Q&A: Many retailers underestimate importance of remodels

HRC Advisory’s annual CEO and CFO survey revealed a major disconnect between capital investments, retail growth and operating strategies.

HBSDealer sister publication Chain Store Age spoke with HRC Advisory CEO Antony Karabus about the survey.

HRC Advisory’s annual CEO and CFO survey revealed a major disconnect between capital investments, retail growth and operating strategies.

HBSDealer sister publication Chain Store Age spoke with HRC Advisory CEO Antony Karabus about the survey.

What did you find most surprising about the survey results?

I was surprised that only 20% of retailers surveyed have increased capital expenditures over the prior year. The fact is there are so many more competing demands for capital allocation in 2015, given the increased need to more seamlessly integrate and connect the customer experience between retail stores and ecommerce sites, as well as providing the most relevant in-store experience for customers in this new connected and digital retail environment.

Do you think retailers tend to underestimate the importance of remodels?

Yes, I do believe many retailers do underestimate this strategy. There is a relatively widely held view among a number of retailers that remodels are a form of maintenance expenditure to keep stores from deteriorating as they age.

But I believe the more progressive retail leaders see the importance of remodels to keep stores looking fresh and, more importantly, to provide the best in-store experience for customers. The in-store experience is one of the most crucial differentiators for brick-and-mortar retailers in competing more effectively against the pure play e-commerce retailers as the physical store environment provides the best way for customers to touch, feel and generally experience the brand in a very real way, versus just on an internet site

Why do you think so many retailers are investing in new brick-and-mortar?

I think it’s because there are many retailers still in sectors where there is significant organic growth, such as athleisure, yoga, discount, extreme value and outlet channels, as well as the opportunity to expand concepts into smaller communities where there may be less competition.

In addition, there are numerous good locations that have become available as literally thousands of store locations have become available due to bankruptcies and downsizings. Also, selected landlords have been upgrading or fine-tuning their tenant portfolios to better suit their brand NorthPark in Dallas, for example, has made significant changes to its tenant portfolio recently.