PhoenixMart spotlighted ahead of Harvard’s Innovation Project

In a recent interview with PYMNTS.com CEO, Karen Webster, PhoenixMart CEO Steve Gardner discusses the need for PhoenixMart’s business model today.

When a consumer wants to buy a good (unless it is something extremely specialized), options abound. Furniture, electronics, softwares, hardware, clothing, food, accessories — it almost doesn’t matter. Between the millions of physical retail locations for shopping and the borderless, always open digital marketplaces of the world, a customer can get whatever they want, whenever they want — if they can pay the right price for it.

But a business that wants to go on a shopping spree faces a much more limited marketplace of goods to choose from. A consumer looking to buy one chair has lots of options, but a small or medium-sized business on a realistic budget that needs 500 chairs, or even 50,000 is really picking from a handful of choices.

“What we’re left with instead is what the big players have decided to source and place in their stores. If I am a small or midsized company and I want office furniture, I basically have six choices,” PhoenixMart CEO Steve Gardner told MPD CEO Karen Webster in a recent interview. “Everything is going to look exactly the same and I am going to have very limited options.”

When a customer is shopping local for big B2B retail orders, their options are limited to handful of big-box stores and what they stock, he explained. And while the Web has opened some of the same global doors for business buyers as it has for everyday consumers, the reality is that the stakes on corporate purchases are much higher.

“The problem is the Internet lets me see it, but not touch it, feel it and most importantly it doesn’t provide me with a real person to complain to if it is not what I thought it would be,” Gardner told Webster.

The goods may be bland or not exactly what a SMB is looking for, but for a firm with limited amounts of money to experiment with its retail purchases, a known and dull commodity is often better than an exciting unknown.

“For a small or even medium-sized firm, if we don’t have the budget or the know-how to get outside the big-box stores or get outside what is offered in the big-box stores, I am going to go with the bland [model] at Costco if I can touch it and I’m spending 10K or 15K on it and my business needs it.  I’m not going to risk it on shipping it from Mexico or from wherever.”

But while SMBs just sort of accept this kind of forced conformity when they are shopping, as it turns out, this is not exactly the way things work everywhere in the world, according to Gardner.

“If I am in China, I can have hundreds of options in a location that is easy to find and easy to access,” he explained.

One such specialty location — the biggest in China — is Yiwu, a 40-million-square-foot real world mega-marketplace for B2B buyers.

“Yiwu is just the biggest of these; there are many smaller scale versions of this. I can get furniture that is unique, I can get furniture that suits the style of my business,” Gardner noted.

Millions of visitors track through Yiwu each day — and as the idea caught on in Asia, it almost immediately began an international expansion, notably to the Middle East in Dubai.

“People who used to go to China from the Middle East and Africa now have a choice. They can go to China and deal with all the language issues, the cultural barriers, the customs issues and counterfeiting issues. Or they can go to Dubai and deal with more English proficiency, and where the rule of law is slightly more transparent. What [Dubai’s] DragonMart proved is that these kinds of marketplaces don’t just draw from an area, but literally the whole world.”

And now the whole world is coming to the U.S., in the form of PhoenixMart, a 1.5-million-square-foot physical B2B marketplace located strategically between Phoenix, Arizona, and Tuscon — a metro area with 6 million people of its own, as well as a major airline and rail of its own.

“We’re just in a location that allows people or encourages people to come from far and wide, and we do anticipate that happening,” Gardner noted.

The marketplace does what Gardner notes its digital counterparts do: namely bring buyers and sellers together, but in the case of PhoenixMart and its similarly concepted counterparts, it also allows for the physical interactions most corporate buyers need.

“It is broken into 2K suites, about 500+ square feet each. Some are bigger, some are smaller. And those almost 2K suites will be filled with well over 2K companies since some firms share suites,” Gardner told Webster. Gardner also noted that he believes that the concept will adapt to the U.S. because it solves needs on both sides of the transaction: the buyers need to get what they actually want, and the seller’s desire is to thicken up their profit margin some.

“Manufacturers are used to margins that are razor-thin and in walks someone who couldn’t find them through other channels. The buyer gets an incredible deal and the manufacturer only has to send the same thing to a person minus a middle man — and the difference on the profit margin is just tremendous.”

Currently, the space will offer those suites across 12 industries paired strategically with each other: Food and Beverage; Fashion (textiles) and Variety; Electronics and Accessories; Office and Recreation; Automotive and Industrial; and Home and Hotel (Hospitality).

“None of these are high liability,” Gardner noted. “We’re staying away from medicine/arms aviation because those are all highly regulated and they don’t work in this business model.”

As for the model itself, as of right now, PhoenixMart does not charge the retail partners for anything but their rent in the space — which by itself is enough to make the firm profitable.

“However, we will be adding some other revenue streams with the VIP clubs and association relationships,” Gardner noted, also explaining to Webster that the firm is also still in the early phases of investigating how to tie payments into their physical marketplace and offer consumers a recommended payment platform. That, Gardner noted, would offer the firm two benefits: access to a new potential revenue stream and access to better data.

“That data, who is buying what from which country — that data is so valuable [and it] is not being accumulated in the U.S. the way it can be in China,” he noted.

Doing something new is different, and building a million-plus square foot physical retail space in a country that has never seen its like before is certainly a bold move.

But, retail everywhere is shifting, and those who are going to make it are probably going to have to be bold. And, Gardner says, the reality is that no matter who the shopper is, the goal remains the same.

“Customers want to be able to choose from a variety of products and have choices about how much they pay, how they pay, how much they negotiate. That is happening right now in China. It is ridiculous it isn’t happening here, but soon it will be.”

And such a shift would make physical commerce the go-to platform for buyers whose only other option was the Web.

For more information and news on PhoenixMart, be sure to check out the latest articles in Forbes, Inc., and Bloomberg.

Valley Partnership panel discusses availability of labor in Metro Phoenix

Phoenix, AZ – Valley Partnership has announced the topic for its upcoming monthly breakfast on Friday, Feb. 26. This month’s program examines the availability of construction labor in Metro Phoenix.

The panel will feature Jerry Barnier, Founder, Suntec Concrete; Jeff Eschliman, Vice President of Operations, Maracay Homes; Fred Ingersoll, Director of Apprenticeship & Training, Arizona Builders Alliance; and Brad Nelson, Project Superintendent – Construction, Hensel Phelps. Moderating the panel will be John DiVall, Senior VP and City Manager, Liberty Property Trust.

“National reports indicate a lack of qualified construction workers in the Valley,” said Cheryl Lombard, CEO and President of Valley Partnership. “This is profoundly affecting developers and their new projects, as well as residential homebuilders.”

Breakfast speakers represent the largest skilled labor force in the state, as well as regional pipelines for training of multiple trades in the industry. Panelists have a deep understanding of local markets across residential and commercial sectors. Discussion will include national perspectives and possible solutions to meet the needs of a rebounding industry.

Registration begins at 7 a.m.; program begins at 7:45 a.m. To register, please visit www.valleypartnership.org and click on the “Monthly Breakfast” tab. For more information, please contact Cecilia Riviere at 602.266.7844 or [email protected]g.

Real Estate Daily News Buzz is designed to give news snippets to readers that our (yet to be award winning) editors thought you could use to start your day. They come from various business perspectives, real estate, government, the Fed, local news, and the stock markets to save you time. Here you will find the headlines and what the news buzz of the day will be.

Monday, the Dow Jones industrial average fell 177.92 points, or 1.1%, to 16,027.05. The Standard & Poor’s 500 index lost 26.61 points, or 1.4%, to 1,853.44. The NASDAQ composite index slid 79.39 points, or 1.8%, to 4,283.75.

Benchmark U.S. crude oil fell $1.20, or 3.9%, to close at $29.69 a barrel in New York. Brent crude, a benchmark for international oils, dropped $1.18, or 3.5%, to close at $32.88 a barrel in London. In other energy trading, wholesale gasoline fell 3.7 cents, or 3.7%, to 95.61 cents a gallon and home heating oil fell 1.3 cents to $1.046 a gallon. Natural gas rose 7.7 cents, or 3.7%, to $2.14 per 1,000 cubic feet.

El Rio Moves Health Center into Historic Mansion Downtown – El Rio Community Health Center is now operating its headquarters out of the historic Manning House. The 109-year-old building near Interstate 10 downtown is named for former Tucson Mayor Levi Manning. El Rio bought the property for $2.36 million in 2013. The total investment after refurbishing and new construction is expected to be slightly more than $11 million. Work is underway to build a new three-story office tower that will be called “Manning 2.” El Rio officials say they hope the move downtown will give the health center a greater presence in the area, help boost downtown’s revitalization, and foster employee wellness. Approximately 240 of El Rio’s 1,100 employees are expected to work downtown by the end of next month.

Brixmor Property’s Top Executives Exit after Accounting Review “Shopping center operator Brixmor Property Group Inc said three of its top officers, including its chief executive, had resigned after an internal accounting review showed discrepancies in the company’s financial statements. The company said on Monday that its quarterly statements had been tampered with to show consistent growth in same-property net operating income.” (Reuters)

John L. Tishman, Builder Who Shaped American Skylines, Dies at 90 “John L. Tishman, a master builder of the 20th century whose Tishman Realty and Construction Company transformed the skylines of Chicago, Detroit, Los Angeles and New York, died on Saturday at his home in Bedford, N.Y. He was 90. An heir to the company founded by his grandfather Julius in 1898, Mr. Tishman supervised the construction of three of the world’s earliest 100-story-plus skyscrapers.” (The New York Times)

Colleges Eye More Private Equity, Alternatives as Returns Trail “College endowments are looking to get better returns from private equity and other alternative strategies as investment performance has underwhelmed, according to a new poll. Alternatives were the top-performing asset classes for endowments, with venture capital delivering an average return of 15.1 percent in the year ended June 30, followed by private real estate at 9.9 percent and buyout and other types of private equity at 9.3 percent, according to a study released last week.” (Bloomberg)

5 Reasons Investors are Likely to Bet on Real Estate in 2016 “With everything that has happened in recent months, including the Federal Reserve’s interest rate hike and the turmoil in global equity markets, many investors will likely be seeking refuge in real estate. For them, real estate may seem like a less risky investment with potentially significant returns. The year is already shaping positively for real estate worldwide.” (The Street)

Canadian Love Affair with Manhattan Real Estate Seen Continuing “Strong Canadian investment in the Manhattan commercial property market is expected to continue this year after quadrupling and hitting a record level in 2015, real estate specialists said. Canadians accounted for almost a third of the $25.6 billion in foreign capital that poured into Manhattan commercial properties last year, with investment swelling to $8.3 billion from $1.97 billion a year earlier, according to data from Real Capital Analytics.” (Reuters)

Blackstone Welcomes $200,000 Bets in Cosmopolitan Casino Reboot “Bill McBeath knew exactly what was missing at the Cosmopolitan Las Vegas: gamblers. In the 14 months since Blackstone Group LP brought him in to run the 3,000-room resort, McBeath has created a new high-limit slot machine lounge and added more baccarat tables to the hotel’s speakeasy-like Talon Club. Just in time for Super Bowl Sunday, he opened a new sports betting area, moving it to the main level from the second floor and doubling the size.” (Bloomberg)

Chubb Boosts Coverage for North American Real Estate Clients “The world’s largest property and casualty insurer now offers more coverage to its real estate and hospitality clients in the hopes of mitigating risk in these industries. Less than a month after Swiss insurance giant ACE Ltd. acquired Chubb Corp. in the biggest insurance industry deal in history, the company—which retained the Chubb name—has expanded its offerings and capacity for United States and Canadian commercial real estate owners and managers and tapped Michael Chang to lead the Real Estate & Hospitality Practice.” (Commercial Property Executive)

Dallas Hedge Fund Investor Kyle Bass Rips Real Estate ‘Ponzi Scheme’ UDF “Hedge fund investor Kyle Bass launched a new website Friday laying out his firm’s views on United Development Funding (UDF). Back in December I wrote an article on Forbes.com suggesting that UDF had become a ‘high risk’ security based upon the controversial practices revealed by defaults, bankruptcies, lawsuits, and resignations. At the time of my article, the source for my research was disclosed publicly on the website Harvest Exchange.” (Forbes)

Redfin: Higher Rents Pushing More People to Purchase Homes “Higher rents are leading more people into the housing market, according to a Redfin survey reported by the company’s data analyst Taylor Marr. In November, 21% of respondents cited high rent as their top reason for house hunting, which is up from 13% in July. It’s no surprise, given that rents have been rising rapidly while wages haven’t. Nationally, rents rose between 4% and 5% in 2015 and have advanced by double digits in tech hubs and other cities.” (Multifamily Executive)

7 Lessons I Learned from Failing at Real Estate Investing “A lot of people make money investing in real estate. But there’s the real version and the TV version. I fell for the TV version. Based on little more than a book from a self-proclaimed real estate superstar, I blazed forward and bought my first real estate investment property. It was a complete failure. I learned seven lessons from that failure, and now I’ll share them with you.” (Forbes)

Yellen will testify amid predictions of slower rate hikes — Things looked so clear back when the Federal Reserve raised its benchmark interest rate from record lows, and it signaled the likelihood of four more hikes in 2016. Panicky financial markets, global weakness and slumps in key U.S. economic sectors have since clouded the outlook. So are there more hikes ahead? Chair Janet Yellen is expected to address Congress this week and outline the Fed’s outlook. It’s unclear how much she’ll say about the likely timetable for rate increases.

Apollo Education to go private in $1.1B deal — Apollo Education is being taken private in a $1.1 billion deal by a consortium led by private investment firm The Vistria Group. The announcement comes about a month after the owner of the University of Phoenix and Western International University signalled that it may be looking for a buyer. Apollo Education has had several lacklustre quarters as enrollments at its for-profit schools fell amid increased government scrutiny of the industry. Shareholders of Apollo Education Group Inc. will receive $9.50 per share, a 37 per cent premium to the Phoenix-based company’s $6.95 Friday closing price.

Gov’t creates new student aid enforcement office — The Obama administration is taking new steps to protect students amid increased scrutiny of for-profit colleges and other schools. The Education Department said Monday that it was creating a new student aid enforcement unit that will “respond more quickly and efficiently to allegations of illegal actions by higher education institutions.” Critics have complained the government didn’t move swiftly enough to take action against for-profit schools like Corinthian Colleges, which filed for bankruptcy protection last year amid fraud allegations, closing schools and leaving thousands of students with hefty student debt and frustrated efforts at earning degrees.