No Comments

Walmart Vs. Amazon – The Battle of The Retail Giants

Walmart Vs. Amazon – The Battle of The Retail Giants

What’s their next move?

Post by Barry Wolfe

Did you see this one coming?

Sam’s Club is building a small-format concept that will be “centered on convenience and a digital experience” stocking only 1,000 to 2,000 skus. (Read story here:

On the same day, it was revealed that the company opened the first of its new e-commerce fulfillment centers in Memphis, TN.

Interestingly, both announcements were made by Jamie Iannone, CEO of and EVP of membership and technology.

I see this as a sign of things to come as e-commerce, fulfillment centers and brick-and-mortar locations merge in an omnichanneling landscape. In so many ways, Walmart is ahead of the game on this one. They have 660 Sam’s Clubs ands 4,672 Walmarts in the U.S. for a total of 5,332 sites. Amazon has 75 fulfillment centers and 412 Whole Foods.

This tells me that Walmart is in an excellent position to achieve penetration across a broader spectrum of markets, those that are e-commerce-friendly to slow adapters, from the coasts to rural areas. And, it also tells me that Amazon isn’t likely to sit by on such an unbalanced equation. They are likely to make a move that will allow them deeper market penetration, faster deployment, and access at a localized level. What will give them that advantage?

My inclination is toward drugstores. They’ve tackled food through Whole Foods, whose consumers mirrored their own customer profile and gave them grocery market entry via a physical location in a demographically-aligned trade area.

Next, would be medicine/drugstores/beauty. I’ve said this before as it gives them entry into a growing market segment (beauty) while gaining a foothold in a recession-resistant category (medical/drugstores). I’m not the only one thinking this is their next move. CVS is rolling out delivery for prescriptions and some over-the-counter medicines as it is said to be bracing for Amazon’s possible disruption. (Read more here: drugstore’s merger with Aetna makes it an even more interesting player as Amazon has been making various supply-side moves.

Interestingly, Walmart just recently filed for several patents including a patents system for accessing medical records stored on a #blockchain, and just last month, Walmart was awarded two patents; one for a digital marketplace system that customers may use to resell items and the other geared towards facilitating customer deliveries to restricted areas using autonomous ground vehicles. Read full story here:

What will be Walmart’s next move? What will be Amazon’s next play?

Let me know your thoughts here:


No Comments

Net-Leased Retail Research (Fall 2017)

Marcus & Millichap recently released the Net-Leased Retail Research Fall 2017 Report which looks at the current net-lease landscape including key indicators such as employment, 1031-exchange activity, retail sales growth, and the 10-year Treasury. Following are key highlights I gathered from the report:

  • Job growth remains steady, with gains averaging 174,000 positions per month over the past year. This has resulted in the unemployment rate reaching the lowest level since 2001.
  • Net-leased development remains the predominant sector of overall retail construction. Of the approximately 60.4 million square feet of retail space delivered over the past year, more than 46 million square feet was composed of single tenant net-leased retail. Dollar stores, quick-service restaurants, and pharmacies are the single-tenant concepts that have experienced the most construction activity in 2017.
  • Driven by investor desire to shift their portfolios toward less management-intensive assets, 1031-exchange volumes make up a considerable portion of the net-lease marketplace. So far in 2017, exchange-related buyers encompass more than 40 percent of transaction volumes. As a result, the status of this tax provision moving forward will remain a major driver of deal flow and investment demand. Any potential changes to the tax code that significantly impact 1031 Exchanges would have a serious impact on this sector so it is certainly something to watch closely.
  • Overall, leverage on acquisition loans has continued to reflect disciplined underwriting, with LTVs typically ranging from 60 percent to 70 percent for most retail properties. Going forward, The Federal Reserve’s plans to normalize its balance sheet will place upward pressure on interest rates.

The Net Lease Report also includes a summary of credit rating, number of locations and range of cap rates related to sales by several different brands and sectors. Download the report below. As always, at the Wolfe Retail Group of Marcus & Millichap, we are available to discuss this information in depth, including any impact this may have on any of your projects. We remain optimistic that 2018 will be another strong year for our sector of the commercial real estate industry. Feel free to message me via LinkedIn.


No Comments

2017 U.S. Retail Investment Forecast

Many unknowns assuredly await investors in the coming year. Prospects of consistent economic growth alongside rising interest rates, a potentially more aggressive Federal Reserve and a range of decisions expected to come from the White House and Capitol Hill merit scrutiny. We hope this report provides useful insights that will help our clients navigate the shifting landscape. Click below for this full report.
National Retail Index (NRI)
  • Markets in Western states are well represented in this year’s National Retail Index (NRI). Seattle-Tacoma climbed two places to claim the top spot in the ranking, pushing last year’s highest-ranked market, San Francisco, down to the second position. Other Western metros in the top 10 are Los Angeles, Salt Lake City and Portland.
  • Raleigh announces its debut in the Index by securing the seventh position. Another Southern metro, Nashville, vaults from slightly outside the top 10 to the fi fth rung in 2017 behind projected low vacancy and a robust gain in the average rent.
  • Boston is this year’s highest-placed Eastern market, executing a seven-spot rise to the third position due to tight vacancy. New York City places close behind, while San Diego leads a contingent of four California metros to initiate the group of markets ranked from 11 to 20. The NRI concludes with Cleveland, Kansas City and St. Louis occupying the bottom three rungs of the 46 ranked markets
National Economy
  • A tightening labor market will trim job creation to 2 million new positions in 2017 from more than 2.2 million hires last year. Wage growth began to gather momentum last year and increases will continue this year as labor market slack tightens, promoting additional retail spending.
  • An increase in consumption and business output as well as more robust residential construction will support GDP growth in the 2.5 percent range in 2017. The availability of consumer and business credit is expanding.
  • Some uncertainty hangs over the economic outlook as the Trump administration begins to assemble an economic agenda. Tax cuts and infrastructure spending are assumed to be primary components of any economic legislation.
National Retail Overview
  • The retail sector continues to flourish despite the expansion of online retailing. Several value- and service-oriented retailers lead a list of scheduled store openings this year that will help generate 81 million square feet of net absorption and a reduction in the national vacancy rate to 5.1 percent.
  • The emergence of online distribution combines with tighter construction lending and investor caution to restrain development. This year’s projected completions of 49 million square feet mark a decline from 2016.
  • Changes are occurring at the property level, with many owners subdividing vacant anchor spaces to add restaurants and service providers as strategies to enhance property performance.
Capital Markets
  • Following an increase in the yield on the 10-year U.S. Treasury, investors have adapted their underwriting models to reflect arising interest rate environment. Debt markets remain liquid, providing solutions and sources for a range of capital needs.
  • Leverage on acquisition loans refl ects disciplined lender underwriting, with LTVs typically ranging from 55 percent to 65 percent for most retail properties. The combination of higher rates and conservative lender underwriting encouraged some investor caution that slowed deal fl ow in late 2016, a trend that will likely extend into 2017. Lenders will continue to scrutinize properties’ exposure to underperforming chains and vulnerability to e-commerce this year.
  • Banks stepped in to capture greater market share last year as CMBS issuance eased in response to new risk-retention standards under the Dodd-Frank law. The prospects of major changes to Dodd-Frank could materially change CMBS standards this year, but revisions will likely emerge slowly.
Retail Investment Outlook
  • Overall pricing and cap rates have surpassed pre-recession levels, driven by trends in primary markets. Many secondary and tertiary metros offer unique opportunities as prices remain below the prior peak, and these markets are eliciting interest from investors.
  • The rising popularity of online shopping is pushing investors to revise tenant mixes as a means to create additional value. Owners are turning to retailers that are difficult to disintermediate through online options.