In this episode of Retaili$tic, Deborah Weinswig, CEO and Founder of Coresight Research, unpacks a week filled with insight, innovation and evolving trends, sharing her highlights from Placer.ai's Discover event, ICSC NEW YORK and The AI Summit New York. From the future of mixed-use developments to the growing influence of Gen Z on malls, Deborah explores the trends shaping the retail and commercial real estate landscape in 2025. She touches on loyalty programs, AI (artificial intelligence)-driven personalization and the impact of GLP-1 adoption on consumer behavior. Plus, hear how AI breakthroughs are reshaping industries, from retail to drug discovery. Navigate the ever-changing retail and real estate world with this week's episode!
Takeaways
Chapters
00:00 This Week in Research, Highlighting Retail 2025 Outlooks and the Collapse of the Kroger-Albertsons Merger
02:49 Exploring Mixed-Use Developments
06:12 Challenges in the Dollar Store Industry
09:31 The Role of AI in Retail
11:23 Evolving Consumer Behavior and Predictions for 2025
Welcome to Retaili$tic, the official podcast of CoreSight Research for December 17th, 2024. We kick off this week with our visit from Georgina Smith, head of editorial, to get the skinny on all the new reports publishing on coresight.com. Then we have a fascinating few minutes with CEO Deborah Wineswig to catch up on insights from last week's meetings in Manhattan. First, let's check in with Georgina in London.
This week, we are continuing our Retail 2025 series with directional market insights and themes to watch across multiple US retail sectors next year, as well as our predictions for the overall retail markets in the UK, China and India. We will offer exclusive insights from each report in our Retail 2025 series in upcoming episodes of Retailer's Stick. So that's something to look forward to. Top news last week included the collapse of the $24.6 billion merger between Kroger and Albertsons in the US.
The merger was blocked by the rulings of two judges which occurred in separate court cases. The day after it terminated the merger agreement, Albertsons filed a lawsuit against Kroger alleging that Kroger willfully breached the merger agreement in several key ways. Our new report dives into the implications of the merger collapse for the grocery and CPG sectors in the US. We expect industry concentration in the US grocery market to steadily increase next year, predominantly in the supermarket space.
While the court decisions to block the proposed Albertsons-Kroger merger may discourage large-scale mergers in the future, CoreSight Research expects that the overall concentration trend will persist, with some small shifts in dynamics. For instance, we anticipate that major grocers will now seek to grow their market share by focusing on acquiring small and mid-sized players, with Aldi's acquisition of the Harvey's and Winn-Dixie supermarket banners being a recent example of this strategy. Elsewhere in research this week, we continue to track US consumers' participation in holiday shopping.
identifying the product categories and retailers that are dominating the season. Our proprietary survey findings reveal that holiday shoppers are increasingly purchasing food and apparel as we near the holiday peak. And we also highlight the appeal of Coles this week as a time when other department store retailers are struggling. We will also present the latest developments in retail shrink and recent commentary on the topic from selected US retailers. And using data from the US Census Bureau, we will look at total retail sales growth trends and performance by sector in November.
Finally, with 2025 almost upon us, are you ready for CES in January? We will preview that event this week to enable you to best plan your time there. And I encourage you to reach out to us by emailing contactus at corsite.com to meet the team at CES or NRF 2025. We look forward to seeing you there. Thanks Georgina. Sounds like a busy week. Now let's head up to the boardroom to hear from Debra.
It was another event filled week and we started off on Tuesday at Placer AI's Discoverers event. It's an annual conference that they host ahead of ICSC New York. ICSC New York being the convening forum for commercial real estate, mixed use, very focused on retail real estate, a little bit of industrial, but that pretty much sums it up. And it is a deal-making event. I spoke at that event on mixed use, and I think the title of the session was Connecting the Dots. It was quite interesting with a gentleman who used to run e-commerce for companies like Tory Burch and Ralph Lauren, turned technologist and investor. And then also we had somebody from Irvine who used to run a few properties and has now got a really good sense of what's happening in mixed use.
The moderator was David Blumenfeld from Next Rivet. And a lot of the conversation centered around the convening of tech and real estate and retail. One of the big topics was around loyalty and how do you, as a mall operator, think about understanding the customer holistically versus the individual customer by retailer? One great way to do that is to have a loyalty app for the mall. And several folks have talked about what that looks like and where there's opportunities. It's probably one of the biggest opportunities right now with Gen.ai.
And one of the ways to fund some of that is through a retail media network, which has been growing at scale for the landlords and we think it'll be even bigger in 2025. So number one topic was around loyalty and kind of this idea of turning them into a platform. Secondly, the focus was around tech selection and how to help the landlords not only understand what the options are, but who owns this relationship, who owns the decision internally, and how does all of that come about.
And then...another hot topic was around the future of mixed use. So mixed use being live, work, play all by the same landlord and same location. So I actually saw this really interesting story yesterday about, I don't know where it is, but there's a mall in Providence that people kind of like live on the upper floor. But you're like, you're literally living in the mall. So it's basically they converted the top floor of stores into residential. And I have to say, I think I read it kind of several times, so just thought it was like that interesting. And this idea around, you know, kind of mixed use and I think some of the fallacy that if you have residential, you ultimately have a strong mall. Well, the number of people you need to have a strong mall far outstrips residential usually. So I think it's great. I think it creates excitement. I think that mixed use is definitely the way the future.
In addition, as we think about how a lot of this has continued to evolve, the landlords, I think, are increasingly interested in Gen Z where that customer is physical first. We believe they shop in a unified commerce type of way. So they may go into the store, they put the item in their basket, they then go home, they share what they think they're gonna buy with their family and their friends, and then they either focus or they go back to the store to physically buy it. But this idea that they're doing a lot more research for ultimate conversion, and it's one of the reasons that for Gen Z we see a lower return rate.
So those were some of the overarching themes coming out of our panel. I also had the opportunity to talk to a lot of capital providers. Several other REITs, landlords. It was really fascinating. And some of the topics coming out of that were around what does, actually I thought I was quite interested in what is the future of tariffs and the impact on how people think about kind of shopping in general. I was surprised how much that topic came up. course, I just wrote a report on that.
Secondly, was around the number of bankruptcies expected for 25. And in the past where it felt like landlords were very concerned about that. It was actually the exact opposite where there was almost this like, thank goodness we can get that box back, right? We can put a better tenant in. So I thought that was definitely a change. And then, you know, lot of landlords were saying that they're seeing the interest in the number of new boxes is either flat to down, but that the retailers, restaurants, et cetera, are making more conscientious decisions and they're using more tools such as GenAI to make those. So they're making fewer decisions and better decisions, which I also thought was a positive.
And then one of the big topics is around the dollar store industry, which there's been a lot of drama. And if we look at, even just from a CEO perspective, I think the CFO of Family Dollar just retired. He was, you know, as an analyst, he was great to all of us on Wall Street, really clear and concise, helped us understand, helped us like translate their strategic initiatives into dollars and cents.
And so if we if we look at kind of Dollar Tree and where that company is and what have been the synergies in terms of a combined entity, does it make sense to stay as a combined entity? What happens with leadership there? And then we look at leadership at Dollar General, right, with Todd having kind of come back. And then if we look at Five Below with with Winnie just joining after Joel left, it's just a lot of turnover. And these are complicated stores to run. They're very hyper local, not only in terms of assortment, but also dynamic pricing. Obviously we're not dynamic pricing on Dollar Tree, but Family Dollar. And so the end, thing, right? With five below, it's more that you have, you know, kind of multiple price points now. But I think this sector is going to be one that we're going to continue to see, I'd say immense change in 25. And then we spoke a lot about the dollar stores where I think we've already seen a lot of change, right? We've seen a lot of store closures.
The challenge around a small box where you have very low associates, salespeople, cashiers, whatever the retailer refers to that individual who's helping people or assisting them in checking out, that per square foot in the dollar, in the drug store, excuse me, as you think about the sales per foot, and once again, a lot of this is happening in the pharmacy, but you just don't have enough labor per foot to stem a lot of the challenges that those retailers have faced and been very public about.
And the interesting thing when it comes to the drug stores themselves, right, as we're seeing a lot more compounding of GLP-1, we expect there to be continued strength and opportunity, but I think that we need a more strategic approach in terms of the offering. Putting everything behind Plexiglas is not a pleasant experience for the customer and how those loyalty programs, right, they all have a lot of insights on their customer and what they can do to message, you know, through different initiatives, how can they reach out to the customer when they acknowledge that they're in store?
What can they do in terms of real time promotions and pricing and just that, you know, with this whole move to like a Gentic, these Gen AI agents, the opportunity to really truly be hyper personalized is kind of like in the palm of our hand. And that I think I was just at this AI summit, which I'll talk about as well. And what we saw was that the bigger tech companies are really leaning into these AI agents to specifically help with personalization at retail. And so we think there's a lot of opportunity there.
So those were some of the major topics that came out of ICSC. At Placer earlier in the week, big focus on 2025 predictions and a lot around site selection, tariffs as well, GLP-1 and the impact of what people are buying, are they eating less, are they buying more apparel? The idea around how the value of some of these boxes is changing and how these landlords need to be more agile. Big focus on millennials versus Gen Z with Gen Z increasingly increasing their foot traffic into the malls. And that was, I think, big call out certainly for Black Friday.
One of the other topics around just opportunity in the year ahead is that very few of the AI POCs move forward into rollout and a lot of retailers and landlords have experimented, but we haven't necessarily seen those in the wild. And the idea being that everyone will be more sure-footed in 25. And so this landlord-tenant relationship, the ability to be more personalized is there. And a lot of conversation around the success of some of these more localized retailers, whether it's grocery or drug or whatnot, and how they are really driving one-to-one relationships I thought was also fascinating.
And then someone brought up the idea of accelerated polarization for the consumer, right? Where they're shopping and how they're shopping, but they're not afraid to cross shop. So maybe you're shopping in luxury, but then you're buying your groceries at Aldi. And, you know, all of the data does suggest that. And I think that that's increasingly interesting because it's more difficult to have your chronotypes or to really have your belief system because everything seems to be changing. Someone said to me, yo' retail is just weird. And I'm like, It's just evolving, right? And that I think is really exciting.
And then at the AI Summit, I spent a lot of time really very hands-on learning more of the deep tech part of a lot of what different tech companies are doing, whether IBM was there, NVIDIA, very large tech companies to the very new. So there's a company called Grafen, which is doing a lot. I spent some time with their CTO. They're doing a lot around AI drug discovery, which is an area that Coresight has focused on quite a bit.
I met a company called Mind Breeze and that was fascinating in terms of how they're helping everybody and just spent a of time with some folks from E&Y, like they're head of cyber and just what they're seeing in terms of how companies are really putting cyber at the forefront, which is why some of this is taking a lot longer than expected. That was fascinating as well. So it was one of those mind expanding weeks.
I'm still digesting and there was so much more that we learned and I think that the big questions coming out of the week were people are eating less because of GLP-1. These are the thought processes. And that potentially we're going to have less population next year, which once again, we've never seen people eat less year on year and we've never seen less populations. So there's a lot that is going to have to be figured out for the first time. And just kind of what does that mean and what does that look like? Maybe we'll figure that out in the week ahead. Thanks so much and have a great week.
Thank you, Deborah. We're eager to cover some of those topics on next week's episode as we kick off coverage of retail 2025 trends in advance of NRF. And thank you for joining us this week. We appreciate you listening and hope you will join us every week for the latest insights from Coresight Research. For more info on the Coresight's AI Council, access to our full catalog of in-depth research, schedules of upcoming events, and all the ways Coresight Research supports the retail industry, visit us at Coresight.com and follow Coresight research on LinkedIn. See you next week!