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Blackstone Flags Retail Investment Opportunity As Big Brands Put Focus Back On Stores

When more than 800 international retailers gathered in Paris last week at the World Retail Congress, their to-do lists were overflowing with a raft of new issues and challenges, many of which barely existed even two years ago. But major investors like Blackstone are buying property again, and that centuries-old route to market, the shop, is seeing a renewed focus. 

Top of the in-tray list was artificial intelligence, as retail groups look to apply AI to their customer-facing operations and services and to optimise global supply chains, with increasing doubts over whether the long-distance, low-price model can survive military and political upheaval, climate change and sustainability requirements.

For landlords, the good news is that overall, the retail industry — despite the advent of new technologies — seems to have refocused on store estates and the crucial role of the store in connecting with consumers, which should mean more investment and expansion in 2024. But to make the most of those opportunities, the real estate sector will need to help retailers embrace an era of constant transformation.

Here are five key themes from the WRC on how changing retail requirements could influence property requirements.

Sephora has invested in its Paris flagship as it seeks to differentiate its offer.

1. Time To Invest In Property Is Now

“The headline is that it's going to be an interesting year to invest in retail real estate,” Blackstone Senior Managing Director Andrea Drasites said. “You have geopolitical disruption, you have the new normal of a higher interest rate model, which changes the balance sheet. Also, you have the choppy consumer, who is still relatively wealthy around the world but has less disposable income. You have to have conviction in the theses and the data. You can't wait.”

Retail has not been a big investment theme for Blackstone over the past 15 years, but the company dipped its toe back in the market last week, completing the £227M acquisition of a block on London luxury thoroughfare Bond Street. It is leased to luxury watchmakers Breitling and Audemars Piguet, as well as Church's, the shoemaker.

“These factors will create opportunities, and that's something as a business we're looking at,” Drasites said. “There is a bifurcation of convenience and luxury, with the middle really suffering, which is a theme I think will continue. Scale will be a benefit, but the market is not for the faint of heart.”

Etam Chief Development Officer Jose Gomez said that with five brands, close to €1B in sales and operating across 52 countries, with approximately 20% of revenue online, when looking at a new country, “We don't think how many stores, we look at all channels.”

“The easiest landlord relationships are with those who look after their malls and put the right brands in the right place, even if they have to sacrifice a little profit,” he said of working with landlords. “The key is that you have a successful brand. Then the malls will welcome you with open arms.”

AWWG Chief Commercial Officer Juanjo Sotomayor oversees a platform of brands including Pepe, distributed across 60 countries and managing 500 stores.

“The main [key performance indicator] for us is still location, which includes the brands around you and the footfall,” he said. “But not just the quantity of people going past but the quality. The [profit and loss] for each store is important.”

2. Combining Tech And Location

Younger generations may be digital natives, but VML Global Chief Commerce Officer Beth Ann Kaminkow said the store is the “epicentre of where most of our purchases happen,” adding that younger generations typically want to go into physical spaces.

“You will grab them there,” she said. “There is a huge push towards personalisation. If you're not there from an AI standpoint, then they will be. It's about ‘emotioneering’ — people really want this technology to be inserted with emotion and be engaging. There is a creative multiplier effect that will grab the heart and wallet.”

Crate & Barrel CEO Janet Hayes cited introducing the retailer’s Design Desk service as an example, which came about because customers needed design help.

She said the average basket value for those who use the free service is $3K, while the average for those who don't is $1K. The designer and customer are able to build 3D renderings of the room they want to revamp. In the retailer's newest New York flagship, the Design Desk has been moved to the front to help create theatre.

“Technology-enabled, human-assisted, we have been able to change the game in our stores,” Hayes said.

The time to invest is now, Blackstone Senior Managing Director Andrea Drasites said.

3. Restructuring Stores For Success

Carrefour boss Alexandre Bompard said that in recent years the company has had to take some tough measures, including restructuring and selling off pieces in loss-operating countries such as China. One key challenge was to turn around its hypermarkets

“We tackled the hypermarkets in three ways: first, by becoming customer-centric, [then] by completely changing our organisation and process to boost productivity. And thirdly, for the most troubled stores, we partnered with entrepreneurs for issues we couldn’t resolve by ourselves,” he said. “The plan was to pave the way for omnichannel and become a leader in all our geographies and integrate our physical channels with our digital ones seamlessly.”

Meanwhile, Sephora CEO and President Guillaume Motte attributed the beauty retailer's success to product curation and differentiation, experience and the building of communities.

“As a CEO, I truly believe that a strong sense of purpose, values and culture are key assets to performance,” he said of the retailer, which welcomes shoppers to the store by clapping for them as they walk in via a red-carpeted aisle.

“Boring retail is dead,” he said. “Exciting retail is alive and kicking.”

4. Blended Margins To Value Stores

Mindshare Executive Director of Invention and Strategy Janet Levine said the strategy is changing for retailers on in-store media and that whereas “we used to point everything towards the store,” there is now a shift whereby retailers may start online, but the store has a big opportunity for brand-building.

“It is so much of an opportunity, and it's imperative to reach our consumers in the store, not just drive them to the store,” she said. “We have to craft and design a programme that leverages a whole ecosystem, which means every stage has to have shopability.”

Vericast Vice President of Product Management Hans Fischmann said most transactions are still carried out in the real world, but brands could miss out on opportunities to influence people.

“The challenge is how we do that,” he said. “Retailers have been sitting on unused value, but with the new metrics now, each square foot has a blended margin.”

“When you think of the closeness to the point of sale, not only are stores valuable but are undervalued,” said Ethan Chernofsky, senior vice president of marketing at, a company that specialises in footfall analysis. “There is a fundamental reassessment of what the store is capable of, and the starting point is to realise the value of the store.”

Carrefour boss Alexandre Bompard is focused on digital transformation.

5. Luxury Leverages Location

During the congress, luxury department store groups Harrods and Galeries Lafayette said they are committed to their flagship stores and to real estate expansion, but data has become a key battleground as they compete with the super brands.

“We strongly believe that physical retail is still alive, it is still strong, although we have to adapt to the way people want to use stores,” Galeries Lafayette CEO Nicolas Houzé said. “We decided 20 years ago to open in China, and we now have seven stores outside France and want to open five more in the next five years. We have opened direct stores in Germany and Luxembourg, are planning to franchise in India and operate with a partner in China.”

Harrods CEO Michael Ward said his company also stresses the advantages of an iconic location.

“We have as good information as Amazon in terms of data, but we have one huge advantage because we have experience,” he said. “We fight data with data and have sweet sauce on top.”

Related Topics: Blackstone, Retailers, Carrefour