The brick-and-mortar retail landscape is changing. Many traditional enclosed malls are closing or reinventing themselves. Fewer of the large, typically suburban, destination-style retail projects are in the pipeline. More urban lifestyle-focused, mixed-use projects have taken their place. These tend to favor smaller-format stores and locally based retailers and restaurants, and national chains have been hesitant to embrace them. But as urban-flavored mixed-use destinations continue to make up an increasingly significant slice of the overall marketplace, patterns and priorities are changing.
Established brands are recognizing the opportunities that these new spaces represent and are seeing the value of moving into new markets with new audiences. To make that happen, they are making more of an effort to fit in. This means rolling out newer, more compact floor plans and concepts that are not only smaller, but merchandised and marketed in a manner designed to appeal more to local consumers.
What steps can larger, more traditional retailers take to fit in and adjust to an urban lifestyle center? How can they make their spaces feel more relevant and engaging to a group of consumers looking for a more personalized and experiential lifestyle experience? Some things to consider:
Early adopters in these centers tend to be local and regional retailers -- unique one-off concepts and neighborhood-type businesses. Established brands evaluate opportunities based on past performance of their standard formats and are less comfortable with a smaller format. In the early stages of a civic redevelopment, you can’t really point to the metrics, but national brands won’t even consider moving forward if the numbers aren’t there. National retailers would be smart to continue to work to look beyond the data and traditional metrics and appreciate the value in new and emerging market opportunities. In some cases, being a slave to formulas means missing out on potentially lucrative opportunities.
Formats, merchandising, and marketing
From Walmart and Target to Whole Foods and Dollar General, national retailers are showing a willingness to be more flexible and adaptive with store size and layouts. While there always will be limitations and compromises in a smaller space, the fact that some of the nation’s best-known large-format chains have been willing to roll out entirely new urban concepts speaks to the value of these smaller projects. Whole Foods is rolling out a smaller-format 365 concept offering a lower price point. Target Express was the big-brand innovator in small-format urban stores, and Target also has been implementing merchandising strategies designed to appeal to local audiences. While many national brands have an established marketing infrastructure in place, they can generate additional traction by working with landlords who are familiar with the contours of the local market.
One of the most important things any national retailer can do is to engage with the local community. Community programs, promotions, and special events should be top of mind as you move into mixed-use settings. From pet supply stores offering vaccination programs and adoption drives to fitness brands scheduling regular “yoga in the park” outdoor sessions, personal connections pay off. Pottery Barn uses local in-house designers to work with customers one-on-one; Lululemon recruits brand ambassadors from their local fitness communities; Eileen Fisher hosts book signings from fashion writers; eyewear brands hold trunk shows with limited, special-edition products; Williams Sonoma hosts noted chefs for cooking demonstrations and book signings.
The landlord’s role
Developers and landlords, too, need to play a part in helping national brands fit into smaller lifestyle projects. They should be flexible and responsive, working with their retailers on integrating into projects and making concessions when appropriate. They should approach tenant selection with a thoughtful and strategic mind-set. Cookie-cutter concepts are less likely to be successful in creative, community-driven lifestyle centers. Real estate’s local imperative has never been more important than it is in planning successful town centers. Developers and landlords must be willing throw old formulas out the window. Be responsive to the market and give your consumers the products and experiences they are looking for.
Richard Broder is CEO of Broder & Sachse Real Estate, Inc., a Birmingham, Michigan-based real estate development company. Contact Richard at email@example.com.