Tag Archives: Retail

Revealing National Retail Trends

Recently, I participated in a round table discussion with other retail experts in Southern CaliforniaShopping Center Business just published the following article about that discussion entitled “Revealing National Trends.”

***************************************************************************************

Feature Article, May 2010 – Shopping Center Business

“Revealing National Trends

Southern California Roundtable leads to discussion of trends that can be applied nationally.
Roundtable moderated by Jerrold France and Randall Shearin

Shopping Center Business held a retail roundtable hosted by Holland & Knight at the City Club on Bunker Hill in Los Angeles.

Shopping Center Business recently held a retail roundtable in Los Angeles, hosted by the law firm of Holland & Knight at the City Club on Bunker Hill. Attendees of the roundtable were Pat Donahue, Donahue Schriber; Sandy Sigal, Newmark Merrill; Jill Bensley, JB Research Co.; Jeff Kreshek, CIM Group; Bill Stone, Excel Realty; Jeff Green, Jeff Green Partners; Mark Schurgin, The Festival Companies; Greg Lyon, Nadel Architects; Julie Brinkerhoff-Jacobs, Lifescapes International; Tamsen Plume, Holland & Knight; Karl Lott, Holland & Knight; and Susan Booth, Holland & Knight.

SCB: Southern California is an important market as a lot of retail trends are created here. What do you get as an overall sense of the market here?

Donahue

Donahue: We are better off than we were a year ago. There were relatively no transactions last year. Things are starting to thaw out. We have exposure to four states and Southern California held up much better than Northern California, Arizona, Nevada and Oregon. Our occupancy in Southern California is even with a year ago, where our portfolio is off 400 basis points. Our rents in Southern California year over year are flat to plus two, versus a portfolio that was negative 11. Out of our entire portfolio, 80 percent is in California.

Stone: Our concentration is in the Southeast [United States]. The Southeast has been better; we have a number of centers there at 100 percent occupancy. When you go to the centers, not only are the parking lots full, but there restaurants are full. There are not as many people shopping out west. The whole country has been waiting for the other shoe to drop. In California, everyone is worried about the state. There has been some hesitation here on the part of people to go out and spend. People are holding their money.

Bensley: I looked at the personal savings rates back to the 1960s. This year, the savings rate is 3.3 percent, and that is down, which is good for the shopping center industry because consumer spending is two-thirds of our economy. Last year, it was about 5 percent. In 1991, during the last recession, the savings rate was at 7 percent. In the 1980s, it was at 10 percent. It just shows you the transition of what we’ve done in taking out money from our homes. That is where all that money came from. It was the spending of cash that was then all lost with the value of our houses.

Donahue: We, as a country, took on more debt in the last 7 years than in the previous 40 years combined.

Bensley: It is astounding. It is bad for retail when people save more, but at some point we have to even out.

Donahue: If we go to what we were doing, we will all be out of business. We have to have a positive savings rate. The idea that you are supposed to live above your means is not good. I’m thrilled we’ve shifted to a positive savings rate. It is going to wreak havoc on our business, there’s no question, but it is going to weed out the people who shouldn’t be in this business. Circuit City, Linens ‘N Things and Mervyn’s only lasted 12 months in the downturn. These aren’t retailers who weathered the storm. They shouldn’t have been in business when they were. This recession is weeding those players out. At the end of the day you will come back with a much stronger economy, a much stronger country, and consumers who are doing the right things. We can’t be leveraging ourselves into this.

(Left to right) Stone, Schurgin and Sigal.

Sigal: A lot of the retail failures were a function of the credit markets shutting themselves off. We are seeing a return of some financing to the marketplace. There are the haves and have nots — there are tenants who have access to the capital markets and the REITs who have access. The have nots are just holding on for dear life. If their debt gets called they are done. California is such a large market, you can’t say ‘California is recovering.’ We have centers in the inner city, denser communities. That customer has continued to visit because there is nowhere else to go. Our tenants are the 99 Cents Only and the discounters. In this kind of environment, their marketplace has grown. They have the base who has no one else to go and they have a new group of shoppers. A lot of people will discover retailers like Walmart, K-Mart and Target, and once they discover it, they will keep going. Our L.A. region has seen no increase in vacancy. We are still at 95 percent. In San Diego, we’ve been affected; we are 400 basis points worse there, just around 90 percent. It is a function of high rents and it is dependent on the housing market. The Colorado market has been our best market. It has been steady…

Click Here to read the rest of the article at Shopping Center Business.

Advertisements

How Target Saved My Birthday

As a corollary to my last blog, I am thrilled to provide a recent real world and personal example of a first class retail experience I had with the group that owns the “Cheap Chic” category.  Of course, I am talking about Target.  My husband, older son, and I were on my birthday trip to Truckee to visit my youngest son.  We weren’t leaving until 9PM because of family scheduling nightmares.  We decided to split the 10-hour trip from Ojai, in Southern California, to Truckee in Northern California into two legs.  For the first leg, we would drive about three hours to stay in San Luis Obispo (SLO), made famous by a recent episode of “The Bachelor.”  (Don’t lie; you watch it just to see how awful Vienna will be, what slutty and inappropriate thing she will say, and how much she will embarrass herself when Jake isn’t looking.)

We took off at 9PM on a Thursday evening.  I had two bags packed – one with my essentials (make-up, shades and meds) and one with my clothes.  I always count on my husband to pack the car.  (That’s the man’s job, right?)

So we took off and spent a lovely first night in a SLO hotel where I only brought in my “essential” bag.  The next morning, after a good night’s sleep and an early start, we went out to the car to begin the next day of our journey.  We put all the bags in the back of the 4Runner and I noticed we were short one bag.

“Did you pack my red rolling bag?” I queried Charley, my husband.

“No, I thought you had everything in the ‘essentials bag’!”

“Are you kidding me!??”  Has he met me? I am extremely high maintenance.  When I travel, especially to a cold place, I bring along coordinated outfits including no fewer than three pairs of shoes, no matter how short the trip.  And I am not one of those people who can do black, white (or tan), and one additional color.  Oh no, I need the pink shirt, the red sweater, a couple of jackets, etc, etc.

There I was, on my birthday trip, with no clothes!  And I was wearing ratty old sweats (for the drive), and a pink sweater and jacket from Sears!  (Remember my last blog about Sears?  This is what I bought along with a pair of red sandals that I, incidentally, didn’t bring to the snow.  Oy vey!)

So I stressed for a few minutes and then decided what the hell – there was nothing to be done, another excuse for retail therapy!

Now realize – I had no clean underwear, no socks, no sweaters, and nothing dressy for my birthday dinner… nothing but what was in my essentials bag.  And we were traveling on I-5 through the Central Valley of California, not really a stopping mecca.  Not a Nordstrom to be found along the way – not in Stockton, not in Modesto, not in Sacramento, nowhere!

“Why don’t we look for a Wal-Mart?” suggested Charley.  “We can have lunch and you can get what you need.”

Again – have we met?

But then I got the bright idea.  “Let’s look for a Target!”  They are my favorite when I go ‘cheap shopping,’ which is a bunch more often since the recession hit.

So we looked for the distinctive logo (which up until then I didn’t realize was a real target!).  When we found one, I was thrilled.  I was on a mission to get a whole trip wardrobe for under $150.

What would I need? Underwear, jeans, black tops, and a pair of black sweat pants.  Remember, I had jackets and shoes, so I was good in those areas!  While the boys went to get lunch at the Starbucks in the Target, I picked out two pairs of jeans, a black tank, a black paper-thin long sleeve tee, a black cotton V-neck sweater, three pairs of undies, and a new comfy pair of black sweats.  All fashionable, all reasonably well fitting, and none of them cheap looking!  I am thrilled to say, I wore all the pieces for five days on the trip, even to my fancy birthday dinner!

And so here’s to you Target, for saving my birthday trip, and being the best in class. Oh, and by the way, I had a ball with my husband and two boys, a trip to remember, uninterrupted by a forgotten suitcase.

Shopping, Sears and Me

I love to shop. I’m talking about reason to live, first thing you think about in the morning, when can I go again love! I guess that is why I have been a retail analyst most of my adult life. So I consider shopping, retail, the shopping ambiance, the retail experience, whatever we call it these days since the recession, I consider these my avocation and my vocation. I am an expert!

My mother imparted this love to me, as is the case with most girls. It is imprinted on us like little ducks from an early age, this need to gather, to get the prettiest, most current, loveliest shoes, sweaters, pants, skirts, purses, that we can afford. And as a corollary, there are certain shopping rules, again imparted by our mothers. For example, my childhood in an upper middle class suburb of Chicago, taught me that there were only a few department stores where we were allowed to shop for clothes: Marshall Fields and Carson Pirie Scott. WE WERE NOT ALLOWED TO STEP FOOT INTO SEARS! Now I know this is deathly un-PC and there were not a boatload of clothes to be had at Sears back then, no “softer side of Sears,” still we were not allowed to step foot into the store on a girls shopping trip.

When I became a retail analyst, that had to change, but I still have the “No Sears” song in my head.  As most of us know, Sears has done quite a bit in the last ten years to deserve my scorn. They have made many decisions, none of them based on being a great retailer. Considering the ruthless competitive landscape in retail, it’s a miracle that Kmart (who now owns Sears) has survived. Tough rivals in the discount segment abound, including WalMart Stores, Target, and Costco. All three of these behemoths have much stronger brands and customer loyalty than either Sears or Kmart. And regardless of whether hedge fund manager and Sears chairman Eddie Lampert is involved — his mere presence often seems to make some investors consider Sears’ future as a hedge fund, not a retailer — Sears and Kmart both lost their brand luster many years back.

Why am I blogging about Sears today? One thing Sears had going for it way back when was its great brand of appliances, ease of shopping for them, great repair service and service contracts. They were vertically integrated. So all of our appliances are from Sears and they are for the most part, work horses. But when they break, it has been a tear-your-hair-out nightmare to get an appointment for service. We had a minor part break on our refrigerator this summer and it took six visits to get it fixed because they kept sending the wrong part or the service man didn’t show up at the appointed time or they had to cancel or some other excuse that never made sense. It didn’t bother me too much because the refrigerator still worked, although it was very funny to receive a white door for the unit when the refrigerator is stainless steel! (Doors are very big and bulky to mail!)

The last appliance to break was the clothes dryer. I called to schedule an appointment to get it fixed and knew it was going to be a nightmare, but we bought the service contract so we are on the hook with Sears. The agent at the scheduling center told me I had to wait three weeks. I told him that was unacceptable, at which point he pretty much told me to go “F” myself, that I could take it or leave it, that they had no complaint department, he had no supervisor and if he was in my position he would just leave it alone. So I called a local service to fix the problem and sent Sears the bill with a letter of explanation, a very rational letter, and enclosed the repair bill. I fully expected nothing, but I felt better doing it.

Two months later, my husband got a call (in fact now 4 calls) from Sears. He referred the first caller to me. They told me they were extremely sorry for the way I was treated, but they had no control over their repair servicing arm, which of course, they don’t. He told me he would be sending a check for $18.75 for parts (the bill in fact was $100) and that they would be sending me a $50 Sears gift card for my trouble. Will this make me ever consider Sears again for anything? This is called “customer mop-up.”

So here I was with a $50 gift card for a store that I now had multiple reasons not to shop. I tried to force myself into our local store three times before I finally made it. So what was my experience this time, with the 2010 “softer side of Sears?”

I was sad to see that Sears lived down to my expectations. With so many category killers doing a superb job in their niche, they just didn’t do anything well. They didn’t own the “cheap chic” category, they didn’t own the “cheap/inexpensive” category, and oh my god, the quality of the soft goods was abhorrent!

So they have stuck with the warning from my childhood, “NEVER SHOP AT SEARS!” The store carried cheaply made goods (soft and hard), mostly unattractive, AND FOR A PREMIUM PRICE!!!! .

Why would anyone shop at Sears?

Lessons Learned: The 3 Silliest Assignments I Ever Had

My friends tell me I am one of the funniest people they know.  I can find humor in the most awful or embarrassing circumstances and make people laugh.  Those of you who know me may think this is contrary to my way of thinking, which I would call “the worst case scenario.”  Still, many of my jobs have brought laughter to my family when I tell them what I am working on.  My husband wrote me a case study that I keep in front of me on my desk at all times.  It is called THE BEE MUSEUM, and it is an assignment for a nonprofit client that wants to test the market and financial feasibility for, you guessed it, a BEE MUSEUM.  This nonprofit is in a tiny market, but they project a million visitors per year, each spending a $20 per capita.  This is how many of my jobs go, in a nutshell.

We are hired principally to test new ideas, things that have never been done before.  So there have been some wild-ass ideas in my practice.  But as a very wise man once told me, “you never tell a client what they can’t do; you tell them what they can do.”  So for these very silly assignments, we develop projections based on realistic programs.  They may not be what the client wants (most of the time) and they may generate significantly less attendance and revenue, but they reflect the realities of the market.  So here they are, in no particular order, the three silliest projects I have ever worked on and the lessons learned.

Lesson Number 1:  Test before you build and then trust the results!

Native American casinos often wish to develop a cultural component along with the casino amenities.  Many of these start out as museums detailing the story of the tribe.  In one such instance, we were hired when the huge museum next to the casino was already under construction.  It had occurred to them that it might be good to get a realistic viewpoint on their attendance potential.  Of course, they were projecting one million visitors, who would come on the same trip as the gambling excursion.  This was in a day-market locale.  After studying the market, we told them, no the most you could get is 350,000 annual visitors and this would be from the 50-mile market, not from the casino visitors.  They are there to be BAD and they do not want to be educated or uplifted on the same trip they are losing (or winning, but not as often) their rent money.  Low and behold, they stabilized at about 350,000 before they had budget cuts and attendance lagged.  They were never pleased with us, even though we were correct.

Lesson Number 2:  Arrogance will get you nowhere in the retail and attraction businesses.  Remember the local culture and keep your culture out of it!

A very well-known entertainment company was planning a foreign theme park in a country where wine is consumed with lunch and dinner.  This is not alcoholic behavior; this is the culture and custom of the country.  Focus groups confirmed that it was the custom of potential visitors to have wine with meals.  What did this company do?  They prohibited alcohol from the park because it was against THEIR CULTURE.  Can you see where this is going?  Shouldn’t they have known better?  Wasn’t this obvious without expensive focus groups?  Needless to say, after a few years of low attendance and flagging EBDITA, they reversed their ridiculous stance and allowed alcohol in the park. 

Lesson Number 3:  Get inside your potential customer’s head, and don’t stop at a few interviews.  You could lose hundreds of millions.

This is another strange story about the failure of a whole division of Bullocks, when there was a Bullocks.  These stores are all Macy’s now.  But at this time, Bullocks wanted to expand to Northern California.  In order to do that, they had to open multiple locations, indicating a huge investment at the time.  Federated had the best research department in the business.  So we did all the area research, some consumer research, and several stores called “Bullocks Northern California” opened in the San Francisco Bay Area.  And they all FAILED!  How could this happen?  Are any of you aware of the jaw-tightening dislike that Northern Californians have for Southern Californians?  Well, I knew because I went to Berkeley and heard it every day I was there, being from Beverly Hills, which was a particularly huge transgression.  Anyway, no god-fearing Northern Californian would be caught dead in a Southern Californian retailer, EVEN THOUGH THE MERCHANDISE WAS THE SAME AS MACY’S, the closest competitor at the time. 

Shopping Center Business – Retailers Who Are Moving Ahead

Not everyone’s closing up shop — these retailers and restaurants have made strides in 2009, and are planning expansions in 2010, and beyond.

By Jill Bensley and Erica Barton

As the holidays approach, the retail industry is showing signs of new life. Buoyed by 3.5 percent third-quarter growth of the gross domestic product, the retail sector may have seen the worst.

Always important to the rebound are plans for store expansion. In fact, 2009 shows more than 250 individual retailers who had plans to expand by more than a total 10,000 units. A summary by merchandise class is given below:

Walgreens has the second largest number of stores planned in 2009, second only to McDonalds.

Announced plans for 2010 include more than 49 different retailers with plans for more than 3,500 new locations. While not all of the aforementioned expansions are in the United States, the sheer volume signals better times for the retail sector.

The Top 50 in 2009

A list of the top 50 expanding companies by number of units is shown in Chart 1. As can be seen, the most expansive include McDonalds at 1,000 new units; Walgreens at 554 units; Dollar General at 500; Subway at 484; Zara at 450 (through 2011) ; GameStop at 400;  Family Dollar at 385; Dollar Tree at 235; 7-Eleven at 200; and O’Reilly Automotive at 150. Obviously, the lower end of the retail spectrum is gaining the most in this recession…  (Click Here to read more.)

Introduction – Raison d’Etre

Image by Wouter Pinkhof

Does the world need another blog?  According to recent statistics from blog-tracking site Technorati, the blogosphere has doubled every six months for the last three years. That’s 175,000 new blogs per day worldwide. Technorati added its 50 millionth blog on July 31, 2006.

After several painful sessions of browbeating from my son and several friends, I suppose the answer is “if everyone else is doing it, so should you.  So get off your butt and do it!”  Those of you who know me understand that I never put anything in writing that I wouldn’t want the world to see.  Therefore, this is a painful process.  But I have been convinced that I have a ton of information in my head that is useful to many of my friends and clients.  So without disclosing any particulars, I will present, each week, my thoughts on my topics of expertise, namely figuring out how to concept and test the market/financial feasibility for places which may include:

Retail

Entertainment

Sports

Leisure / Hospitality

Gaming

Culture (Theaters/Museums)

In the last few years, mixed-use projects have included all six of these elements.  Figuring out how they interact from a market and financial point of view is what we do and what keeps me engaged.  (I bore easily).

For those of you who don’t know me, I have been in the business for over 25 years and as a friend once said to me, “you must be pretty good by now.”  Well, I don’t know about that, but I do know a whole lot about the subjects noted above.

Why Even Bother With Area/Consumer Research

When I worked at Federated Department Stores (which at the time had all the best department stores in its portfolio, including Bloomindales), we had two units for research and evaluation.  One was dubbed “area research” and included all demographics, competitive research and projected sales.  The other “consumer research” did focus groups and intercept interviews of our customers.    Our projections turned out + or – 5% because our models were that accurate.  I learned a great deal from working there, which I brought into my practice.  Namely, that if you think you know the answer, and it is YOUR PROJECT, you are probably wrong.  And that you need to get an independent evaluation or you will make a $100 million mistake.  Some projects are smaller and some are larger, but you get the picture.

In my next posting, I will talk about area research and how it is done.  Subsequent postings will discuss consumer research and some of the interesting stories we have surrounding this type of analysis.  Stay tuned……….all of these things are GOOD TO KNOW, and thus the name of my blog!

10 Ways to Avoid Chapter 11 in the Attractions Business

A whole long while ago, I wrote an article with my mentor and favorite octogenarian, Buzz Price, about the many failures of certain themed restaurants and attractions.  I looked it over and was very surprised to see that it still has relevance today for development of new attractions, something that will be happening soon enough.  Thus, here are 10 pitfalls to avoid when planning an attraction.

  1. When planning, balance revenue generation in major categories: attractions, food service and merchandise.
  2. Spend time computing capacity.  Indoor attractions are hard to justify because of constrained capacity.
  3. Attractions are driven by opportune locations, preferably in the path of major attendance generators.  Stadium crowds at sporting events may not provide the required flow.
  4. High front-end R&D costs incurred in anticipation of a fast rollout are a plague.
  5. Study the market and understand the nuances of its preferences.  Pick your niches carefully and stick to them throughout planning and operation.  Don’t try to change consumer behavior.  The devil is in the details.
  6. Keeps your eyes wide open and try to be objective about your pet project.  You may think you have invented the next internet, but your market may not.  On the other hand, be passionate about the project and its greatest cheerleader.  Keep a balance between your passion and market-driven objectivity.
  7. Narrowly concepted attractions won’t find a broad-based market.  Along those lines, clear and concise branding is key.  Make sure your brand measure is clear to your customer.
  8. Assure that you have a critical mass of attractions to generate visitor interest for the required length of stay.  Create enough capacity for your maximum design day on-site crowd.
  9. Use realistic assumptions when looking to the future.  Respect comparative and competitive performance.  If you do better than projected, you can fix the problem (in most, but not all cases).
  10. The attraction must start up fully formed.  Phase I needs to be a complete show. Undercapitalized projects have a high failure rate.  Create realistic models for development cost, revenue and expense.