Amazon sent shockwaves throughout America and abroad when news broke of the e-commerce giant’s acquisition of Whole Foods Market. The $13.4 billion deal was the first of its kind and showed a leap of faith from traditional shopping trends to a new, technologically advanced horizon. Amazon currently has a variety of grocery based options such as AmazonFresh, Prime Now, Prime Pantry, Subscribe and Save and of course, Whole Foods.
With the implementation of these new digital grocery options, Amazon has given its Prime members, all 100 million of them, access to new, more convenient options. Though upon the inception of this virtual grocery idea, consumers were hesitant to purchase perishable items such a dairy, meats, and vegetables, the number of these items being bought is steadily rising.
Though grocery stores seemed an untouchable commodity, a business model unchanged by the time, the rising success of digital grocery shopping is changing that rapidly. Humans need to eat to sustain life, and food retail is a $5 trillion business. Though Amazon has broken barriers with their revolutionary technology, online grocery sales are expected to continue to increase to over $300 billion by 2022. According to recent studies, more than 50% of consumers are likely to order things like food, supplies, and groceries online. That same study concluded that only 24% of those consumers would go to a local retailer or supermarket.
With the aforementioned numbers in mind, it is clear that traditional grocery stores and retailers who do not stay relevant are primed for failure – no pun intended. So how will these more traditional retailers remain successful? Some grocery retailers are partnering with outside delivery companies such as Instacart, which allow customers to browse grocery store items with an app and have them delivered by an individual to their location of choice within and hour, or at a pre-selected time.
Larger retailers like Walmart and Target have been actively working to improve their delivery capabilities, following Amazon’s model. A variety of smaller, independent grocers are thriving by selling locally grown produce, specialty items that are otherwise hard to find, regional items, and holding interactive class.
Amazon , however, continues to be at the forefront of the digital grocery advancement, they recently have continued to expand Prime to a variety of foreign countries such as Mexico, Luxembourg, and Singapore. In Seattle, Amazon created its first Amazon Go store. This store includes grocery and food retails. It uses technology to ditch checking out entirely. Consumers can literally walk out of the store and be automatically, virtually charged.
With advancements like this underway, it is important to for retailers, start up companies with fresh ideas, and traditional stores to put their efforts into overtime. As the world becomes more virtually connected, and possibly disconnected from traditional interactions. customers are willing to do what it takes to save time. With schedules busier than ever, customers are willing to pay higher prices for convenience. So it is important for grocery stores to stay relevant, and innovate in this time of evolution and change.
Opportunity zones have been a hot topic in commercial real estate recently. You may be asking “what exactly are opportunity zones?” If you are a savvy real estate investor, here are four things you should know about opportunity zones, beginning with the textbook definition for what they are.
What are Opportunity Zones?
An opportunity zone is an economically-distressed community where investors can earn preferential tax treatment for pouring capital into in. Post-recession, some communities simply did not recover, and these particular communities have become opportunity zones. These zones are approved by the federal government and remain opportunity zones 10 years after they have been designated as so. During this time, investors have the option to defer taxes on their capital gains as long as they invest those gains into an opportunity zone fund. These funds put at least 90% of the pooled capital toward developing these opportunity zones.
This has intrigued interest from commercial real estate clients because of the increased investment opportunities and the guarantee that if the investment is in place for 10 years, the appreciation on the opportunity zone investment is excluded from future taxation.
When Should You Invest in an Opportunity Zone?
Investors are attracted to new opportunity zone investments because of the tax deferment and exclusion factor. Although, the tax reduction benefits are dependent on how long the investment is kept. If the opportunity zone fund is maintained for 5 years, there is a 10% exclusion for this deferred gain and in 7 years 10% turns to 15%.
An investor will become eligible for an increase in the basis of the fund’s investment equal to its fair market value if the investment is maintained for 10 years or more on the day that the fund investment is either exchanged or sold. This is why it is important for investors to understand that the sooner they choose to invest in opportunity zones, the faster this investment begins generating ROI.
Where Should You Invest?
- Oakland, California: West Oakland, Uptown, Jingletown, Coliseum Industrial
- LA: Downtown and South Los Angeles
- San Jose: Market Almaden, Washington Guadalupe, East Northside, Jackson Taylor, Mayfair
- San Diego: Golden Hill, South Park, Barrio Logan
- Seattle: Beacon Hill, International District
- Portland: Pearl District, Central Eastside
- Phoenix: Downtown, Tempe, Chandler, Mesa
- Nashville: East Bank, Five Points, 12 South, Edgehill
- Atlanta: Bankhead, Grove Park, English Avenue
- New York City, Brooklyn
Every opportunity zone will have different needs, so the best option is to find an area that has needs in a sector you are familiar with.
How Should You Invest in Opportunity Zones?
When investing in an opportunity zone, you should consider expanding upon your traditional ideas and putting your capital gains to work. You may not initially think that diversifying your portfolio with assets may yield a lower potential return is a wise choice, but opportunity zones will mix things up. The tax benefits you receive will let you as an investor take a lower pre-tax return on this diverse asset and you will end up achieving a higher post-tax return. This can help promote new projects in these areas that need the work, attention, and expansion.
As the adoption of online food shopping continues to grow, what lies ahead for grocery shopping? Food retail is in need of some change, but how exactly are grocery store chains adapting to this new wave of retail trends? Let’s take a look at five ways grocery stores are innovating for 2019 and beyond.
Grocery Stores Will Offer an Experience
In 2016 and 2017, consumers in America spent more money on food at bars and restaurants than they did at grocery stores. Supermarkets will need to think creatively to combat this. Some stores in smaller cities have transformed their space to combine groceries with entertainment. Kroger has plans to open a store in 2019 in downtown Cincinnati that will include a second-floor bar operated by third parties and ready-to-eat items by vendors.
Grocers Leasing Vacant Mall Space
Recently, Whole Foods opened a store in a former Sears location mall in Florida. As mall operators look to supermarkets to fill their anchor department spaces, ancillary merchants like spice shops, wine stores, and cooking suppliers will take adjacent vacant spaces as they open, to form little food hubs. Since the malls need the foot traffic and the grocers need the large blocks of space, the marriage of the two concepts is a truly innovative solution.
Many grocery store companies are feeling pressured by the convenience of fast replenishment services offered by Wal-Mart’s Easy Reorder or Amazon Dash. Because of this, grocers will include auto-replenishment on their online marketplaces. Currently, 47 percent of consumers in the United States said they would take advantage of auto-replenishment for household items like toilet paper and soap according to Accenture Strategy. These same consumers also said they would use auto-replenishment for fresh food items like vegetables.
Traditional supermarket operators will need to compete with Amazon as they continue to enter the grocery format. This is where freestanding grocery kiosks will come into the sphere. They will be installed in office buildings, train stations, and other convenient spots for commuters. This will allow for quick orders that can be picked up on their way home or can be delivered. While more expensive than mobile apps, these kiosks can serve as a way to advertise and alert even the busiest commuter of their immediate needs. A kiosk could also promote various items.
New technology will help grocery stores go on camera and sell products live. By collaborating with major household and food brands, grocers can create sponsored online programming that features cooking, cleaning tips and live entertainment along with cooking segments. Viewers will have the chance to click and order any of the products featured. For example, a guest chef could make a recipe using ingredients that the shopper can then order live and make that evening.
Grocery stores will need to adapt to all of the changes that are happening in the retail sector. These are just a few of the ways grocery stores will innovate for 2019 and beyond.