Wednesday, August 19th, 2009
The media is quick to point out the dismal sales performance of numerous retail chains. Reports of significant decreases in comp sales are reported daily and full economic recovery is clearly tied to a resurgence of retail sales. While, the end of the recession may be near, retail sales will lag far behind a recovery. Why? There are too many consumers with too much debt, high unemployment, and homes under water to consider shopping for anything other than necessities. With consumer expenditures accounting for almost 70% of all economic activity and without a confident consumer, retail sales are going to continue in their depressed state, even as other signs of a recovery appear to be positive.
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Tags: consumer, consumer spending, economy, Real Estate, recession, Retail
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Monday, July 27th, 2009
Over the past decades I have worked in almost every major metropolitan area in the United States. In this capacity I often encounter reports that the subject market is significantly under stored. While doing my market research I am always amazed to find newspaper articles reporting that a market has significantly less retail space than the national average which always turns out to be wrong. So, I will share some insights into one of the biggest myths in the retail real estate industry – “my market has significantly less retail space than the national average”.
The proliferation of this myth falls right into the lap of an uninformed media which appears to want to take a position of supporting growth or showing that an area is over stored with retail space. This is because of the rapid expansion of power centers in the 1990s; lifestyle centers after 2000; and free standing mega stores in recent years have all contributed to a crowded retail landscape. Therefore, in an attempt by the media to quantify the amount of retail space and to compare the density of retail in one market to another, retail space per capita has been used as a common indicator. However, our analysis concludes that these types of numbers are among the most misquoted and misunderstood data points in the analysis of retail real estate. The problem is like the old joke – “one lies and the other swears to it”. In this case, retail space per capita is the number that is often, if not almost always, reported inaccurately and then the next article repeats it all over again and before you know it, you have a fact that everyone relies on. But, when comparing vastly different markets and using so called national averages one may end up with nothing more than a comparison of apples to oranges.
The most commonly used database on retail space comes from The National Research Bureau (NRB); however, they only include shopping centers and not the total of all retail space. Consequently, shopping center data has often been incorrectly used as a total for all retail space and then compared to the local population to generate a per capita number. In brief, the retail space per capita that is often quoted is actually shopping center space and not retail space.
This type of comparison works well as a barometer across the United States, but it is highly inconsistent when using it as a source of retail density in major urban areas that have a large amount of retail not located in shopping centers.
According to many, NRB[1] is the premier provider of retail real estate information in the U.S. Its database of information contains information on over 40,500 shopping centers which is the most comprehensive and detailed information source on U.S. retail properties available. Likewise, NRB has prepared the Shopping Center Census for the past 20 years, which is published by the International Council of Shopping Centers (ICSC) and by the U.S. Department of Commerce / U.S. Census Bureau in Statistical Abstracts of the United States. The NRB census is widely considered the authoritative source to calculate the retail area per capita. While the NRB is an excellent source for shopping center gross leasable areas (GLA), it is insufficient when analyzing per capita GLA for urban areas for a number of reasons.
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Tags: Florida, GLA, ICSC, leasing, lifestyle center, Miami, NRB, real estate myths, retail space per capita, square footage
Posted in Real Estate, Real Estate Development, Retail, Shopping Centers, Specialty Retail | 3 Comments »
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
Posted in Retail | 1 Comment »
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
Brands have been telling their stories for decades now. Typically, in a mass-advertising, mass-branding world, the ‘telling’ has involved reaching and impressing as many consumers as possible. Those who literally bought into these storied brands then gained the respect and admiration of other brand-exposed consumers.
Example: if you’re Jaguar, and your (expensive) story is about old money with a dollop of English eccentricity and the whole world is aware of this, then consumers craving recognition from anyone impressed with this kind of lifestyle only need to buy one of your cars to bask in the glow of their peers’ admiration. Much of the current market research completed today is based on this idea of the brand story. For instance, Country Squires tend to drive Jaguars because they are status symbols and gain them access to the social club. However, while well-known, storied and very visible STATUS SYMBOLS will continue to dominate consumer societies for years to come, they will face increasing competition from STATUS STORIES: As more brands go niche and therefore tell stories that aren’t known to the masses, and as experiences and non-consumption-related expenditures take over from physical status symbols, consumers will increasingly have to tell each other stories to achieve a status dividend from their purchases. Expect a shift from brands telling a story, to brands helping consumers tell status-yielding stories to other consumers.
These types of experience are rapidly increasing as guerrilla and mobile retail are gaining popularity. For instance, major newspapers have recently caught onto Kogi Korean BBQ which sells their tacos out of trucks in LA. Fans get location updates via Twitter & usually 100s of followers are waiting when the trucks pull up. Another example is the ever-growing in popularity Treat Truck in New York.
Status Stories: Why Now?
STATUS STORIES are an answer to some of the major shifts and trends taking place in the consumption arena, from uniqueness, to visibility, to ‘alternative status sources’:
No longer do consumers want to be like the Joneses, the Mullers or the Li’s. When individuality rules and conformity is frowned upon, owning something no one else has is hot. The ‘mass’ that consumers are willing to put up with is either the stuff they don’t really care about—and can get on the cheap at the Wal-Marts and Aldis of this world—and some remaining objects of mass desire like the iPhone or the Mini Cooper. However, even these are likely to be customized and personalized the moment they leave the warehouse, website or store.
This consumption trend accounts is pushing the hand-made, artisanal and local markets. Many designers are custom making fashion piece or designing limited edition items. These one-of-a-kind items are often the most have pieces of the season and consumers are willing to dish out the cash for the luxury of having one.
The shift from mass to unique explains the surge in niche or even one-of-a-kind products and services. So brands will increasingly not want to, or will not be able (if only for financial reasons) to tell their story to the masses. Which in turn means that consumers buying from these brands will no longer be able to rely on the product or service to provide them with that instant recognition and admiration from their peers. It is thus up to the customer to tell a story, any kind of story, with the brand providing the ingredients.
Besides the shift from mass to uniqueness, mature/prosperous consumers now predominantly live in experience economies. Experiences not only are inherently more unique, they also do a better job of providing instant gratification: they’re often more affordable, and thus more numerous than old-world status symbols.
Tags: consumer, guerilla retail, market research, mobile markets, mobile retail, pop-up shop, twitter
Posted in Advertising & Marketing, Retail | 1 Comment »
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
Posted in Retail | 1 Comment »