Top 5 Most Surprising Trends in Traffic with Ethan Chernofsky
Guest: Ethan Chernofsky
Topics: Retail trends, Placer.ai
Transcript:
Chris Ressa 0:01
This is retail retold the story of how that store ended up in your neighborhood. I’m your host, Chris Ressa. And I invite you to join my conversation with some of the retail industry’s biggest influencers. This podcast is brought to you by DLC management.
Welcome to retail retold everyone today I have an exciting episode we’re going to talk about traffic at retail properties. Joining me today is Ethan Chernofsky. Ethan is the VP of Marketing at Placer. Ai. excited to have him we’re going to talk about the five most surprising trends and traffic at retail properties. I’m excited for this episode.
Ethan, welcome to the show. Chris,
Ethan Chernofsky 0:46
thank you so much for having me. It’s great to be here.
Ressa 0:47
Yeah, pleasures mine man, either, why don’t you tell the audience a little bit more about who you are and what you do.
Chernofsky 0:54
So I’m the VP of marketing@plaisir.ai. And Pacer is a location analytics and foot traffic data platform. And so we show people what’s actually happening in the world of offline retail. And, you know, how, how people are moving, which which, you know, retailers are getting the most traffic, and so on and so forth. And my background is working for other data companies just really love the idea of analyzing different sectors
Ressa 1:19
from that data perspective. Very cool. Well, I think the audience is
anticipating some cool trends. So let’s hop in let’s and I know there’s probably no order, but I like to do it. Let’s talk about number five, what is the fifth most surprising trend.
Chernofsky 1:41
So the fifth most surprising demand for us was this crazy Home Improvement surge that we saw. So a lot of people kind of looked and expected that, you know, brands like Home Depot and Lowe’s would do really well, in the early part of the pandemic, like we’re stuck at home, we have time for these DIY projects. It’s their normal period of seasonality between March May. And that all kind of came to fruition, but I don’t think anyone could have expected how significant the surge was and how long it would last. So that we’re looking to fact in August, which is not the normal timeframe for these brands to see them doing. Still 20 some odd percent up year over year in terms of visits, crazily successful. But it also shows how important it is to be aligned with what’s happening in the world. So not just home home improvement, like Home Depot and Lowe’s. But brands like home goods, or you know, pure one is actually on the way to liquidation. But that Bath and Beyond are all seeing similar surges now take over, as we’re trying to figure out how do we upgrade our home that we’ve been stuck in. And it’s this really interesting factor of brands that figured out how to align themselves with a need at the time. And this something that can apply to apparel, it can apply to so many different brands. It’s just about how do you fit within what customers need and what audiences
Ressa 2:55
need at that moment? Yeah, that’s interesting. I think that the home improvement
sector is fascinating. I think there’s, I think there’s a lot of tailwinds behind this, I can think of a million DIY projects that are going to happen, whether that is people building home offices, making those better, whether that’s just you know, taking care of the yard, and, you know, fixing up their shed, I think there’s going to be a lot. I think the home furnishings is interesting, right? I think organization is going to be a good one. So, you know, whether that’s the Container Store, and people trying to give their house a little bit better, Feng Shui are just looking nicer. So it makes a lot of sense, I think.
I also think it you know,
we’ll see what what happens. But I know the decorating piece, at least in my household, right? As we, as we’re stuck at home, we’re trying to make it feel, as you know, comfortable as possible. So I can tell you, I’m sure my house around Thanksgiving and Christmas is going to look more festive than it’s ever looked before. So I also suspect you’re going to see, you know, as well as the home furnishings around that I think you’ll see, you know, the arts and crafts like Hobby Lobby and Michaels arts and crafts and Joanne do really well during this time.
Because of that
Chernofsky 4:24
I agree with you completely at the big thing, though, is like, if you’re not one of those core elements, like how do you tap into it? So we were waiting for this Office Depot staples surge, because we were like, clearly they’re going to recognize that we’re all working from home. And there’s this unique moment in time for them to kind of recover, as they say, Hey, we’re gonna be the ones who help you figure it out whether it’s a Geek Squad style entity or something a little bit more targeted or focused and we haven’t really seen it and I think it shows you that you can be aligned with how the trend is going and miss the boat. Or you can Be a little bit off trend and figure out how to fit yourself within that narrative to drive success over the
Ressa 5:05
coming month. So that’s a good point. Do you think that’s because those are some items that people feel a little more okay buying online? Is that why or do you? Do you really think it’s the retailers having been as successful at aligning themselves with the trend?
Chernofsky 5:24
Both, I think the retailer’s haven’t made the case, why you need to come to me and you can’t, you shouldn’t do it online. We can buy pillows on on the internet as well. But there’s this feeling like, oh, we should go look at it, we should go test it. But if I’m upgrading my home office, why wouldn’t I want to test out the chair? Why don’t I want to have a sense of which lamp works best and it’s give me the light, it’s this idea of when you come into the store, you’re gonna get something extra. And that will provide boost that ecommerce as well. But it’s on the brands and it’s on each individual retailer to make that case to their audience. And some cases people are doing that extremely well. And and others
Ressa 5:59
less. So. Make sense? Understood. Cool trend. What is number four?
Chernofsky 6:07
Number four is a recent one. But Starbucks just recently launched their their Pumpkin Spice Latte earlier than ever before, right. And it’s, you know, they’re talking about autumn in the midst of heat waves in the end of the summer. And it’s this really powerful push by the brand to say our normal seasonality is a fallen winter. So how do we make the fall come earlier, we bring you this classic drink that makes you think of you know, leaves changing color and things getting colder. And it worked. So a brand that was seeing visits down about 20%, year over year nationwide, was down to just six and 7% for that Saturday and Sunday after the launch. That’s huge. But there’s also really wide ramifications. It’s a brand that saying, I’m going to own the calendar, I’m going to manipulate things to work in my favor, and they do it extremely well. And this is something that I think so many retailers need to pay attention to because we’re entering into a holiday season, it’s going to be fundamentally different. Black Friday is not going to be the same as it’s always been Thanksgiving is not going to be the same as it’s always been, so on and so forth. So how do you create your Black Friday in October moment? How do you create your own brand feel it’s going to make someone want to give you those visits and a time when they wouldn’t normally do. So this isn’t the time to start preparing for that. And it’s so many different chat, there are so many different ways to do so in an effective manner.
Ressa 7:28
I love that you said own the calendar. That is really interesting. And I think you know, I’m actually thinking about applying that, as you say that, like how do I own the calendar for my own businesses. That’s a really powerful line. I think that
I think the reason that happened in that spike is
people are craving a change of pace, we’ve been stuck in this rhythm of what’s going on through the pandemic. And I think people are craving a change, right? I think it’s another reason you see the home improvement in the home goods, right? Because that’s all change. And like getting to the other side, I think is so such a powerful message. And if the little things that you can do to try to pivot your life to the other side I think people want to do and maybe it’s as simple as Pumpkin Spice Latte like starts to bring oh my god, it’s fall. Thank God, let’s get out of this period. So I think it’s really interesting.
Chernofsky 8:32
But don’t you also want to see the like, who’s gonna you know, when AMC ope as they’re opening up their doors? Don’t you want to see them play like an NBA game in the theater? Don’t you want to see someone put up a big screen in a massive parking lot and tell people to come? We’re gonna barbecue, we’re gonna bring it to your car. So you don’t even have to get out. But let’s enjoy the game together somehow. Like if you’re in Boston right now, or in Miami and your teams are doing well. Isn’t there this ability, unique ability for someone to say we’re going to create a communal atmosphere? And that’s going to drive visits for those brands? I mean, I think there is it’s just a question of how quickly can these different whether it’s a restaurant or you know, a classic retail brand, get on top of it and make something happen?
Ressa 9:12
Yeah, that’s, that’s really interesting. The sports in the theaters I haven’t thought of and I have some friends in the theater business. I’ll pick their brain on that one. That’s it’s interesting. Cool perspective. All right. What is number three?
Chernofsky 9:32
Okay, so number three is the shifts in consumer behavior and the fact that they’re lasting as long as they did. So in May, we looked and we saw that visits were shifting to grocery brands were shifting towards mornings, away from evenings, and they were shifting towards weekdays away from weekend. And that was kind of expected, because everything was up in the air, things were different. People had a little bit more flexibility. But there was this expectation that as we return to more and more to normalcy, we see that trend returning more and more to what it had been If we haven’t, we’ve seen that consumers are clearly showing that they prefer the morning visit, they’re showing that they clearly prefer coming in on the weekday as opposed to the weekend. And they’re showing that they’re willing to spend more time at these grocery stores, when that happened. And this is something that could sustain itself as even if we go back to work, and we come back to the office, and it’s not this fundamental reimagination of how we operate as a professional. But I have a little bit more flexibility, this is going to have really long term impact, because it’s saying to brands that I’m wanting to spend several minutes longer on my grocery visit. So I’m going to buy more things you have the ability to do more with with that visit. But I think for all the other retailers and entertainment aspects, I’m freeing up significant time in my evenings and on my weekends. So if I used to go to the supermarket for an hour and a half on a Sunday, and I’m done that’s already done Tuesday morning, that means that I’m there’s a poll to be made to get me to do something that I wouldn’t have done before. And I think there’s going to be really interesting opportunities, not just for grocery brands, not just for the retailers that are co tenants with those brands, but just the wider entertainment space in the wider retail space, because of the freedom of
Ressa 11:13
time. Interesting, and
what are one of the what give me an example of an opportunity.
Chernofsky 11:22
So if I am, you know, I’m the type of brand that normally sees weekend traffic. But I sit I am co tenanted with a with a grocery brand that might take it away like a you know, a home goods player, I can now get more out of that weekend than I would have before. But also like, if you can cross promote, imagine if I know where that audience is coming from. So I can analyze that true trade area and then target that with a deal to come to my movie theater or my trampoline park or whatever event I want to do on the weekend. These are people who you’re showing now have more time to spend on weekends. And that creates opportunity.
Ressa 12:01
Interesting at those retailers that have lost traffic on the weekend, where it shifted to the weekday is total
traffic up. Yes. Wow. That’s fascinating. I don’t have a
lot other than that, that is pretty fascinating. I like I end the cross promotion opportunity, I think is really interesting. That’s the most surprising one to me so far. So
Chernofsky 12:26
I’m glad that I wasted it now. Now
Ressa 12:28
we’ll see coming, though that was the most surprising one to me. I hadn’t thought about that. And I hadn’t even looking through traffic at my centers, I haven’t connected those dots. So that’s interesting.
Number two,
what is the number two most surprising trend.
Chernofsky 12:49
So the number two most surprising trend is the push that’s happening around the malls. So we had Macy’s announced today that they’re going to be trying out for different outdoor concepts over the coming months. This is a huge change. And for many in the commercial real estate space, it’s something that we’ve been talking about, it’s something we’ve expected might happen. But to see a huge mall oriented brand and make that shift is is a big, big step. And it has enormous ramifications. Because it means on the one hand, the opportunity that many hope would exist to pull mall oriented brands into outdoor centers is absolutely there. And this is the time to strike. But it also means that there’s going to be a shift of brands that try to fill mall spaces because they’re opening up. And there’s going to be this big testing wave of outdoor or even online only brands who look to test out malls, and mall oriented brands who look to test out outdoor centers. And this could fundamentally shift the entire face of offline retail.
Ressa 13:51
I agree as a I,
as a landlord of open air strip centers, I am intrigued by this opportunity to say the least. And I’m interested to see how some tenants who typically might not co tenant will start to co tenant and see what that what that does to traffic at properties. And I think that’ll be interesting. How different has the traffic been so far between open air centers and enclosed malls?
Chernofsky 14:24
So open air centers are definitely coming back faster?
Ressa 14:27
I mean, there’s no question.
Chernofsky 14:29
The one thing is though, we’re still seeing the values of malls, so malls get longer visits, they get a different type of visit. So it’s usually someone coming from a longer distance. So there’s still this orientation that a mall can create for certain types of brands. So if I’m the type of company that can drive my own traffic on a consistent basis, and Outdoor Center is unbelievably appealing. But if I’m the type of brand that wants the added values of of having so many retailers in one space, there’s still this huge value to the mall, because of the distance people are willing to come because of the amount of time they’re willing to spend. And because the orientation is I’m going to look at a lot of different things. So even if I don’t know you personally, as a brand, yet, this might be my chance to meet you. And that marketing value is still really significant. We’ll see I
Ressa 15:21
have some concerns of if that plays out over the long haul at the amount of malls that we have in the country. But we will see I think, I think I think the, the open air strip centers are going to be a favorite choice for from convenience, occupancy levels, that consistency in traffic. But we will say last but not least, what is the number one most surprising trend in the traffic at shopping centers across the United States, Ethan. So
Chernofsky 15:56
the biggest thing is, with every narrative of 1,000,000,000% ecommerce growth, and the most, you know, greatest online period ever, how fundamentally important offline retail is, it has never been more important. And I think this is so huge to reiterate, because what gets lost in the numbers is in 200%, growth for that many of these brands are talking about, much of it quickly reverts back to slight growth. Much of it comes at where profits are actually coming from offline and not from the online poll
Ressa 16:35
totally. I made that comment a ton. It’s
Chernofsky 16:39
so I mean, I’m so happy to be there. Because I think it gets you read these stories of, you know, you know, Best Buy is a great example, they announced how significant their ecommerce jump was, but at the same time announced that they expected profits to be down because of E commerce going up. And so the way we think about offline, retail is absolutely going to change the idea of using it for distribution and micro fulfillment. And all of these added elements to strengthen ecommerce is huge. But it’s not taking away from me from offline retail, it’s making offline retail that much more important. It’s just adding an emphasis on optimization. So when we hear brands like Bed Bath and Beyond say they want to look at their retail footprint and figure out how to make sure it’s optimized and utilized in the most effective way. That’s super critical. And it means they’re going to look at those true trade areas, they’re going to look for cannibalization risks, they’re going to look for voids that might exist in the market. But on the flip side, brands like Nike are saying we’re going to expand by hundreds of locations Levi’s that saw their wholesale sales decline are going to expand by hundreds of locations, and expect more product oriented brands to do the same and expect more direct to consumer online only brands to come offline. So I think there is going to be this unique stabilization. And what it could create is a far better retail environment. It’s more diversified, creating more unique value for every shopping center and mall, as opposed to the copy and paste weakness that had been created based on prior models.
Ressa 18:09
The myth is that online is more profitable, which should be talked about is that the cost of entry is potentially less expensive than physical retail rate. If Ethan and Chris wanted to open up Ethan Chris’s t shirt shop, pretty cost effective to go online, the minute you want to scale. And I’ve heard the numbers about $10 million dollars in revenue when you get to that you’re typically in multiple markets. If you don’t have physical stores profit is a big challenge. And it’s for all the reasons that we know its returns its last mile, the customer acquisition costs right now are soaring through the roof. And I think that this will come to roost because at some point, retailers need to consistently drive profits. And unless there’s some technological shift that changes, it is going to come via physical stores, you know, we often forget seventh, you know, going into the I think 2018 78% of the United States was paycheck to paycheck. And they that cohort of consumer isn’t interested in paying an extra $30 for shipping isn’t interested in pink. It’s not possible. There’s no more disposable income to do that. And then on the opposite side for the upper middle income and the more fluent. My wife can order for in return three pay no shipping and someone make a profit and therefore there’s going to be a push for more to go into the store. I often say this too, right? And it’s not talked about enough. There’s approximately 464,000 physical stores in the country. There’s about 1.8 million online stores, you have about 16% of the retail sales in America going to 1.8 million stores online, an 84% going to 464,000 stores. To me that doesn’t play out over the long term that will, there will be a, a collision course here and that will, I believe, start to implode. And so that’s my opinion. Yeah, I
Chernofsky 20:37
think you’re absolutely right. But I think it’s all about, you know, we talked about the beginning of this crisis a lot. You know, if you’re a mom and pop restaurant, how do you add delivery? Or how do you do meal kits? Or how do you create the same process is happening on the online side of what can I do to leverage offline because offline still has so many massive advantages that you can’t overlook? I mean, Everlane CEO took your point a step further, he said, at the end of last year, you can’t be profitable doing online, only, you must have offline presence. And I don’t disagree. I think when you look at the biggest online players, profits, incredibly difficult. It’s near impossible. And you need to have this harmonized mix to quote Steve Dennis, between your offline and online presence, and that’s the world we’re going to. But that just means you know, more stores with more different brands, not
Ressa 21:31
no offline retail. With that, I’m going to drop the mic moment and move to the I’ve moved to the last part of the show appreciate the five most surprising, traffic transit retail properties really cool. I want to I want to pivot to the last part of our show. We call it retail wisdom. Tell me when you are ready, Ethan. I’m ready. Let’s do it. All right. First question. What is your best piece of commercial real estate advice? Know your trade area?
Chernofsky 22:04
Everything you know, it’s the 357 mile radius just doesn’t work anymore. Doesn’t make sense. You need to know exactly where your audience is coming from. Because when you do you know where your opportunities are, you know who that audience is, you know how to serve them better. And you know how to upgrade the experience of your center at all times to make sure that they keep on coming back and more people come.
Ressa 22:27
sage advice. Second question. What extinct retailer Do you wish would come back from the dead?
Chernofsky 22:36
I mean, I have a soft spot in my heart for Sports Authority. Okay, they were they were asked but I bought my first baseball glove. I got my first Jersey there. So that’s that’s why I like to see bag if nothing else, just for nostalgia sake. Awesome.
Ressa 22:51
I like Sports Authority as well. I think I bought some my first sporting goods there as well. Speaking of sporting goods, you had mentioned the NBA you just mentioned Sports Authority.
The third question, we’re coming to the fall is football season. I am on Dick’s Sporting
Goods website. I am looking at the Nike vapor 24/7 2.0
football official 14 and over. What does that retail for on Dick’s website? Ooh, $33. close. Very close.
And I want to make sure I get straight $25 But thank you for quiet.
Chernofsky 23:36
I mean, I do I do I win. Did I get
Ressa 23:37
don’t win. Now you went over
Chernofsky 23:41
the problem? I haven’t watched prices right? And I like that.
Ressa 23:45
Well, listen, Ethan, this was great. Thank you so much. I think everyone’s going to enjoy these trends. How do people find you? So
Chernofsky 23:53
come visit us where it plays your.ai We’ve got a blog that has new research every few days. I’m at ether Ethan app place where that AI if you want if you have any comments, you hated the ideas or love them. But Chris, thank you so much for having me. This was a lot of fun.
Ressa 24:07
Thanks, man. This was great. Thank you for listening to retail retold. If you want to share a story about a retail real estate deal that you were a part of on our show. Please reach out to us at retail retold at DLC mgmt.com This show highlights the stories behind the deals from all perspectives. So it doesn’t matter if you are a retailer, broker, entrepreneur, architect or an attorney. Also, don’t forget to subscribe to retail retold so you don’t miss out on next Thursday’s episode