers, including those in the Philly retail space market, are struggling to develop a strategy for future sales growth that balances online expansion and opening new stores, according to new retail analysis.

BDO USA’s ninth annual analysis of risk factors noted by the 100 largest U.S. retailers in their most recent annual reports found that retailers were highly concerned about the best way to fund their growth, even as the retail industry enjoyed solid year-over-year industry performance, positive sales projections, strong consumer confidence and other positive economic indicators.

BDO said the number of U.S. companies that cited U.S. growth and expansion as an area of risk reached 92 percent this year, up from 56 percent in 2013. Retailers in the U.S. and Philadelphia retail space marketplace are vigorously seeking new ways to increase sales and reinforce store brands, while also recognizing the need for an omnichannel marketing approach to satisfy consumers’ increasing demand for online shopping options.

BDO said retailers moved away from primarily investing in new bricks and mortar stores in 2008.  As online buying by consumers ramped up, retailers’ return on the investment in new stores diminished and capital investments were redirected to online sales, supply chain networks and systems implementations.  But with spending in those areas less proven, retailers noted a increased risks with the new investment strategies.

In this new world of retail marketing, different retailers are in vastly different stages of funding their growth.

Wal Mart Stores — which boasts 4,500 U.S. stores and another 2,120 outside the U.S. — spent nearly 40% ($5.1 billion) of its fiscal year 2014 capital expenditures ($13.1 billion) on new store expansions and relocations.  But in the 2015 fiscal year that ended January 31, that amount dropped to $4.1 billion or about 34%, according to BDO. At the same time, Wal Mart’s investment in information systems, distribution, digital retail and other omnichannel expenses jumped from $2.5 billion (20%) to $3.3 billion (27%).

In comparison, Macy’s Inc. — which, with 823 stores in 45 states, is the largest department store in the U.S. — is just now embarking on its omnichannel strategy and is finding difficulties as it starts down this new road. In its last fiscal year, Macy’s spent about $1.1 billion primarily on new stores, store remodels, store maintenance and the ongoing renovation of it’s flagship store, Macy’s Herald Square in New York.  Physical store openings remain a key part of the retailer’s growth focus, with plans announced to open at least eight new Macy’s or Bloomingdale’s stores over the next four years in four states and one U.S. territory, stretching from Puerto Rico to Hawaii.   Macy’s posted first quarter 2015 sales of $6.232 billion, down 0.7% from a year ago, while expenses rose 1.2% over the prior year.   The company said some of the increased expenses came from the launch of a significant omnichannel initiative intended to bolster continued sales growth and enhance customers’ online, mobile and in-store shopping experience.

Macy’s remains committed to the new sales growth approach, but acknowledged that the learning curve was “steeper than we had expected.”

To strengthen their omnichannel sales potential, retailers have committed a massive investment in money, time and energy, but a new survey conducted by PwC for JDA Software found that only 16% of today’s retail companies can fulfill omnichannel demand profitably.  Survey respondents said the high cost of order fulfillment is eroding their margins.

The survey found that retailers acknowledged the importance of omnichannel fulfillment, labeling it a high or top priority and committing an average of 29% of their total capital expenditures for 2015 on improving their omnichannel fulfillment performance.

For more information about Philly retail space or any Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf ( at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate brokerage firm that specializes in Philadelphia retail space.

Wolf Commercial Real Estate is a Philadelphia commercial real estate broker that provides a full range of Philadelphia commercial real estate listings and services, marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings and services, provides unparalleled expertise in matching companies and individuals seeking Philly retail space with the Philadelphia commercial properties that best meets their needs.  As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philadelphia retail space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

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