An Amazon worker tapes a box for delivery at the Amazon Fulfillment Center in Schertz. Amazon has just completed a $200 million, 4 million-square-foot distribution center on the city’s far East Side.
An Amazon worker tapes a box for delivery at the Amazon Fulfillment Center in Schertz. Amazon has just completed a $200 million, 4 million-square-foot distribution center on San Antonio's far East Side. Credit: Scott Ball / San Antonio Report

There has recently been ample discussion on the impact that increasingly mobile and internet-capable consumers have on the traditional retail industry. The dawn of Amazon Prime and its promise of free two-day shipping is leaving a major impact on the traffic levels of many retail store fronts, particularly big box retailers such as department stores.

Amazon even delivers many items within a few hours of an order through its Amazon Now service. Faced with negative store traffic trends and an uninspiring outlook for improvement, retailers are pivoting to a “get lean quick” strategy by shuttering locations at a record pace in an effort to adapt to the new paradigm of reaching consumers in an age of mobile connectivity and free online delivery.

The impact on shoppers is quite clear. Consumers can easily compare prices on the internet, and shipping costs have been meaningfully reduced as retailers rely on free shipping promotions to spur sales. It appears that in this case – as in most cases – the customer wins.

Yet in the wake of all this disruption in the retail industry, the commercial real estate industry has been faced with its own challenge. What to do with the increasing amount of vacant retail real estate? Fortunately for real estate brokers, a number of various tenant solutions have stepped in to fill the retail void.

Increasingly, retail centers are becoming more service-oriented with an increasing presence of restaurants, bars, salons, and gyms. One thing these new tenants have in common is their emphasis on bringing convenience to the customer – Often at a high cost.

For instance, cookie delivery businesses, such as Tiff’s Treats, provide delicious solutions to birthday or anniversary conundrums. While some of these businesses have a retail store component, their locations are mostly manufacturing and distribution centers for delivery orders, a majority of which are placed online. That expense, however, is not negligible. The cost for the great convenience of having delicious warm cookies delivered is about $1 per cookie.

You may have noticed an increase in urgent care centers and freestanding emergency health clinics across the city. Despite them being “freestanding,” these emergency care centers are often located in vacated mall real estate or neighborhood retail shopping centers. The business model of these care centers is thoughtful, emphasizing a more convenient and local access to health care with shorter wait times. However, a number of consumers have experienced dramatic sticker shock after receiving care at a facility that was unknowingly an emergency care center rather than a urgent care center.

According to a research study led by Rice University and the Baylor College of Medicine, among other contributors, 15 of the 20 most common diagnoses treated at freestanding emergency care centers were also in the Top 20 for urgent care centers. Yet despite similar treatment utilization, the average price for a visit to a freestanding emergency care facility exceeded $2,000 compared to the less-than-$200 average price for a visit to an urgent care center. This is clearly out of balance and could almost be perceived as predatory.

This is unfortunate both for the individuals receiving care and the insurance companies, as the total cost of care for non-emergency treatments is higher when being serviced at emergency care clinics. This is mainly due to consumer confusion over which facilities are urgent care centers and which are emergency care centers. While providing more convenient access to care, consumers must ensure the care needed matches the care center they visit.

While the cost of a dozen cookies or the price of receiving instant care from a medical professional may come at a greater cost than one might expect, the lesson is that there is a price for convenience. Small, more localized neighborhood gyms have also been a popular solution for commercial real estate vacancies. While these smaller exercise facilities provide a community aspect to fitness and a greater level of instruction from the trainers on staff, the membership fees are often higher.

So while we may all be winning by getting a greater number of the items on our shopping list delivered to our front door and having access to more instant, localized care, higher levels of convenience and service come at a greater cost – And that’s okay. Consumer spending will continue to be the driving force of the economy, even as the retail industry evolves and adapts.

Avatar photo

Jeanie Wyatt

Jeanie Wyatt is the founder, chief executive officer and chief investment officer of South Texas Money Management.