Tuesday, July 7th, 2009
Starbucks Experience
In order to differentiate itself from McDonalds and Dunkin Donuts, “The Starbucks experience will now include the whir of the grinder and the smell of the aroma all day”, according to new written procedures for the 7000 units of the U.S. chain. According to the Wall Street Journal, Starbucks Coffee, “will now grind beans each time a new pot is brewed”. Seems like telling the baker to vent his fresh baked goods into the shop than out the back. But, something does not smell right when the most basic of assumptions must be converted into a manual. Sounds more like a statement in a failure of a corporate culture than a lesson in process management?
Best Buy
Facing a number of challenges including new competition, Best Buy reported a 15% drop in earnings for the first fiscal quarter of 2009. While the company is projecting cautious numbers for the balance of the year, officials are upbeat with recent increases in market share and increases in margins. After the closure of Circuit City, the firm’ overall market share increased to 21% of all consumer electronics, about 2% higher than 2008, reflecting gains in a computer notebooks, flat panel televisions and mobile phones. Likewise, the company’s gross margins improved from 23.7% a year ago to 25.3% in 2009. However, new competition from Wal-Mart, Amazon and regional players such as HHGregg have also taken market share away from Best Buy. One other challenge is the lack of consumer stimulus checks for 2009 to match those given out in 2008 unless Congress caves into to fund another rounds of consumer confidence for 2009.
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Tags: Retail, Retail Changes, shifting retail trends
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Monday, June 22nd, 2009
The remnants of the industrial economy often surround the downtowns of major cities and form a large part of the fabric of what many would consider to be insignificant neighborhoods. These combined semi-industrial and residential zones typically form barriers between first ring gentrified neighborhoods and the city core, producing in-between waste lands, lost economies and failed communities. Ironically, while the focus often is directed to the showcase block of the downtown and hip new restaurants in the historic suburban neighborhood, it is the in between zone that actually has the most potential for true economic development.
In recent years many of these quasi industrial and residential zones have been absorbed by hospital and university expansions as well as new arenas, stadiums, exposition centers, and the next half baked version of No Dough. However, seldom are these industrial zones re-energized with significant investments in cultural facilities which are more typically reserved for the showcase locations of the downtown. One of several major exceptions is the Frank Gerry designed Guggenheim Museum located in an aging industrial district in Bilbao Spain. It is here that a new model of urban gentrification can be recognized where art becomes the engine of the urban renaissance. This model involves the use of public art and cultural facilities as a promoter of community regeneration. In particular, unpopular and stigmatized urban neighborhoods can now be revitalized more than ever in the current economy when underutilized land and aging and often functionally obsolete buildings are reclaimed.
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Tags: art, Culture, Real Estate Development, Retail, urban gentrification, urban renaissance
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Wednesday, June 17th, 2009
Contemporary film often reflects the sentiments of its audience and initiates varied emotions that are generated well beyond the subject matter of the movie itself. In this regard, the music, location, and lighting can serve as a window into a deeper set of emotions and yearnings. This is for the simple reason that images and sounds link our consciousness with the unconscious to bring back memories of the past that ultimately reinforce the thoughts and feelings about the present.
In the movie You’ve Got Mail, Meg Ryan plays the role of Kathleen Kelly, an owner of a children’s bookstore in New York. It is a quaint intimate and well stocked independent and profitable shop that is a clear extension of her own sensibilities, perhaps allowing Ms. Kelly a needed connection to a lost childhood. But, life was good for Ms. Kelly’s and her devoted patrons until Foxbooks, mega-big-box-store, announced plans to move next door, seemingly to quickly serve the role of category killer.
Hugh Grant, in the 1999 film Noting Hill, played the role of William Thacker who also owned and operated another independent book store in a vibrant London neighborhood, known for its antique shops, small cafes and one of a kind specialty stores. Perhaps the shop was a frivolous commercial experiment with a recent inheritance or a deliberate move to a more pragmatic phase of life after a recent divorce, but it served a vital role in the neighborhood as a place of socialization and community connection. In real life, Notting Hill is an area in West London, close to the north-western corner of Hyde Park, in the Royal Borough of Kensington and Chelsea. It is a multinational district, once considered as a slum, now known as a creative community and home of the annual Notting Hill Carnival and the Portobello Road Market.
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Tags: death of shops, little shop, Retail, retail in movies, shifting retail trends
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Monday, June 15th, 2009
Micro-transactions on the web
- Consumers are proving that there is a market for small dollar amounts for on-line content. Ring tones, cheap internet calls through Skype, iTunes and more are ringing up big dollar amounts on micro-transactions. It was once believed that consumers would not pay for on-line content and the only way to profit was through on-line advertising and monthly subscription services. Now advertising revenue for the time being is not as profitable as once thought and consumers expect information to be free.
Home accessories, a luxury in a down market
- Little luxuries in depressed times cheer people up. In the down market designers of big ticket furniture items are facing a major challenge. A few smart ones are adding well designed home accessory collections to their offerings. But this is not just about pure design; consumers also want functional products that are long lasting, something that the discounters do not provide. Consumers of high quality furniture are attracted to premium materials and finishes and high levels of craftsmanship.
- Home gift and table top retailer recently engaged famed British Architect Zaha Hadid to design a collection for the company.
- Unlike big ticket furniture, home accessories can change by the season to better reflect both design and fashion trends.
Aspirational and luxury retail taking a hit
- Luxury brands in the recent economic boom of 2003-2007 focused on their existing trade with a greater variety of high priced goods, but often with perceptible reductions in quality. The luxury brands also sought to expand their empire by attracting new aspirational consumers by opening more points of purchase to reach a larger market and by developing new products at lower price points for those who aspired to step up to the brand. This resulted in more consumers paying more for premium goods. But just a few years later, the consumer at all levels has traded down and perhaps to never return to the same level of consumption, in this generation.
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Tags: Affordable indulgences, consumer spending, consumerism, Decade of Decadence, design and fashion trends, micro-transactions, New Economy, rethinking green, Teen market shift, trading down
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Thursday, June 11th, 2009
End of the Urban Mall
National retail chains can hardly lead a re-imaging of the city, any more than bars and clubs, and especially not hotels with their ever expanding demand for publicly supported convention centers, stadiums and arenas to fill their rooms. Likewise, chain stores occupying the latest version of an urban mall, once considered to be the panacea of an up and coming city, are now so risk adverse that they have long lost any real interest in downtown locations other than a handful of the most vibrant cities.
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Tags: community, consumers, malls, Retail, shopping, shops, suburban malls, town centers, urban malls
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Saturday, February 21st, 2009
EXECUTIVE SUMMARY
- Retail had been rapidly changing over the past several years to respond to new consumer attitudes and changes in technology. Prior to 2008 retail successes were found in the luxury goods, electronics, the tween and teen apparel, home furnishings, gourmet foods and the restaurant sectors. The current economic recession will reset the retail and real estate development industries.
- With post recession credit restraints, forever changed consumer attitudes, and a changed retail landscape many quality retail developments will no longer be viable.
- Many leading retail chains experienced sales decreases of 20% or more in late 2008 and early 2009. Mall traffic is down by approximately 10% and purchases are lower on reduced priced goods resulting in major reductions in profitability, often in the 50% range.
- As many as 150,000 retail stores will close in 2009. This may result in as much as 187 million square feet of new retail vacancies. The impact of these closures on US shopping center owners and governments which rely on retail related tax revenue will be huge.
- Retail commodity goods, like water, will eventually find their most efficient means of distribution to the consumer which may not be in shopping centers as we know them today.
- In the coming post recession era new forms of the retailing will evolve to take a greater share of sales away from shopping centers.
- Change in retail and the retail goods distribution channel after the recession will be greater than the ability of the shopping center development process to accommodate such changes.
- Village Solutions believes that we are on the cusp of a major disconnect between fixed brick and mortar retail locations and other points of purchase. One may be quick to point out the this more prophecy than calculation, given previous predictions of the pending impact of internet shopping, but we believe that the changes will be more profound and involve many more levels and channels than on-line shopping, which will change traditional shopping center. All parties connected to any feasible new real estate development of significance will therefore, require a complete comprehension of these coming changes in the consumer goods distribution channels in order to properly structure future developments.
- Retail developers in the next economy will need to learn new skills in a radically changed retail landscape. The traditional shopping developer was primarily in the business of securing land in order to add containers of long term income generation. In the post recession era, land encumbered with long term leases, a restrained consumer with new values, and retail distributions channels no longer tied to fixed locations will require new development model.
- How will the business of space making and the consumer’s desire for affordable entertainment and places of socialization outside of the home fit into a post recession economy? We see the development of creative, cost efficient smaller projects, integrated into existing densely developed neighborhoods; a new centering of suburban sprawl into true community centers, re-use and redevelopment of poorly conceived projects; district development as opposed to mix-use development; and
- We believe that traditional retail leases of fixed spaces over annual periods of time are going to evolve from their current structure.
- Fashion Designers in recent years have developed an entitled attitude which was seldom justified by the quality and variety of their collections. The market downturn has caught a whole generation of young designers unprepared to respond to the rapid change in consumer attitudes and the ability to innovate for the new economy. Designers in their 20s and early 30s have only the free spending-consumer as a frame of reference and not the wife of an unemployed fund manager who now sees her monthly appointment with her stylist as a luxury.
- Big international luxury brands in recent years have expanded to such an extent that they have lost much of their cachet with their leading luxury consumers which has fueled a demand for high quality clothes and labels which are new, offer a compelling with great cuts, fits, quality craftsmanship and color.
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Tags: Retail
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