Hello again, this is Josh Carr at The Real Angle, and today I'm speaking with Michael Byrne of MJB Consulting. Mike, how are you doing today? Good. How are you, Josh? Good. Glad to have you on board. So today we're going to talk about a bunch of things. We want to talk a little bit about state of the retail markets, basically, and trends and what have you. So let's start with the basics. So your founder, principal of MJB, what do you guys do there? Yeah, so we've been around for a little while since now, 2002, 22 years. And what we do is we work with pretty wide range of clients, public, quasi-public, nonprofit, private sector, you know, municipalities, bids, quasi-public, government corporations, developers, investors. And we're basically helping them understand what kind of retail they can realistically expect in their project, in their downtown, on their main street, along their commercial corridor, what have you. So you're coming into the conversation, I imagine, before the brokers are then. You're basically saying to them, hey, you've got this proposed project, here's realistically the mix of retailers and the kind of retailers you can pull in, whereas I imagine by the time he gets to the broker, the brokers just kind of putting signs out there not to diminish brokers, but they're just doing the phishing process. Yeah. I mean, in contrast to, say, a very kind of deal-driven transactional broker, I need to find a tenant to fit a space at a rent the landlord's willing to accept a rent to the TILamma will accept, what I'm generally helping clients with is the broader questions of latent markets that might be tapped, a positioning strategy for the retail, how it fits within kind of the competitive ecology of a region or a metro or a city. Got it. And what that means in terms of anchors, mix, layout, all sorts of questions on those lines. And I imagine, now, are you generally getting involved, like, when I think about your role in terms of where you fit in versus what the architects are doing? Is your work that influencing, in theory, what the architects are generating, or is it more they've come to you and they're like, hey, guess what, this is what we're building? Yeah. In theory, it does or should inform site planning and space planning. And I think for the architects and urban designers who understand the importance of markets, it does. That's not all of them. Some, you know, sometimes I'll be giving kind of a scheme for how to design a project or, or, you know, or a street scaping initiative. And all the particulars have already been determined. And it was, and they'll ask me, what do you think of this? And I have to be the one to say, I don't think you're going to fill any of your spaces with this. No, I, I, trees kind of block the signage and, you know, all that. I, I do financial modeling consulting and have done that work for years. And I've had similar things where people have come to me with a complex financial structure and they want me to build a spreadsheet to work around it. And they say, what do you think? And I'll say, well, you shouldn't have signed this legally binding documents, what I think. Right. Right. Unfortunately, you did. Yeah. So now, so now we have to figure out what to do within the constraints. You know, it is amusing to me that often the ones who give the most conversation or lip service to collaborative processes are the architects and often they aren't actually collaborative. No, that, you know, in a lot of projects, they're much more focused on engaging the community stakeholders than the rest of the consultant team, but, you know, it's. Right. No. Yeah. No, it's, it is, it is, again, I don't want to just beat up on architects. Right. No, no. I've been, I've been teaching at Columbia School of Architecture for years teaching finance. And maybe it's just, I've been there too long because as a result, I've, I've developed an almost irrational dislike of a certain kind of architect. Yeah. Not all. I think that's a certain kind because certain kinds of architects, designers, planners, and I was originally one as, you know, our planning by training. Yeah. Yeah, certain, certain ones, they do get it. And others say it's a, it's a blind spot. Right. To put it kindly. Fair enough. Fair enough. Yeah. So, so let's, so let's talk about the retail mix thing. Cause I think it's, I mean, what I wanted to talk to you today for a bunch of reasons. I mean, one of the reasons is just simply you've been doing this for a while. So you actually have perspective, I think, at this point on where retail was and where retail is going. I mean, I remember many, many years ago, cause I've known you for a long time, a memory many years ago, you're making a comment to me about, you know, that every, every downtown that you talk to, when you said what they wanted, they just said, well, we want a Starbucks. Cause at the time, Starbucks was new and innovative. Yeah. If younger listeners can imagine that there was a time Starbucks was new and innovative. Right. We're getting a Starbucks isn't really like big of a get. I mean, it's a Starbucks, like no one's, no one's like, wow, you have a Starbucks. Right. So like where, let's talk about trends, like what we, we're going to attack this a few different ways. Like what retailers do you see right now when you talk to your clients? If they're going to name check a few retailers that they'd be excited to get in their community, what names or what product classes of retailers you seeing come up? That, yeah, that's, that's a great question. So yeah, it's, it's certainly no longer Starbucks and, and, and Starbucks also at one point had a kind of a market cashier as a tenant. Right. Um, that doesn't quite have now because you could pretty much find it anywhere, like really anywhere. Um, and you know, the Chipotle's in the world are going in that direction too. Um, that was once a little more of a get than it is now, but I would say when I work in downtowns, and I do a lot of work in downtowns, um, uh, especially downtowns in metro, urban and metropolitan settings, sure, still the number one request is for Trader Joe's, right? Now Trader Joe's appeal, now this is, that's also a reflection of the kinds of people that tend to be drawn to downtown and urban settings, Trader Joe's assistant for everyone, right? Um, especially Grocer. Yep. Yeah. But from in terms of, you know, psychographically speaking, it fits the urban consumer, um, like a glove, like a certain type of urban consumer, like a glove. Um, yeah. And the fact that you name check the, the term psychographics, I think is important. Yeah. And I think let's just define that for people for 30 seconds. Yeah. Micrographics is, um, we had demographics which defines consumers, uh, quantitatively, right? You know, how many people, how much money they make a year, much money, um, but we all know that someone who has a certain income, you put them next to someone else with that same income, they don't necessarily shop the same, right? Right. And that gets at this, this other dimension of psychographics, which really is more about the soft stuff that's hard to quantify, right? The, um, lifestyles, sensibilities, aspirations, I would say that the easiest way of understanding it would be to contrast those who generally shop at Walmart with those who shop at Tarjay, right? I mean, these are two retailers, a relatively similar model, right? The boat discount department stores, you know, obviously there's some differences in product mix and price point, but, um, you know, not in an order of magnitude sort of way. And yes, they're both have very clearly defined, um, personalities in the marketplace. Yeah. And I think of it. And it's the same in other industries. I think about car brands. Like why do you buy a Mercedes versus a BMW versus an Audi versus a Volvo? Or maybe you just say foreign versus domestic and you drew the line to just simply, I'm buying American, you know, um, and that says a lot about a lot of things, you know, just how you consume products, how you live your life, how many kids you have, how do you vote, all that kind of stuff. Yeah. And that's what's so fascinating to me about retail, um, is that it's, it's, it's, it's not just about the store and the products and, and it's also about the meanings we attach to brands. Um, and the meanings we attach to certain types of businesses, uh, and the way we use those meanings to reflect on us in terms of how we see ourselves or how we want others to see us. Sure. Sure. And it gets very philosophical. It does. It does. Yeah. And it can make, it can make, um, it can make community engagement very tricky. Um, right. Cause different commute, different stakeholders, different members of the community want different retail because of how they perceive. Cause yeah. Yeah. So no, it's funny. It's, um, yeah. I mean, I, God knows I have a number of stories that I could get into, but so let's talk a little bit about. So, so that's interesting. First off, Trader Joe's as a, as a, as a guy, that's kind of the, I guess it's, it's almost a default, particularly for, um, elected in government officials. Trader Joe's is the one you get when you talk to communities, right? And you talk, but when you're talking to, you know, like, um, yeah, an elected or government official, Apple, right? Apple is, is, is, is, is the, it's kind of the store still. Sure. If we can get an Apple here, even though 90% 98% of time it's just not realistic. Um, uh, but you know, Apple is one that you hear, there are some that I note in particular, um, a little more than my clients usually do. And it, it then isn't coming upon me to explain to them why those retailers are such bellwethers. Right. Um, like when I see an anthropology or an urban outfitters opening somewhere, there's a story there. Right. Right. There's a transition in a community and it's being represented by the retail. Yes. More recently, you could say it about Warby Parker. That's another one. Okay. Yeah. Sure. Yeah. Yeah. No, it's interesting as retailers, certain retailers being sort of first mover. Yeah. You know, like that, when it, airy transitions, they're the ones who go in rather than other retailers who are like, well, when you're fully gentrified, we'll show them. We'll follow. Yeah. Yeah. Exactly. And I always keep a very close watch on, on those. Um, yeah. And you have it going up market or down market. It's the same as communities change, as communities change. Um, so the pandemic obviously was a thing, uh, to say, I feel we all know Americans are not acknowledging that it's a thing or was a thing. Was a thing. I know. No, it's, uh, my wife's family about getting to interpersonal stuff. My wife's family has a number of people in the medical profession who, uh, brought brother in law who works, who is an ER doctor and, uh, you know, uh, his stories were something to the effect of someone who would come in with COVID and then refused to acknowledge the fact that they had COVID to wish him being an ER doctor is like, look, what do you want me to do here? Right. Like, right. You're obviously sick. I'm a doctor. Yeah. You're in the ER. That's called whenever you want to call it. Okay. Exactly. Yeah. You just call it the flu, but we still got to treat you like it's, this is not the time for a political debate. If you show up in the ER, you clearly need my services, um, he, uh, has a sense of humor about his job. I imagine that want to work. Yeah. Well, well, not to get to politics at all, but like the whole thing about, are you better now than you were in 2019? Well, no, because we just went through a global pandemic, you know, kind of high as some knock on effects. Well, I don't know. Inflation, maybe? Yeah. No, it's, it's, uh, it is funny. There's a wonderful book by the economist Galbraith about the Greek depression. And he wrote it, I want to say in the 50s. And it was basically saying now that we're 20 plus years out. What happened? Yeah. You know, and, but you, you need that kind of perspective. Now that's it. Yeah. retail. We are enough out. You know, 24, what surprised you, what conclusions, what wisdom have you drawn from what we went through as far as the retail landscape goes? Well, you know, the, the first thing I'll, I'll say is I was pleasantly surprised to be wrong on how I was feeling in April, 2020. And obviously that was not a time any of us were thinking all that straight, but when I considered a complete shutdown of in person, anything, I was saying, all these downtowns and, and, and main streets, which had really been riding a high for a good two decades. Right. I mean, there was a real downtown Renaissance stone in the 90s, um, 30 year trends, long term trends started in the 90s, people moving, and almost before the pandemic, in some places, it was almost even overheating. Right. Like it was, it was almost in need of a correction. And here we're just going to stop, uh, stop this entirely. We're going to be looking at severely elevated levels of storefront vacancy. Right. Yeah. I thought it was the death of retail. I was like, how, how a business is going to, I, I don't, I can't, I couldn't get my mind around it. Um, and that didn't happen. And that is not to minimize what did happen. And the devastation that we did see, uh, at least in the early years of the pandemic. Um, but what always still astounds me is how many businesses survived it. Right. And, um, yeah, and businesses that were, I mean, like I knew certain businesses would survive. I mean, like hair, hair salons. Okay. You're not doing that online. You know, but the fact that all these other retail tenants, for what was really discretionary spending, which to me, still a lot of the stuff, I'm like, you can just get it on Amazon. Yeah. Like, you just, you just haven't mailed to your house, but people still strangely enough are physically shopping and stores. Um, you know, I, I found that surprising now that said, go ahead. Yeah. Yeah. So I, I, I long had a rather contrarian take about the impact of e-commerce because, you know, yeah, on the surface of it, the numbers are the numbers, right? And it's obviously grown and continues to grow, yes, in certain categories, more than others. Um, but what has a, what, what I, what I suspected and what I think the pandemic pretty clearly proved was that there's a ceiling to this, right? Because if ever there was a moment when we would finally be able to settle a debate about brick and mortar versus e-commerce, it would have been 2020, you know, lockdowns, capacity restrictions, public health concerns, all of it. It was tailor made to, uh, put the final nail in brick and mortar's coffin and it didn't do it. Yeah. And even in cities where we're not cities, but even in states that did not have an entire shutdown because a little bit of politicians were like, we're not shutting stuff down the same way other states are and we're not to get into politics, but there was a red state blue state thing going on there. Right. Even in the red states where you had the choice, people still went to stores. Yeah. And maybe they were shopping a little bit more online. I, I, I thought one of the interesting data points was with percentage rent calculations that like people weren't buying the shirt in the store, but you had negative sales because when it came time to return the shirt, you'd, you'd bring the shirt back that you would order it online. So it's like, we're scared enough that you didn't want to buy the shirt physically, but when you wanted your money back, you overcame your fear of the vaccine or the disease because you wanted your 30 bucks, you know, and then I'm like, well, well, then you're really not that scared. Like, like, like, and that's the thing. It's like, and this was fascinating to me. If you took online's market share before the pandemic and looked at it again, two years later in 2022, it pretty much was at the exact same percentage as we would have expected given historical growth rates had their never been a pandemic. Yeah. Yeah. And then it went back down. Right. Yeah. I know it's interesting. I saw a report. I think McKinsey put out this report talking about how, you know, in one year of the pandemic, we had like 10 years of transition or something like that. And it did accelerate the transition, but it was not, it didn't go to 100%, you know, and it did bounce back and we are going to physical stores again. Yes. Some, you know, this is an ongoing conversation I have in my own household about, okay, when is going to the physical store meaningful and when is it just a waste of energy? You know, when can I just have it mailed to the house and I got Amazon Prime? I mean, everyone's got Amazon Prime at this point. So like, and that that's a question, like how much, and it's not even about the money it is about the convenience, but so as far as product types that are, you think, going to continue to grow, like where do you see, where do you see growth in retail? I hear a lot of people talk about experiential retail. I know that was a whole conversation for a period of time. Yeah. Like where are you seeing, what trends are you seeing, I guess? Well, you know, I think what's, and this was the other thing I was going to say before, but it kind of blends into this subject too, is we look at the debate about brick and mortar versus e-commerce largely from the perspective of the consumer, right? And what we need to also be doing is looking at it from the perspective of the retailer. And the big secret about e-commerce, and it remains true today, is that running an online, running pure play online retail is one big money suck, right? You know, simply put, selling online does not make money, right? You lose money, even Amazon, if you look at Amazon, they now have what, like almost 30 years of scale at this point, right? They founded 1994, right? We're now in 2024, and they still, at best, eat out a minor bit of profit under e-commerce operation. It's a thinner, it's a thinner, yeah. They're scale. It's a thinner, yeah. Right. They margin, they make most of their money on cloud computing, a growing amount on advertising. E-commerce is not a money winner for them, and for most retailers, it's a money loser. Pure play online retailers, like Wayfair, for instance, or, you know, they do that. Now that's because you're just competing purely on price at that point? No, actually, because the costs of last mile shipping are very high. The cost of customer acquisition, i.e. paying the king's ransom to advertise on Facebook or Google, I'm sorry, Meta or Alphabet, is exorbitant and the price of returns, right? All of those costs make it a money loser proposition, and you can reduce all three of those costs with physical stores. And that's exactly why so many of the digitally native brands started in the late 2010s to open stores. That's why Warby Parker started opening stores, all words start opening, now, you know, it's because they realize the only way you make these numbers pencil is by having both the online and... Yeah, and Warby Parker is a good example of this, so I recently got glasses, I'm a consumer, I use Warby Parker, and I needed a new eye exam, and it's very convenient to physically go to an eye exam in a Warby Parker store, which is conveniently put in the back of the store, just like the way grocery stores put the milk in the back, so they drag you to the back, you get your glasses, you get your eyes checked, and of course, on your way out, they're like, "Hey, by the way, now that you're here, you know, it's the manage." You might as well look at some frames, right? Right, so they turned what was basically a medical check up into a let me sell you some frames, which, you know, was a good business model for years, and this is what the eye guys always did, and that was the problem Warby Parker pure online, it's like if I have to separately go to get my eyes checked and then I got to deal with you people, that's a harder sale to make. Right, right, and so, yeah, no, it's interesting, it's amusing to me how we've tried to basically make everything online, but still at the end of the day, like the technology is in place, but we're still back to physical stores. Yeah, and I think, you know, a lot of the VC bros in the early 2010s who were convinced and who said as much that we're going, "When it's been online," and I mentioned Mark and Driesin in particular, you know, who famously said that, they were not understanding that for a large portion of the population, you know, and not to generalize, but much larger percentage of the female population, shopping is not something you just get out of the way. Shopping is the best of life. It's fun. Right. We like doing this stuff. Sure, sure, sure, sure. Why do we want to optimize something that we actually like, right? And so, there's this basic aspect of human psychology that was never understood. My girls have realized, because I've daughters, that given left my own devices, I would love to just find myself in Harbor Freight looking at random tools I do not need. Like I enjoy that. Right. I'm constantly fixing things. I like little physical projects I get into woodworking and all kinds of other crap. And you know, and I, it makes me happy, you know, and there's just no other way around that. It just makes me happy. I can justify it. I can tell you that it's for my family or that, you know, I need to fix this thing, but the reality is I could probably just hire a guy to fix it. You know, I just like doing it. And so that whole kind of isolated lifestyle we had during the pandemic, the lack of a better phrase, the Peloton economy, where we just basically. The Peloton economy. I love it. Let's go. Everything in our lives inside our homes, you know, and never have to really interact with the world ever again. I thought it was kind of laughable that there was the assumption this would endure. Yeah, yeah, no, it's, it's similar to the growth and co-working, you know, at the end of the day, just working out of your house can get depressing. It's the exact same conversation. I mean, Josh, I, yeah, go ahead. No, no, it's interesting. It's interesting talking about how retail's evolving. I mean, I will also say that, you know, you talk about difficulty for retailers. You know, the supply chains are also more challenging than they were. And there is something nice to having just product on a shelf. Right. You can push it because it's directly there. Right. So, so, okay. So generally your work, so you're brought in, you sort of put together this retail mix for people. You talk to cities about what, what they can achieve, what they can't achieve. And in theory then, that's helping craft what projects are going to get done. Most of your work has been domestic, or have you got announced out of the sector? No, so I, I, I would say the majority of my work is across the U.S. Sure. And I've done quite a bit of work in Canada, as well as some in the United Kingdom, that sometimes is a function of the strength of the U.S. dollar and the exchange rate. Sure. When the GB dollar was that's already, I was very popular in Canada. Now, not so much. Fair enough. Right. You still have to buy groceries and dollars. Yeah. Yes. But yes, I have, I have, I have done quite a bit of work in Anglo-North America, let's put it that way. Any differences you've experienced? Well, especially, there are some nuances between the U.S. and Canada. You know, it's, it's because it's a much smaller market. They've actually given, you know, there, there's actually an enormous amount of consolidation in their retail, in the retail landscape there, you know, and, you know, and so your, your, your choices, you know, as a, as a developer are, are a little more limited, which forces them to innovate a bit more in certain respects. Okay. But. So everything becomes a Tim Hortons, basically. I mean, they're just on, you know, like there's, even before, you know, like we had this department store industry unraveling, you know, there were fewer choices to anchor more with for instance. And that's fair. Now that's fair. It's a much more urbanized population as well. And you see that, for instance, even in the like casual dining ecosystem, you know, our, our casual dining chains are very middle of the road, family oriented, well, historically have. Historically. Yeah. And that's what I would envision. In Canada, you have, you know, you know, you look at earls and moxies and their casual dining chains, they're, they're more, they're, they are definitely seem to be geared towards a younger, more urban sort of sensibility. Interesting. Interesting. Yeah. Rather than family suburban types. Yeah. I mean, they have those. They have those, but I'm not, they're not as prominent. I would say as they are here, you know, or the evolution of retail is fascinating. And as discussed, it really does come back to, you know, it's consumer behavior, which means you end up talking about brands, regardless of whether or not you want to, and you start with demographics and economics, then you end up talking about specific chains. Well, no, this has been good to talk about sort of the growth of watching the brick and mortar stuff glimmering back. So I guess a couple of final questions. One is just simply, if you were going to bet on any major retail trend continuing, which would it be? And then one question I always like to ask everyone is recent surprises, something unusual that happens on a project that you feel like sharing good or bad. But let's start with trends, trends, like if you're, if you're going to bet on one trend that was going to keep going, which would that big? Well, it's what I think, one of the funny things that happens is that retail, in some respects, is suddenly a desirable investment again. And who would have guessed that five years ago, right? And a large part of that is that the market actually responded to oversupply. It took a long time, right? But we've built very little new retail space since the Great Recession in this country, right? Yes. And we've also removed a good deal of retail space from the inventory. We've diverted to other uses. So that finally, we are starting to come back into equilibrium, such that we are now dealing with some of the lowest national retail vacancy rates we've seen since at least the odds, right? So, overall, in the macro, right, overall, it doesn't apply necessarily to sub segments, but like we are seeing a very strong and robust retail market, right? And I expect that to continue because right now, or at least for a little while longer, because given interest rates, given construction costs, which we're not building a lot of new products, we just can't afford it. They're just not going to be that much for a little while, right? So I would expect that to get even tighter. I'm interested to see where the spillover is, whether it starts to evolve back into cities, which obviously took a real hit with the pandemic. So that's one trend. The other trend which is, and this is not, this is a little bit more of a minority opinion, because I do think that, and we've already seen this discretionary retail in brick and mortar is going to be far more resilient than people expect, right? And you know, the great untold story in retailing is the off-pricers, right? The TJ Maxx is the Rosses, the Burlington's of the world, who have been on fire for years through the pandemic, into the post-pandemic, even though none of them either sell online at all, or derive much more than a negligible percentage of their sales. Yeah, they're in person. They're in person. Yeah. And it's a treasure hunt experience, which people clearly have shown they want to have in store, right? I've had this conversation with my wife about the joy of going to TJ Maxx and finding something unexpected for cheap. Yeah, it's sports shopping. Yeah. And that's going to be far more resilient and has proven to be far more resilient than anyone ever thought it would be. Right. I don't see any reason why that, why that changes. Right. People still like a good deal. No. That's fair enough. Well, look, this has been good. I think that's, that's all very fair stuff. And good. Well, look, I want to thank you again for coming on, on, on the pod. And for those listening, again, this was recorded in early July, 2024. And if people want to find you, well, what's your web address again? What's your address? Yeah. So my, my web address is Mike Byrne, M-I-K-E-B-E-R-N-E at consult M-J-B-E dot com. So C-O-N-S-U-L-T-M-J-B dot com. And that's your website, obviously. Yes. And if, and there's another web, um, another website which I'm putting together, uh, for my writing and my speaking as well, which is going to appear imminently. So if you're interested in that, email me at that other address, you know. Cool. Well, look, Mike, thanks again for coming on and, uh, beautiful. Great. Talk to you. Thanks for having me, Josh.
