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On the Upswing?

An evolving retail landscape shows signs of life

I’m feeling pretty good about our industry after attending the ICSC New York Deal Making Conference earlier this month. In a marked change from recent years, the mood at the annual convention was noticeably upbeat. And, surprisingly — in a good way — there was an obvious buzz in the air about expansion plans. There are some intriguing new retail concepts in the pipeline and the recent influx of international brands making their brick-and-mortar entry into the U.S. market gives us what I think are genuine reasons for optimism in the New Year. 

I saw three broad categories of retailers driving the expansion buzz: the first being hot U.S. retailers. For example, Francesca’s and Vera Bradley, strong brands in women’s apparel and accessories, both recently went public and now have cash to establish a strong expansion pipeline. Sur la Table also has the resources to grow. The second category is made up of brands that are new to brick-and-mortar, like Dermalogica (a cosmetics and skin care retailer). They have traditionally positioned their products in department and specialty stores, but recently opened two stores of their own and are looking to open more. The third category is, to me, the most interesting: the international brands and concepts that are new to the U.S. market. Big international names like leading Japanese clothing retailer Uniqlo, Canadian retailers Joe Fresh and Aritzia, and European high-end skin care brand Aesop are all new to the U.S. retail landscape. We’re mostly seeing them open on the coasts first, but I would expect them to move inward to major mid-American markets like Chicago and Denver once the coastal locations are established.

I think these expansions are actually part of a larger shakeup in American retail. Along with the rising stars, we’re sure to see some brand casualties. The closings we see going forward aren’t going to be the result of another economic downturn, though, but more of a natural brand evolution in a changing marketplace. Let’s face it — a lot has changed over the last four years, especially the way consumers shop. So it shouldn’t come as a surprise when we see some prominent names announce store closures, particularly after the holidays. Pacific Sunwear has already announced 200 store closures nationwide, along with Draper’s and Damon’s. Specialty women’s and teen apparel concepts are both pretty vulnerable right now with the exception of those brands that offer youthful fashion at an affordable price like H&M and Forever 21. I do think Chico’s has adapted and is finally starting to move in a more positive direction, but not everyone showing signs of distress in the past will be so lucky.

I guess my biggest takeaway from the conference is that the overall state of the market is very promising: there are more chains waiting in the wings to take over spaces than there are store closings; probably for the first time in the last four years. And, it’s nice to see that there are plenty of retailers eager to get into brick-and-mortar across the United States.

If these expansions take off, the really interesting question to me then becomes: where will they all go? There might be a bit of a supply-and-demand issue in the near future, given the fact that construction is still, for the most part, at a screeching halt. But I don’t want to put the retail cart before the real estate horse, so maybe that’s a topic for another day … what do you think? Did you experience the same positive buzz at this year’s ICSC convention in New York? Where do you see the most potential for expansion? What do you think about the international brands invading the United States?

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.


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© 2014