Independents’ Day: The rise of independent retailers

Well, the holidays are finally over and the verdict is in: Retailers reported a 3.5% year-over-year sales increase in December — that’s better than I thought we would see — and a 3.3% increase overall for the season. While slightly more than some analysts anticipated (myself included!), it wasn’t the happiest holiday for everyone. Certain sectors (electronics) and brands (Macy’s, Nordstrom) did better than expected, while others (Target and J.C. Penney) did worse.

To me, one of the most noteworthy trends of this holiday season was the robust performance of independent retailers. Because most independents are not tracked like national chains, the bottom line numbers are a little tougher to determine, but anecdotally at least, independents appeared to be doing some strong business this holiday season. As always, it leads me to ask the big questions: Why? And, what could this mean for retail real estate?

My sense of it is that with national brands dominating the retail landscape for so long, we may be seeing some pushback from consumers who are tired of the same old thing and are eager to experience something a little different and less formulaic. I, for one, have always enjoyed shopping the independents. They seem to really value their customers, and have always provided really great customer service — the kind that resonates at a time when dollars are tight and shopping decisions are more strategic. And, with movements like “Small Business Saturday” on the upswing, I think there is a broader cultural trend encouraging us to support our local and regional businesses.

What I think we’ll see from a real estate standpoint is a move by these independent retailers into shopping centers and other mainstream mixed-use developments. Personally, I think shopping centers are great locations for them. The additional traffic that comes with a regional mall location can be a huge plus for an independent retailer. But, they have to be cautious. They need to maintain their independence and not be pushed by the shopping center developers to open more stores than they can manage. We’ve certainly seen it happen in the past. Babystyle is one that immediately comes to mind. If you don’t remember it, it was a great concept — what I would call a cross between Gymboree and Pottery Barn Kids — that ultimately overextended itself with its expansion into several Taubman centers. While not every location did poorly, small chains like this, with very little to no brand recognition, have to count on the traffic of the shopping center they’re in to build it. If centers that don’t have a steady flow of traffic are chosen or overexpansion beyond a certain comfort zone takes place, the prospects can certainly be grim. Oftentimes, just one underperforming store can mean the difference between survival and failure. In the case of Babystyle, it was failure.

Canyon Café is another independent that comes to mind. They, too, expanded into several struggling centers. They survived (with a few locations still open today in Arizona, Colorado, Texas and Missouri), but didn’t have the ultimate success they could have had if they’d been more mindful with their expansion. Despite these few cautionary tales, we know that independent retailers can have sustained mainstream success, because we’ve seen it in action. Inwood Village in Dallas and Legacy Town Center in Plano, Texas both are hubs of strong local operators that draw from a huge trade area.

From a retail real estate perspective, I think the strong performance of independents is an exciting thing. In fact, I think the shopping center of tomorrow almost has to include strong regional independents, specifically because they are unique and will pull in a different customer. Landlords and developers need to understand (and nurture) the appeal and potential of the independents without changing them or diminishing their unique value. Right now, independents specializing in women’s apparel and home hardware are doing particularly well. I think that if they play their cards right, they may have the opportunity to do even better with the right growth strategy.

What do you think? Will the holiday momentum experienced by independent retailers continue in 2012 and beyond? Is there room for independents in the regional mall landscape?

Please make a public comment below or feel free to e-mail me privately at jeff@jeffgreenpartners.com.

Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.


Click here for past columns by Jeff Green.

Recommended stories

Login or Register to post a comment.