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The New Retail Industry: Why Asset-Based Lenders Should be Optimistic

May 15, 2018

If you read the newspaper or used the internet in 2017, you can be forgiven for thinking that the retail industry is dead. You read about demographic shifts and way they’ve totally altered consumer habits. You observed first-hand the steady rise of Amazon.com and the demise of retail mainstays, most recently Toys “R” Us.

Which makes this ‘hot take’ all the more interesting: Lenders should be optimistic about the retail. At least that’s the opinion of Irene Marks and Lynn Whitmore of Wells Fargo Corporate Banking and Wells Fargo Capital Finance, respectively.

Retail Industry Doing Just Fine

The Millennial generation — those born between the early 1980s to early 2000s — are in the driver’s seat. They’re often credited with “killing retail,” but a close look at the data suggests this isn’t the case. Although they do use the internet far more than other generations for product research and comparison, almost 67 percent of their purchases are made offline. Perhaps most importantly, the youngest Millennials, those born in the late 1990s and early 2000s, are showing a greater preference for brick-and-mortar shopping than older Millennials.

That may be why last year ended on a surprisingly positive note for retailers. Holiday sales exceeded expectations. There was healthy interest among investors looking to get in on the bottom floor of a turnaround story. The key for lenders involved in retail is to understand the market changes and recognize brands that are situating themselves to thrive — not just survive.

The Retail Industry of Tomorrow

Retail can’t simply rely on their location to draw customers. Window displays and traditional advertising simply won’t cut it. Successful retail means using the store as an integrated part of the brand’s overall offering. The store isn’t simply a place to sell goods, in other words, but must be an extension of the brand’s overall experience.

To navigate and succeed in the new retail paradigm, brick-and-mortar brands must play to their strengths. That means allowing so-disposed customers to simply pick up their goods in store. It means integrating features in the store with smartphone technology. The retail stores of tomorrow can’t simply be cookie-cutter, homogenous franchises with no connection to the local community. One of the most powerful trends among Millennials is to support local businesses. If retail brands situate themselves correctly, they can capitalize on that trend.

Asset-Based Lenders Must Adapt

Asset-based lenders also have to adapt to the new reality. While lenders are traditionally focused on traditional collateral, like inventory, real estate and accounts receivable, now they must be much more willing to consider other assets, like customer lists, patents, trademarks and other intangible assets, according to Irene Marks and Lynn Whitmore of Wells Fargo. More information can be found in the April issue of The Secured Lender

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