2/12/20 - How Strip Malls Are Becoming A Prime Location For Retailers

From the Simplr studios in San Francisco, this is your daily briefing.  

Introduction

This is Today in Five, for today, Wednesday, February 12th. I’m your new host, Madison Huffman, reporting on the latest developments in the modern business world. Here are today’s headlines in digital disruption.

Strip malls, once historically ignored by some retailers, are now becoming a valuable alternative to traditional malls.

First, here are the latest headlines.

Brandless Shutting Down

DTC retailer, Brandless, is shutting down. A report from Protocol broke the news, noting the company would stop taking orders and halt its business operations. 90 percent of Brandless staff will be laid off and the remaining employees will fulfill existing orders and evaluate acquisition opportunities. In a statement on the company’s website, they said, “While the Brandless team set a new bar for the types of products consumers deserve and at prices they expect, the fiercely competitive direct-to-consumer market has proven unsustainable for our current business model.” 

Edgewell Abandons Plan to Acquire Harry's

Edgewell Personal Care abandoned its plans to acquire upstart rival, Harry’s after the Federal Trade Commission sued to block the over $1 billion dollar deal. It was a notable victory for the FTC, who said the deal would have eliminated one of the most important competitive forces in the shaving industry. Edgewell’s chief executive said the company would continue to pursue its direct to consumer efforts but that it would take longer to build than it would by buying Harry’s. He also said Edgewell would continue to look for smaller brands to acquire but isn’t looking for another large deal like Harry’s.  

China to Cut Tariffs on $75 billion in U.S. Imports

According to a statement from China’s Ministry of Finance, China will cut tariffs in half on $75 billion dollars worth of U.S. imports. The changes will take effect on February 14th. The move follows the Trump administration’s announcement during the signing of a phase one trade deal to reduce the tariff rate from 15 percent to 7.5 percent on February 14th on about $120 billion dollars worth of Chinese imports. The cutting back of tariffs represents a thawing of tensions between the two nations and will offer relief for many U.S. exporters and Chinese importers.

How Strip Malls Are Becoming A Prime Location For Retailers

Strip malls are starting to become a viable alternative for retailers that historically ignored them. Last week, both Macy’s and Sephora announced they would seek to open more stores in strip malls in the coming years. Last year, supplements store GNC announced plans to close 700 of its locations in malls to focus on stores in strip malls, which were reporting relatively stable store comps.  

As customers increasingly shop online and malls see declining foot traffic, strip malls offer a few benefits that are becoming more important. The rent at strip malls is cheaper since their stores are typically smaller. The anchor stores are often gyms or grocery stores, giving retailers the added benefit of being in a place consumers visit on a regular basis. Sephora’s senior VP of real estate and development said, “What we have been lacking is being in those neighborhoods where our customer goes to SoulCycle or picks up pizza on Friday evening.”

Retailers that have reported most or a significant amount of stores in strip malls include Target, Ulta Beauty, TJ Maxx, and Kohls. Ulta’s seen success in strip malls, with its third-quarter earnings beating estimates. The beauty retailer’s success explains why Sephora is keen to open more locations in strip malls. While the data doesn’t show a stampede of retailers filling up spaces in strip malls, it does show that vacancy rates are staying steady, while they are rising at more traditional malls.

Closing

Thanks for listening to this latest episode of Today In Five. Don’t forget to subscribe and leave us a review. We’ll see you tomorrow.