MAPIC 2015 Retailing USA. Opportunity awaits. · Retailing USA. Opportunity awaits. David Zoba Global SVP Retail Real Estate, Gap Inc. (Recently Retired) Panelist ... Understanding

MAPIC 2015 Retailing USA. Opportunity awaits. Trust our retailntelligence.

Trust our retailntelligence.

MAPIC 2015

Retailing USA. Opportunity awaits.

David Zoba Global SVP Retail Real Estate, Gap Inc.

(Recently Retired)

Panelist

Dana Telsey CEO and Chief Research Officer

Telsey Advisory Group

Panelist

Michael Hirschfeld Executive VP

National Retail Tenant Services, JLL

Panelist

Naveen Jaggi President, Retail Brokerage JLL Americas

Moderator

Nigel Jobson Head of Group Property

Superdry

Panelist


The U.S. is a huge and fragmented consumer market

It is made up of a handful of international cities, and hundreds more markets large and small


Country Shopping Center GLA SF Per 100 Inhabitants

USA 2,357 SF

Canada 1,536 SF

UK 384

France 382

Denmark 380

Finland 355

Portugal 352

Spain 312

Poland 293

Italy 273

Germany 235

Greece 89

Source: ICSC Country Fact Sheets, 2014 (US, France, Germany, Poland, Portugal, Spain), 2013 (Canada, Italy, UK), 2012 (Denmark, Greece), 2011 (Finland).

Understanding the U.S. Market

Vastly more shopping options

§  The U.S. has over six times more square feet of retail space per person than the UK



Retail is low density

§  Malls and high streets play a role, but most retail is spread out across suburban shopping centers and freestanding buildings

49%General Retail

34%Shopping Center

7%Power Center

9%Malls

1%Specialty Center

Retail SF by type in major U.S. markets

Source: Q3 2015 Retail Market Inventory, JLL, Costar.


Source: Q3 2015 Retail Market Inventory, JLL, Costar.

Greater New York 7%

Greater Los Angeles 6%

Chicago 4%

Philadelphia 4%

Dallas/Ft Worth 3%

Houston 3%

Atlanta 3%

Boston 3%


Retail geography is fragmented

§  The top 8 U.S. markets only make up 33% of the nation’s retail space

§  Major retailers open hundreds of stores across many markets before their presence is truly felt nationally

12.8B SF of retail space spread across

137 U.S. markets



Primary markets the world over

§  Major retailers generally begin U.S. entry in one of the top 13 U.S. markets

USA Asia Pacific Europe

New York Hong Kong London

Los Angeles Shanghai Paris

Las Vegas Singapore Moscow

Miami Beijing Milan

Chicago Tokyo Madrid

San Francisco Taipei Istanbul

Washington DC Seoul Rome

Boston Bangkok Munich

Dallas Osaka Barcelona

Atlanta Chengdu Berlin

Honolulu Kuala Lumpur Brussels

San Diego Tianjin Amsterdam

Houston Shenyang Hamburg

Top Retail Markets: U.S., APAC, Europe



Multiple markets combine for big impact

The state of California, by itself, is the world’s eighth largest economy. It’s about the same size as Brazil.

The economy of Texas is roughly the same as all of Scandinavia, including Sweden, Norway and Denmark combined. If it were a nation, it would have the 11th largest GDP.

Source: 2014 GDP Estimates, U.S. Bureau of Economic Analysis and International Monetary Fund

New York’s GDP is roughly the same size as Spain. If it were a nation it would be ranked #15.


It’s not just about malls and high streets Foreign entrants have found success (and failure) in a variety of retail property types.


Fifth Avenue, New York City

Understanding U.S. Retail Types

High streets are a small percent of retail

§  Downtown shopping with a mix of specialty, department store and luxury – often a first choice for foreign retailers new to the market



High streets like 5th Avenue in NY are home to many foreign retailers


§  Malls have remained much the same for decades: department stores anchors, specialty retailers – often with an emphasis on fashion

King of Prussia Mall King of Prussia, PA

Simon Property Group


For most Americans, malls are still tops for clothing and general merchandise


Sephora entered U.S. in New York

Launched JCPenney in-store shops

360 North American stores; 485 JCPenney in-store shops; Sephora owns 12% of U.S. Beauty & Cosmetics market share, according to IBISWorld


France’s Sephora encounters most Americans in a mall setting

2015

2006

1998



Sephora has been less aggressive with new stores than domestic rival Ulta since 2014

103 98

75

122

98

16

42

63

42

125 121

94

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

2010 2011 2012 2013 2014 2015

New U.S. Sephora Stores (Includes JCP in-store) New U.S. Ulta Stores


§  Sephora’s 485 JCPenney in-store shops are ~1,500 SF, compared with the ~5,000 SF stand-alone stores

§  Britain's Topshop is found in 94 of Nordstrom’s 121 full-line stores

§  Nordstrom launched 14 Topshop (~2,500 SF) and 14 Topman (~1,500 SF) in-stores in 2012

§  Topshop/Topman has 3 American flagships at 20,000 SF each


Store-within-store strategy


§  Upscale national tenants in an urban setting

§  Department stores anchors, specialty retailers – often emphasizing aspirational and luxury brands

§  Similar tenant mix to traditional mall


For many, lifestyle centers are the new high street

The Americana at Brand Glendale, CA

Caruso Affiliated


§  Sweden’s H&M came to the U.S. in 2000 with a Fifth Avenue 57,000 SF flagship

§  Most of H&M’s 381 U.S. stores are in malls; 17 are in lifestyle centers

§  H&M opened 51 stores in the U.S. last year


H&M demonstrates patient steady growth

85%Malls

3%Neighborhood/Community

2%Power6%

Lifestyle

4%Outlet



H&M averaged 32 new stores per year since 2011

200 218 240 269 310

361

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

2010 2011 2012 2013 2014 2015

# of stores


§  Centers focused on convenience in areas of high car traffic

§  Tenanted with goods and services retailers, often grocery-anchored


Neighborhood and strip centers are daily destinations for grocery and services

Berry Town Center Davenport, FL Phillips Edison


§  Aldi entered the country in 1976 in Iowa

§  Currently 1,400 stores (~16,000 SF) in 32 states in the Eastern half of the U.S.

§  29 West Coast locations opening soon in California

§  130 locations per year (through 2018)


Germany’s Aldi has blanketed much of the U.S. in neighborhood centers


§  Expected to open 500 U.S. locations

§  Broke ground on a distribution center in Virginia (October 2015), and will soon open its national HQ in the state

§  No stores currently open


Germany’s Lidl is hot on Aldi’s heels


§  Big boxes of home improvement, discount department and off-price “category killers”

§  Few foreign retailers have made it to power centers


Power centers offer big boxes, category killers


§  41 Outlet centers will have opened from 2012 – 2015

§  60 new projects and expansions are planned


Outlet centers offer fashion brands at a discount

Source:VRN

U.S. Outlet Centers 202

Average Outlet Size 395,381 SF

Average Occupancy Over 95%

Average Sales PSF $546.33

Source: VRN.


Pay attention to the differences in the U.S. consumer Millennials have a unique set of shopping habits and their purchasing power is growing. e-commerce is less mature in U.S. than Europe.


Understanding the U.S. Consumer

Top 4 consumer spending growth trends Americans love their pets §  U.S. pet industry expenditures will grow to $67.6 billion by 2018

Athleisure explosion §  U.S. apparel, footwear and accessories spend grew by $2 billion in 2014 –

driven by active wear, athletic performance footwear and bags §  Yoga pant sales have skyrocketed

Foodie nation §  Consumers are choosing higher end “fast casual options,” many retailers are adding

food components, shopping centers are devoting more feet to food uses

Healthy nation §  With the increasing availability of data from health trackers, health awareness

seems to be rising along with health-retail: fitness centers, juice bars, healthy food, exercise wear



Stocking up for the week

§  Many Americans value time over money – one-stop-shopping is important

§  Americans often do all their grocery shopping in one weekly trip

- 60% of Americans say they grocery shop to “stock up”

- Only 37% of Europeans said the same thing



Auto driven nation

§  Europeans think 100 km is a far distance to drive for a purchase – many Americans call 100 km their daily commute

§  Retailers must pay close attention to parking ratios

§  Trade areas (catchment areas) are often defined by drive time



Millennials are making a major impact

§  At ~80 million strong, millennials1 represent 25% of the U.S. population

§  Responsible for $600 billion in spending, which is expected to grow to $1.4 trillion by 2020

CONSUMER EXPENDITURE SURVEY COMPARISON – MILLENNIALS IN 2013 VS. 2003 2003 2013 '13vs.'03(bps)

Under25yearsold

25-34yearsold Millennials

Under25yearsold


Under25yearsold


Food 15% 13% 15% 16% 13% 15% 30 (20) 16Alcoholicbeverages 2% 1% 2% 1% 1% 1% (110) (10) (82)Housing 32% 36% 33% 34% 36% 35% 250 30 188Apparelandservices 5% 5% 5% 5% 4% 5% 0 (80) (22)Transportation 21% 20% 21% 19% 19% 19% (220) (90) (184)Healthcare 2% 4% 3% 3% 5% 4% 70 100 78Entertainment 4% 5% 4% 4% 5% 4% (10) (20) (13)Personalcareproductsandservices 2% 1% 1% 1% 1% 1% (40) (10) (32)Reading 0% 0% 0% 0% 0% 0% 0 (10) (3)Education 7% 2% 5% 7% 2% 5% 10 40 18Tobaccoproductsandsmokingsupplies 1% 1% 1% 1% 1% 1% (30) (10) (24)Miscellaneous 1% 1% 1% 1% 1% 1% (40) (10) (32)Cashcontributions 2% 2% 2% 2% 2% 2% (10) 10 (4)Personalinsuranceandpensions 6% 10% 7% 7% 11% 8% 110 80 102

TOTAL 100% 100% 100% 100% 100% 100%

Prepared by Telsey Advisory Group

Source: Bureau of Labor Statistics, Accenture, Berglass+Associates/WWD study titled “What happens when millennials get the wallet”. (1) Definitions of age range varies but typically include 18 – 34 year olds. Note: Reflects latest available data. Note: Cash contributions represent donations to charities and other entities in cash form. Note: Millennial category represents weighted average between Under 25 and 25 – 34 year old segments.



E-commerce less mature than in Europe

Source: retailresearch.org. Q2 2015 U.S. Department of Commerce.

2.1%

2.8%

3.0%

6.6%

7.1%

7.6%

6.9%

7.2%

10.0%

13.5%

2.5%

3.3%

3.5%

7.2%

7.4%

7.8%

8.0%

8.4%

11.6%

15.2%

0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%

Italy

Poland

Spain

US

Netherlands

Sweden

France

Europe av

Germany

UK

2015

2014



Mobile commerce is gaining traction

§  Mobile devices are causing consumers to spend more time online

§  Mobile commerce is a significant opportunity for brick-and-mortar retailers who can successfully broaden their distribution channels

Source: eMarketer. Note: Retail m-Commerce sales includes products or services ordered using the internet via mobile devices, regardless of the method of payment or fulfillment; excludes travel and event ticket sales.


$24.8

$42.1$57.8

$76.4

$98.1

$114.5

$132.7

11.0%

16.0%

19.0%

22.0%

25.0% 26.0% 27.0%

2012 2013 2014E 2015E 2016E 2017E 2018E

Retail m-Commerce Sales ($bn) % of Retail e-Commerce Sales

USRETAILM-COMMERCESALESANDSHAREOFRETAILE-COMMERCESALES



E-commerce concentrated in few categories

§  Categories conducive to e-commerce are commodity-like, have low shipping costs relative to the value of product, and are generally not needed for immediate use

§  51% of online sales are concentrated in just three major categories - Consumer electronics1 (22%); Apparel and accessories (16%); Pre-recorded media2 (13%)

Source: eMarketer. Note: Retail m-Commerce sales includes products or services ordered using the internet via mobile devices, regardless of the method of payment or fulfillment; excludes travel and event ticket sales.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Pene

tratio

n Ra

te

2013E 2017E

e-Commerce Penetration > 20%

e-Commerce Penetration <10% Categories

expected to increase to

more than 20% penetration by

2017.


ONLINEPRODUCTPENETRATIONRATES



E-commerce’s long-term impact










Documents

MAPIC 2015 Retailing USA. Opportunity awaits. · Retailing USA. Opportunity awaits. David Zoba Global SVP Retail Real Estate, Gap Inc. (Recently Retired) Panelist ... Understanding