Grocery Stores Fuel Retail Industry

A JLL report unveiled that grocery-anchored shopping centers are a stable point in the transforming retail sector. Senior Vice President Greg Ferrante explains why embracing tech is not enough to be a successful grocer in 2018.
Greg Ferrante, SVP, Retail Brokerage, JLL

Whether it is an apocalypse or rebirth, retail is certainly going through a transformation. Still, grocery-anchored shopping centers might be a stable point in the hustle and bustle related to this real estate sector. JLL’s Grocery Tracker revealed that although store expansion slowed in 2017, investment into grocery-anchored assets increased by 5.3 percent. In fact, it was one of the only retail sectors that experienced growth in a year of low transaction volume.

JLL’s report shows that investors’ interest in grocery-anchored shopping centers will remain elevated in the foreseeable future. “People will not stop eating and, accordingly, they will not stop frequenting grocery stores. Investors need to be concerned with the quality and long-term success of grocers in their centers. This will be true for a great deal of time,” Greg Ferrante, senior vice president of retail brokerage at JLL, told Commercial Property Executive. “Grocery stores are often the primary driver of traffic in retail centers. Successful grocers beget successful tenants,” he added.

Grocery-anchored centers and tech

E-commerce is at the basis of this shift in the retail sector. However, JLL’s report shows that merely 5 percent of customers are interested in purchasing groceries online. Nevertheless, the digital world is and will continue to be a key factor in determining grocers’ success. According to Ferrante, some of the most used technologies include scan-and-go mobile checkout, fuel rewards, dedicated mobile apps and in-store location apps. “By embracing technology, grocers are merely embracing their customers who are increasingly technologically savvy,” he added.

Technology will also allow grocers to decrease store sizes, which will result in lower rent costs and increased profit over time. Smaller format stores of about 10,000 square feet will be the focus going forward, the report shows. This will also provide grocers with the opportunity to concentrate on investing in the improvement of the shopper experience in 2018. In addition to the integration of digital tools, in order to achieve and maintain success, grocers should adapt to trends such as offering organic and locally sourced foods and raising brand loyalty through private labels.

Image courtesy of JLL