DUARTE – Ralphs Grocery Store to Close in July

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The Ralphs grocery store at 1193 Huntington Drive in Duarte is slated to close sometime in July 2015. The decision to close the store was a corporate decision by Ralph’s based on a variety of different business factors including that the Duarte store was consistently one of its lowest performing stores and that many who shop at this store do a portion of shopping elsewhere, making the current model in the City not sustainable.

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Ralphs has closed a number of locations in Southern California in the past few years, including San Dimas which was then leased to Smart & Final Extra and Arcadia which was leased to Savers. The Duarte location was reported to be in the bottom 50 of under-performing stores for years out of a 3600 store portfolio nationwide.

Ralphs was the grocery anchor within the Buena Vista Marketplace at the northwest corner of Huntington Drive and Buena vista. The shopping center is approximately 143,000 square feet. Additional tenants include Starbucks, The UPS Store, Wells Fargo, AT&T, Jamba Juice, Dollar Tree, Hertz, Subway, and Flame Broiler. The property was developed around 1990.

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 Buena Vista Marketplace is owned by the publicly traded REIT, Weingarten. Weingarten acquired the property in January 2001 as part of a portfolio sale that resolved a troubled situation with then owner Burnham Pacific. Weingarten’s business activities encompass the long-term ownership, management, acquisition, development and redevelopment of strategically located neighborhood and community shopping centers and select industrial properties. The vast majority of their shopping centers are anchored by either a supermarket or a national value-oriented retailer. These anchors combined with convenient locations, attractive and well-maintained properties and a strong tenant mix help to ensure the long-term success of its merchants and the viability of its portfolio.

Glendora – Diamond Ridge Plaza Sells for $111 Million

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Glendora’s largest retail center, Diamond Ridge Plaza sold in April for $111,000,000. The seller was Hsing-Chieh Shih and the buyer was UBS Realty Investors LLC, a subsidiary of UBS AG, a financial services firm that provides wealth management, asset management, and investment banking products and services to private, corporate, and institutional clients worldwide (www.UBS.com).

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Diamond Ridge Plaza is an approximately 355,000 square foot power center built in 2007 located at 1307 E Gladstone, Glendora, CA and is anchored by Best Buy, Staples, Bed Bath & Beyond, Old Navy, AMC Theatres, and more. The sale price was approximately $313 per square foot.

 

4th Quarter 2014 Los Angeles Retail Market Recap

This review covers the Los Angeles Market, which includes the Los Angeles, San Bernardino, and Ventura Counties as defined by Real Capital Analytics. The review includes three main topics; Volume, Pricing, and Fundamentals. The data includes deals over $2.5 million.

SYNOPSIS

Volume – Dollar volume increased by 59% from 4Q2013 while the number of properties traded increased only 15%. The average square foot of deals increased.

Pricing – Subsequently, the average price per square foot increased with a slight increase in cap rates of 20 points. Yield spread is back to a more normal range.

Fundamentals – Institutional vacancy declined by 30 points after holding steady for two quarters, while effective rent has leveled off and NOI per square foot edged up slightly.

VOLUME – Dollar Volume & Year Over Year Change

The total volume for the Los Angeles Market for 4Q2014 was $2.4 billion which was up 120% from 4Q2013 ($1.1 billion).

1 Volume 1

VOLUME – Number of Properties and Total Square Feet

There were 109 properties traded with a total of 9.7 million square feet, which represents a Year Over Year (YOY) increase of 28% in the number of properties (85 properties in 4Q2013). The total square footage traded increased dramatically by 111%, from 4.6 million to 9.7 million square feet from 4Q 2013 to 4Q 2014. The average deal size increased in that period from 54,118 square feet in 4Q 2013 to 88,991 square feet for 4Q 2014. This has had a downward pressure on cap rates which have continued to decline since 2010.

1 Volume 2

PRICING – Price per Square Foot & Top Quartile Price per Square Foot

The average price per square foot was about $233, however, the top quartile was over $625 per square foot. The top quartile figure is heavily influenced by the sale of 54 properties that sold for over one thousand dollars per square foot during the quarter. The average price per square foot in 4Q2014 decreased from $247 in 4Q 2013.

2 Pricing 1

PRICING – Cap Rate and Top Quartile Cap Rate

Cap rates decreased 20 basis points this last quarter to 5.7%. This continues the downward trend which started Q1 2010 when cap rates were about 7.7%. The top quartile also had a 30 point decline from 5.3% to 5.0% from 2Q 2014.

2 Pricing 2

PRICING – Cap Rate and Yield Spread

The yield spread continued its climb back to normalcy as it increased this last quarter to 354 basis points from 266 points in the 1Q 2014. Part of this could be due to the fact the 10 year treasury has also decreased a similar amount.  The spread peaked 3Q 2012 at 496 points, the highest spread since 3Q 2002 when it was 488 points.

2 Pricing 3

FUNDAMENTALS – Institutional Vacancy Rate and Institutional Vacancy Year Over Year Change

The Institutional Vacancy rate continued its steady decline to 3.9%, breaking the 4.0% barrier for the first time since 2Q 2009 when it started a steady climb to its peak at 7.1% in 4Q 2011.

Institutional Vacancy Rate is defined as the percentage of the property’s net rentable square footage that is not under lease obligation, and may vary from physical vacancy.

3 Fundamentals 1

FUNDAMENTALS – Institutional Effective Rent and Institutional Effective Rent Year Over Year Change

Effective rent has declined slightly in the past four quarters from $31.40 in 4Q 2013 to $30.90 in 4Q 2014.

Institutional Effective Rent includes all collected rental income from the property. More specifically it includes: Base Rent incorporating free rent and escalations, Contingent Income, Expense Reimbursement, Other Operating Income.

3 Fundamentals 2

FUNDAMENTALS – Institutional NOI per square foot and Institutional NOI Year Over Year Change

Institutional NOI per square foot decreased slightly in 4Q 2014 to $22.30 from $22.70 in 4Q 2013. This seems to be more of a leveling off after a steady rise from $17.70 in 4Q 2011.

The average institutional expense (Institutional Effective Rent – Institutional NOI) is about $8.60. Institutional NOI is climbing faster than the L.A. Metro annual inflation rate of 0.7% which is up from 1.1% for December 2013. The low inflation rate is due primarily to the significant decrease in Motor Fuel, which declined 22.4% since December 2013. This decline helped to offset moderate rises in other categories.

Institutional NOI is defined as Institutional Effective Rent Revenue minus Operating Expense. Operating expense includes the following: Ground Rent, General Administrative, Management Fee, Marketing, Other Operating Expense, Payroll And Benefit, Professional Fees, Property Insurance, Real Estate Tax, Repairs And Maintenance, and Utility Expense.

3 Fundamentals 3

3rd Quarter 2014 Los Angeles Retail Market Recap

This review covers the Los Angeles Market, which includes the Los Angeles, San Bernardino, and Ventura Counties as defined by Real Capital Analytics. The review includes three main topics; Volume, Pricing, and Fundamentals. The data includes deals over $2.5 million.

SYNOPSIS

Volume – Dollar volume increased by 59% from 3Q 2013 while the number of properties traded increased only 15%. The average square foot of deals declined.

Pricing – Subsequently, the average price per square foot increased with a slight increase in cap rates of 20 points. Yield spread is back to a more normal range.

Fundamentals – Institutional vacancy declined by 30 points after holding steady for two quarters, while effective rent has leveled off and NOI per square foot edged up slightly.

VOLUME – Dollar Volume & Year Over Year Change

The total volume for the Los Angeles Market for 3Q 2014 was $1.7 billion which was up 59.2% from 3Q 2013 ($1.1 billion).

1 Volume 1

VOLUME – Number of Properties and Total Square Feet

There were 101 properties traded with a total of 3.8 million square feet, which represents a Year Over Year (YOY) increase of 15% in the number of properties (88 properties in 3Q 2013) with a corresponding decrease in the total number of square feet (4.7 million square feet in 3Q 2013). The average deal size declined in that period from 53,409 square feet in 3Q 2013 to 37,624 square feet for 3Q 2014. The takeaway is the noticeable increase in the volume while the deal size is has declined.

 1 Volume 2

PRICING – Price per Square Foot & Top Quartile Price per Square Foot

The average price per square foot was about $486, however, the top quartile was over $668 per square foot. The top quartile figure is heavily influenced by the sale of nine properties that sold for over one thousand dollars per square foot during the quarter. The average price per square foot in 3Q 2014 increased from $335 in 1Q 2014, and has increased dramatically from $267 in 3Q 2013.

2 Pricing 1

PRICING – Cap Rate and Top Quartile Cap Rate

Cap rates increased 20 basis points this last quarter to 5.9% after a 60 point drop in 1Q 2014 from 4Q 2013. The top quartile also had a 30 point decline from 5.5% to 5.2% from 2Q 2014.

2 Pricing 2

PRICING – Cap Rate and Yield Spread

The yield spread continued its climb back to normalcy as it increased this last quarter to 337 basis points from 266 points in the 1Q 2014. Part of this could be due to the fact the 10 year treasury has also decreased a similar amount.  The spread peaked 3Q 2012 at 496 points, the highest spread since 3Q 2002 when it was 488 points.

2 Pricing 3

FUNDAMENTALS – Institutional Vacancy Rate and Institutional Vacancy Year Over Year Change

The Institutional Vacancy rate edged back down slightly to 4.4% from 4.7% the previous two quarters. However, Institutional Vacancy has been steadily declining since its peak in 4Q 2011 when it was 7.1%.

Institutional Vacancy Rate is defined as the percentage of the property’s net rentable square footage that is not under lease obligation, and may vary from physical vacancy.

3 Fundamentals 1

FUNDAMENTALS – Institutional Effective Rent and Institutional Effective Rent Year Over Year Change

Effective rent has leveled off the last four quarters with an average rent of $31.10 per square foot per year which was up 1.3% from 3Q 2013 when it was $30.70. Institutional Effective Rent includes all collected rental income from the property. More specifically it includes: Base Rent incorporating free rent and escalations, Contingent Income, Expense Reimbursement, Other Operating Income.

3 Fundamentals 2

FUNDAMENTALS – Institutional NOI per square foot and Institutional NOI Year Over Year Change

Institutional NOI per square foot edged up slightly after staying steady for three straight quarters, up twenty cents to $22.90. The Year Over Year change of 2.6% is higher than the rate of inflation.

The average institutional expense (Institutional Effective Rent – Institutional NOI) is about $8.20. Institutional NOI is climbing faster than the L.A. Metro annual inflation rate of 1.3% which is up from 0.4% for November 2013. Institutional NOI is defined as Institutional Effective Rent Revenue minus Operating Expense. Operating expense includes the following: Ground Rent, General Administrative, Management Fee, Marketing, Other Operating Expense, Payroll And Benefit, Professional Fees, Property Insurance, Real Estate Tax, Repairs And Maintenance, and Utility Expense.

3 Fundamentals 3

First Half 2014 Deal Summary

Following is a summary of the ten largest retail deals in the Los Angeles Metro market for the first six months of 2014.

10 Largest Retail Deals in Los Angeles Metro in 2nd Quarter 2014

Property Name/CitySale PriceSquare FeetPrice/Square FootCap RateCap Rate
Qualifier
Occupancy
At Sale
Fallbrook Center
West Hills
$210,000,000880,000$239N/AN/A98%
Malibu Village
Malibu
$120,000,00050,948$2,355N/AN/A90%
Weller Court
Los Angeles
$28,700,00069,405$414N/AN/AN/A
LA Fitness
Van Nuys
$23,526,08753,000$444N/AN/A100%
Ralphs Center
Redondo Beach
$22,000,00069,649$316
N/AN/A100%
8655 Beverly Blvd
Los Angeles
$21,997,60022,438$980N/AN/A100%
Alexander McQueen
West Hollywood
$19,900,0004,390$4,533N/AN/A100%
24 Hour Fitness
Burbank
$18,500,00068,525$2706.4%underwritten100%
4550 Van Nuys Blvd
Sherman Oaks
$16,800,00030,467$551N/AN/A77%
Source: Real Capital Analytics. The information listed above has been obtained from sources we believe to be reliable, however, we accept no responsibility for its accuracy. This chart does not include pending sales.

 

Of particular note is the occupancy level of the transactions, ranging from one transaction at 77% to the remaining properties being between 90 and 100% occupied at the time of sale. This reflects the appetite for investment grade properties that are in demand, particularly well located anchored centers. What could be better located and anchored than the Malibu Village transaction, with tenants such as Wells Fargo, Nike, Sephora, Chipotle, and many others. This property last sold in July 2011 for $77 million, and three years later for $120 million, an approximate 56% increase! The recent buyer is a German institutional investment firm, which reflects another trend toward an increase in cross border transactions.

The Alexander McQueen building is located at 8379 Melrose Avenue in the trendy section of West Hollywood. It is fully occupied by the fashion designer, Alexander McQueen, and is situated on a hard corner.

For further details on any one of the 10 deals, please send me an e-mail using the “Contact Me Directly” tab at the top of this page.

2nd Quarter 2014 Los Angeles Retail Market Recap

This review covers the Los Angeles Market, which includes the Los Angeles, San Bernardino, and Ventura Counties as defined by Real Capital Analytics. The review includes three main topics; Volume, Pricing, and Fundamentals. The data includes deals over $2.5 million.

As the saying goes, a picture is worth a thousand words, so I’ve kept the write up short for easy review!

VOLUME – Dollar Volume & Year Over Year Change

The total volume for the Los Angeles Market for 2Q 2014 was $971.3 million which was down 0.5% from 2Q 2013 ($976.4 million), however, 2Q 2014 volume was up 18.1% from 1Q 2014 volume of $822.6 million.

1 Volume 1

VOLUME – Number of Properties and Total Square Feet

There were 89 properties traded with a total of 2.7 million square feet, which represents a Year Over Year (YOY) increase of 51% in the number of properties (59 properties in 2Q 2013) with a corresponding increase in the total number of square feet (3.1 million square feet in 2Q 2013). The average deal size declined in that period from 41,071 square feet in 2Q 2013 to 34,831 square feet for 2Q 2014. The takeaway is the noticeable increase in the volume while the deal size is has declined by 15%.

 1 Volume 2

PRICING – Price per Square Foot & Top Quartile Price per Square Foot

The average price per square foot was about $328, however, the top quartile was over $726 per square foot. The top quartile figure is heavily influenced by the sale of 12 properties that sold for over one thousand dollars per square foot during the second quarter. The average price per square foot in 2Q 2014 declined slightly from $338 in 1Q 2014, but has decreased from $423 in 2Q 2013.

2 Pricing 1

PRICING – Cap Rate and Top Quartile Cap Rate

Cap rates increased 50 basis points this last quarter to 5.9% after a 70 point drop in 1Q 2013 from 4Q 2013. The top quartile also had a 50 point rise from 5.0% to 5.5% in the same time frame.

2 Pricing 2

PRICING – Cap Rate and Yield Spread

The yield spread increased this last quarter to 334 basis points from 268 points in the 1Q 2014. Part of this could be due to the fact the 10 year treasury has also decreased a similar amount.  The spread peaked 2Q 2012 at 496 points, the highest spread since 3Q 2002 when it was 488 points.

2 Pricing 3

FUNDAMENTALS – Institutional Vacancy Rate and Institutional Vacancy Year Over Year Change

The institutional vacancy rate ticked up slightly to 4.8% from 4.7% the previous quarter. However, Institutional Vacancy has been steadily declining since its peak in 4Q 2011 when it was 7.1%.

Institutional Vacancy Rate is defined as the percentage of the property’s net rentable square footage that is not under lease obligation, and may vary from physical vacancy.

3 Fundamentals 1

FUNDAMENTALS – Institutional Effective Rent and Institutional Effective Rent Year Over Year Change

Effective rent also saw strengthening with an average rent of $31.50 per square foot per year which was up 4.5% from 2Q 2013 when it was $30.70. Institutional Effective Rent includes all collected rental income from the property. More specifically it includes: Base Rent incorporating free rent and escalations, Contingent Income, Expense Reimbursement, Other Operating Income.

3 Fundamentals 2

FUNDAMENTALS – Institutional NOI per square foot and Institutional NOI Year Over Year Change

Institutional NOI per square foot stayed steady for the third quarter in a row at $22.90. however, it still reflects an increase of 5.8% from 2Q 2013 when it was $21.70. This reflects a trend that has been occurring since the 4Q 2011 when Institutional NOI was only $17.70, a 29% increase in only 11 quarters.

The average institutional expense (Institutional Effective Rent – Institutional NOI) is about $8.60. Institutional NOI is climbing faster than the L.A. Metro annual inflation rate of 2.0% which is up from 1.3% for March 2013. Institutional NOI is defined as Institutional Effective Rent Revenue minus Operating Expense. Operating expense includes the following: Ground Rent, General Administrative, Management Fee, Marketing, Other Operating Expense, Payroll And Benefit, Professional Fees, Property Insurance, Real Estate Tax, Repairs And Maintenance, and Utility Expense.

3 Fundamentals 3

 

Pasadena – Sears: Downsizing an Icon?

The old Sears logo was briefly uncovered during the facade renovation.

The old Sears logo was briefly uncovered during the facade renovation.

It is no secret that Sears has been struggling, having lost 19% of its stock value in the last year ($48.04 to $38.90). But this is something I didn’t expect to see, the subleasing of space in its Pasadena store to Home Goods, a subsidiary of TJ Maxx which has seen their stock price rise in the same period from $58.34 to $78.34, a nearly 26% increase.

I estimate that approximately a third of the bottom floor is now taken up by Home Goods, while the balance of the 216,000 square foot building is still occupied by Sears. The Home Goods portion opened on May 18, 2014.

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Home Goods sells “one-of-a-kind handcrafted merchandise, high-end designer goods found in department stores and specialty stores at significant discounts.” Home Goods, which opened in 1992, has approximately 400 stores with long range plans for between 750 and 825.

Sears, the once dominate department store in the United States, is a retailer with 2,172 full-line and 1,338 specialty retail stores in the United States operating through Kmart Holding Corporation (Kmart) and Sears, Roebuck and Co. (Sears) and 500 full-line and specialty retail stores in Canada operating through Sears Canada Inc. (Sears Canada), a 95%-owned subsidiary.

Home Goods now occupies the eastern portion of the bottom floor of the Pasadena Sear.

Home Goods now occupies the eastern portion of the bottom floor of the Pasadena Sear.

1st Quarter 2014 Los Angeles Retail Market Recap

This review covers the Los Angeles Market, which includes the Los Angeles, San Bernardino, and Ventura Counties as defined by Real Capital Analytics. The review includes three main topics; Volume, Pricing, and Fundamentals. The data includes deals over $2.5 million.

As the saying goes, a picture is worth a thousand words, so I’ve kept the write up short for easy review!

 

VOLUME – Dollar Volume & Year Over Year Change

The total volume for the Los Angeles Market for 1Q 2014 was $809 million which was up 61.1% from 1Q 2013 ($502 million), however, 1Q 2014 volume was down from 4Q 2013 volume of $1.1 billion. It is typical that there is a lot of activity in the fourth quarter followed by a decline in the first quarter.

1 Volume 1

VOLUME – Number of Properties and Total Square Feet

There were 89 properties traded with a total of 2.7 million square feet, which represents a Year Over Year (YOY) increase in the number of properties (62 properties in 1Q 2013) with a corresponding increase in the total number of square feet (1.9 million square feet in 1Q 2013). The average deal size staid relatively the same at 30,337 for 1Q 2014 as it was in 1Q 2013 which was 30,645. The takeaway is the noticeable increase in the volume; up 43% in one year while the deal size is relatively the same.

1 Volume 2

 

PRICING – Price per Square Foot & Top Quartile Price per Square Foot

The average price per square foot was about $328, however, the top quartile was over $652 per square foot. The top quartile figure is heavily influenced by the sale of the Gucci Building in Beverly Hills which sold for over $8,000 per square foot!

2 Pricing 1

PRICING – Cap Rate and Top Quartile Cap Rate

Cap rates continued their downward trend to 5.3%, which is down from 6.4% in 1Q 2013. The top quartile saw a decline from 5.% to 4.8% in the same time frame.

2 Pricing 2

PRICING – Cap Rate and Yield Spread

As would be expected with a decline in cap rates and an increase in volume, the yield spread also continued to thin. With an average cap rate of 5.3% the spread over the 10 year treasury narrowed to 259 basis points in 1Q 2014, which is down from 1Q 2013 when the average cap rate was 6.4% with a spread of 455 points.

2 Pricing 3

FUNDAMENTALS – Institutional Vacancy Rate and Institutional Vacancy Year Over Year Change

The institutional vacancy rate was a reported 4.9% which was down from 5.3% in 1Q 2013. Institutional Vacancy Rate is defined as the percentage of the property’s net rentable square footage that is not under lease obligation, and may vary from physical vacancy.

3 Fundamentals 1

FUNDAMENTALS – Institutional Effective Rent and Institutional Effective Rent Year Over Year Change

Effective rent also saw strengthening with an average rent of $30.60 per square foot per year which was up 2.9% from 1Q 2013 when it was $29.80. Institutional Effective Rent includes all collected rental income from the property. More specifically it includes: Base Rent incorporating free rent and escalations, Contingent Income, Expense Reimbursement, Other Operating Income.

3 Fundamentals 2

FUNDAMENTALS – Institutional NOI per square foot and Institutional NOI Year Over Year Change

Institutional NOI per square foot stayed steady at $22.80 in the 1Q 2014 from 4Q 2013, however, it still reflects an increase of 7.7% from 1Q 2013 when it was $21.10. This reflects a trend that has been occurring since the 4Q 2011 when Institutional NOI was only $17.70, a 29% increase in only 10 quarters.

The average institutional expense (Institutional Effective Rent – Institutional NOI) is about $7.80. Institutional NOI is climbing faster than the L.A. Metro annual inflation rate of 1.0% which is down from 1.3% for March 2013. Institutional NOI is defined as Institutional Effective Rent Revenue minus Operating Expense. Operating expense includes the following: Ground Rent, General Administrative, Management Fee, Marketing, Other Operating Expense, Payroll And Benefit, Professional Fees, Property Insurance, Real Estate Tax, Repairs And Maintenance, and Utility Expense.

3 Fundamentals 3

 Source: Real Capital Analytics

Azusa – Sold! Retail Building on Foothill Blvd (old Route 66)

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Sperry Van Ness is pleased to announce the sale of 250 E Foothill Boulevard, an approximately 6,000 square foot building built in 1911. Terms of the deal are not public.

DEAL STORY

The Property: 250 E Foothill Boulevard, Azusa, CA. The Los Angeles County Assessor’s office listed the building as 7,396 square feet on approximately 8,831 square feet of land. However, upon subsequent measurement, it was found that the building is closer to approximately 6,000 square feet. The building was built in 1911 and was listed by the City of Azusa as an historical building due to its age.

The Challenges: The previous tenant was operating a pawn shop under a conditional use permit that expired, leaving the property owner with a vacant building. The owner decided that it would be better to dispose of the asset rather than try to fix it up and lease it. However, the owner was not aware that the City had placed the building on the “City of Azusa Historic Property Survey List” in 2001. This designation prohibited the owner or a buyer from demolishing the building and constructing a new one.

Also, a Phase I environmental report in 2008 indicated the existence of potentially environmental issues with the existence of a hydraulic hoist. The owner decided that it would be in his best interest to remediate the situation before entering into a contract to sell. Given that the owner was located some 150 miles away from the property, Sperry Van Ness was able to coordinate the activities of the environmental contractor and the repair of the ten foot door in order to allow access to the interior.

Sperry Van Ness fielded several low-ball offers that did not seem to be in the best interest of the seller. With patience and persistence, we were able to find the right buyer and close the deal in 30 days.

The Broker: Ken Rhinehart, Senior Advisor

Lessons Learned: Trust your commercial property to a commercial specialist. If you own a retail property, you want a retail specialist, not a generalist.

No deal is too small, and sometimes, even a small deal can present obstacles that require the careful attention to detail and experience that only a knowledgeable commercial specialist can provide.

The client’s needs come first. It would have been much easier to take one of the initial low-ball offers and be done with the deal, but we persisted and ultimately found a buyer willing to pay the highest price. The client’s needs come first.

The Amazon Effect – Are Manufacturers Changing Packaging to reflect a new product delivery paradigm?

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I bought a toy on Amazon for Christmas for my two year old son and I was surprised when I opened the plain brown box. Gone was the colorful packaging pictures of happy children playing with the toy and the clear plastic that induces cries from toddlers that they need that toy while rolling down the aisle of the store. In its place came a plain brown box with the toy inside. No laceration inducing clam shell packaging that requires a razor blade or industrial tools in order to open.

Instead, I opened the box and saw this; just a simple box with the toys inside.

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This Fisher-Price “Drillin’ Action Tool Set boasts “Certified Frustration-Free Packaging” with “No clamshells – No wire ties – low waste.”

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I, for one, am grateful to hopefully see the demise of the horrible clamshells, after a sever laceration to one of my fingers from the packaging of a previous toy!

But the implications of this packaging are much wider than a simple consumer package. Obviously, manufacturers such as Fisher-Price (a wholly owned subsidiary of Mattel since 1993) are seeing the cost benefits of packaging products in this fashion. The colorful packing is expensive to produce and print. The interior packaging does not require anything more than simple cardboard, like the picture says, “No ties and No clamshell.”

But why the new style of packaging? I think it is a result of the Amazon effect. The manufacturer may now cut out the middleman, such as WalMart, Target, Toys R Us and other retailers, and ship the product directly to Amazon with cheaper packaging which lowers the cost to the consumer.

I haven’t seen this with other products, yet, but I am sure other manufacturers will follow if they haven’t already. Amazon will continue to have effects on all types of brick and mortar retailers as this continues to grow. However, so far, you can’t download an app that will cut your hair, polish your nails, dry clean your clothes and give you a hot cup of coffee with your donut.

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By the way, my son loves the drill!