Can City of Elk Grove, Leasing Consultant Retail Strategies LLC Push Back Against National Retail Trends?

May 3, 2017 |  

A recent announcement from Elk Grove Economic Development Director Darrell Doan was, if nothing else, curious given a significant business trend unfolding in the United States.

Doan and the City of Elk Grove have decided to spend $50,000 for a one-year contract with Birmingham, Ala.-based Retail Strategies, LLC, a glorified leasing agency, to help recruit high-end retailers to the City. Taxpayers are essentially paying for the Alabamans to fly to Elk Grove, take a look around, prepare a study, and do the job done by aggressive leasing agents, or even Doan himself – recruit retailers to the City.

As part of their resume vital, RS have successfully landed Applebee’s, Red Robin, and Planet Fitness outlet for their client cities.

  

What makes this contract unusual is that it is done in a rapidly changing business environment. As most consumers are aware, online shopping has changed the way people make purchases over the last several years.

While this trend has been with us since the Internet burst on the scene in a major way over 20 years ago, its effects on retailers are seemingly evolving at an almost exponential rate in the last year or so.

People are well aware that major chains like Macy’s, Sears-Kmart, and Penny’s are closing several of their stores, many of which act as anchor tenants at traditional malls. While department stores and regional malls are quickly becoming a post-WWII anachronism, the onslaught of retailers is reaching beyond department stores.

In recent months retailers varied as shoe store operator Payless have either entered Chapter 11 bankruptcy resulting in the closing of hundred of stores, or others like Limited Express that closed all their outlets.

  

This is not to say retail is in a recession or consumer spending in down. Indeed, the economy is chugging along at a respectable, if not spectacular rate, and consumer spending, which is the largest component of our economy, is growing ever so slowly.

What it points to is clear – consumers are spending their money in different ways and by different means.

According to some studies, compared to baby boomers, millennial are spending less on consumer goods and more on experience-type things like dining and travel, and no, not going to their local casino. They are opting to locales that offer some unique geographical or cultural experience not available in their immediate spheres. cont. below

It should be noted that some segments within retail are doing well. These tend to be off-price retailers that operators who sell deeply discounted clothing and home goods like Ross Dress for Less, Burlington Coat Factory, and TJ Maxx.

Others doing well include cyclical retailers like Home Depot and Lowes. While these big box operators are affected by downturns, over time they are less vulnerable to the shifting spending patterns that other retailers have fallen prey to in recent years.

It is pretty easy to buy your Nike’s online; not so much for several sheets of plywood or a few gallons of interior paint.

It is no surprise that Sacramento’s Delta Shores, which is slated to open this October, is classified as a Power Center. Among the retailers poised for shoppers from Sacramento, Elk Grove, and Interstate-5 travelers are Ross Dress For Less, RC Wiley, Hobby Lobby, Ulta, Dick’s Sporting Goods, Walmart Super Store, Habit Burger, Panera, In n Out, and several others.

Except for RC Wiley, which already has another local store, most of the national and regional businesses have outlets in Elk Grove and are unlikely to be open another store in the city.

If that were not enough, the United States by far has the most square footage of retail space per capita. This excess capacity is being addressed by the market forces that we see in Elk Grove.

  

And for good measure, this seismic change in retail is affecting workers. It has been reported that about 60,000 retail jobs were lost in February and March 2017 alone.

   

Coming back to Elk Grove’s contract with RS, one must wonder what rabbit, if any, they will pull out of their hat. Aside from the recent addition of Costco, there is still unused retail space in Elk Grove.

Notably, there is retail space at the Kohl’s shopping center on Elk Grove-Florin and Calvine roads that is over 10 years old that still has unfinished interior spaces, which needless to say, have never been occupied. At the same center, there are retail pads that could accommodate at least 50,000 square feet of retail space.

Obviously, there is no market need otherwise the developer would have erected structures to accommodate demand.

     

So what Will Retail Strategies bring to Elk Grove - a few more Dollar Tree’s, another Applebee’s or Red Robin’s, or perhaps a new Family Dollar, or an Olive Garden? Maybe they will jump-start the 99 Cent Store planned for Elk Grove-Florin Road. 

Or is Doan throwing in the towel and seeking their assistance to help push Howard Hughes to sign some high-end retailers to their languishing Outlet Collection at Elk Grove? If so, why it is incumbent on taxpayers, beyond the generous six-figure salary Doan has been drawing from Elk Grove for the last two years, to pay for services that will benefit Howard Hughes in the near term? 

It's like trying to paddle a canoe upstream on the American River during the spring run-off - you can try it, but you'll probably drown.

As the relationship between the City and Retail Strategies unfolds, it will be worth watching if these consultants turn out to be another Jeroen Gerrese ending up in litigation, or will they land some high-end retailers of note.

Given the rapidly changing face of retail locally and in the United States, we will be watching.