Take a look at the graphic below, we all know what it means, more and more of retail sales is now and will in the future be driven online. And when I say driven I mean data-driven. Let me throw this at you. Amazon is not an online retailer they are an online search engine that owns the entire value chain of the retail transaction. Yes, that’s how you get to be Amazon, beat Google and Wal-Mart at the same time. Impressive you have to admit.
There have been tomes and tomes written about how this has and will affect retail in general and retail commercial real estate specifically. The mainstream (if that even exists anymore) media can’t go a single day without using the term Retail Apocalypse. Sounds all doom and gloom especially when you have zero clue about what that actually means.
There is one huge point that I have not seen addressed at all and that is The Convergence of Tenant and Owner Data. How is it possible that no one has looked at Amazon as the Landlord of Internet Retail? Maybe they have, or maybe they are too busy watching their world burn to pay attention to the real issue. The value of their precious data.
To the point, Amazon has today a considerable market share of online eCommerce. Again, they own the entire value chain of the transaction and that transaction is based entirely upon data. Consumer data, behavioral, wants needs, timing, seasonal, point of sale, location and geospatial, loyalty, brand loyalty, (think about just the last two) and supply chain data just to name a few off the top of my head.
If Amazon is indeed the Landlord of Internet Retail they are then the Landlord of The Data that drives it. Owning and dominating another valuable piece of…the entire transaction. They have also turned each and every individual human into their defacto tenant. From a retail perspective, it’s hard to imagine how anyone could compete against that strong and well thought out position in the marketplace. Here a quick thought, when does Amazon start charging and or getting a bigger percentage of all retail sales. Mall owners do it. Hell, mall owners buy retail brands to compete with their own tenants. At what point does a retailer pick Amazon to “partner” with instead of an individual building owner? You know that answer, it’s already happening.
What happens when and I do mean when this domination and position of The Landlord Of The Data happens in all the other segments of commercial real estate? By the way, this is an old old old school concept.
Let’s take Class A office for example and drill down into how that might work. Wait, we don’t have to WeWork has already established themselves in the same if not yet dominate position of Landlord of The Space and The Data that drives it. Maybe we could look at the hotel and hospitality segment for a clearer example. Wait, your right AirBnB has already been in that same dominate position for how many years now? How many partnerships have been formed with building owners and these two companies or companies like them? Too many to count. It’s simple, partner or get buried! Or create your own brand that does the same thing hoping the consumer could care less about who they are doing business with. I did mention loyalty!
Here’s another position for you to consider and it’s one that I have touched on recently. What happens when someone just goes straight to every tenant, individual and or otherwise and owns that entire value chain and starts advocating for them, with DATA of their own. What did I say had “precious value?” Ownership of data. (As a side what value would there be to Facebook if they did not use everyone’s data, for their profit? Zero!) If there is no data there is no value, unless of course, you own it.
Which brings me to the owners of those physical structures. As we sit here today, things could not be better, for them. Sit on your hands collect rent and smash debt. Make Billions and Trillions doing it. There is to this point no way to create enough scale to make building data valuable beyond its own little space. It does indeed have spectacular value, don’t get me wrong. Just the lease data alone is worth billions by itself. That, of course, assumes you get data access and the rights to use that data in the open market.
Take the position in the marketplace as the Landlord of The Data (like Amazon, WeWork, and Airbnb) combine it with tenant facing data and what do you have? The Convergence of Tenant and “Owner” Data and with that create what everyone thinks they have and that is the dominate next-generation platform for commercial real estate.
+1. How many think they are there already? Too many and no one is even close.
+1+1 What is Scale for building data? I have some thoughts…maybe another day.