REAL ESTATE

Achieving Closure

BY Jeff Green

While we’re only just getting started on 2014, already one of the big retail stories is store closings. While the economy is far from robust, we aren’t in a recession either, and so at first these closings might seem a little surprising. I don’t see it that way, however: The recent spate of planned store closing for 2014 is exactly what we should expect from an industry in transition. It’s not a crisis, so much as it is a realignment. In the absence of any major new economic news, I think we’ll continue to see more announcements throughout the year, and perhaps on into 2015 and beyond.

What has raised some eyebrows is not just that so many closings have already been announced, but that the list of brands shutting down locations includes some of the industry’s most iconic and familiar names: from JC Penney to Target, and from Macy’s to Barnes & Noble. In the case of Barnes & Noble, along with brands like Sears, the closures include some flagship stores both in the U.S. and around the world. It’s true that there are some chains that are expanding (as I mentioned in my last column, store openings are projected to be up 1.2% this year) but, overall, this will be a year of repositioning the retailer’s portfolios.

It’s important to remember, of course, that the vast majority of retailers open and close stores every year in an attempt to replace underperforming locations with new opportunities and maximize the overall quality of its portfolio. Macy’s is a brand that falls into that category, and so the fact that a handful of Macy’s closures have been announced is not particularly surprising — and is certainly nothing to be alarmed about. Most of the announced Macy’s closures are in small markets or in centers that are no longer really viable.

Many of the closings on tap for this year are less about optimization, and more about running out of options, especially in the specialty retail segment. Specialty retail is an area we are going to want to watch carefully in the next year or two, because many of these chains have over-expanded and consequently are saddled with many locations that are significantly underperforming and are not at all profitable. In December, Loehmann’s, a clothing retailer that has been around for more than 90 years, formally declared Chapter 11 Bankruptcy and agreed to a liquidation plan. I’m also hearing rumors of Coldwater Creek closing some stores in the not-too-distant future.

Sears is an interesting and fairly unusual case. While the shuttering of the brand’s Chicago flagship has gotten some media attention, Sears has actually been shedding stores relatively quietly. I’ve talked in the past about how, for Sears’ portfolio, the value is much more in the real estate than in the stores themselves, and the way they have gone about closing stores reflects that. They have closed some locations, but, in others, Sears has leased out a portion of the store to other retailers. In most cases, Sears owns their own locations, so they are able to essentially act as a landlord. While the long-term health of the Sears brand remains very much in doubt, this structure actually puts Sears in a better position financially relative to other struggling brands.

The interesting question (or, at least, a question with an interesting answer) is, why now? You’d think if brick-and-mortar stores made it through the rigors of the last recession, they would be in a better place today? In some cases, I think it’s simply a case of brands that have held on for as long as they can, hoping for a more robust turnaround than the economy has delivered. Essentially, they have run out of time: The modest economic improvement we’ve seen over the last two years or so is just too little too late.

But while a lean economy, over-expansion and, in some areas, an oversaturated retail environment, have taken a toll on some brands, I think there’s more going on here. I see many of the planned closures for 2014 as motivated at least in part by some significant and ongoing evolutionary changes within the industry — most notably the move to smaller stores sizes and the changes brought about by the exploding growth of online and mobile sales. Really, I see three general categories of closure (excluding the “healthy” closures, such as those planned by Gap and Macy’s) that encompass the majority of planned closings: closures related to an oversized store/box, like Best Buy and, to some extent, Sears; closures due to overexpansion, such as Coldwater Creek; and closures driven by the need to adjust as a result of increasing competition from online and mobile, such as Barnes & Noble and, again, Best Buy.

As for 2015? We’ll likely see more of the same, in my opinion. Many of these closures are a reflection of a much longer term restructuring across the retail landscape: a fundamental repositioning. Even if the economy takes off, those structural issues will remain. What do you think? Are any of these store closings impacting you in the markets you work with on a day-to-day basis? Let’s continue the conversation: Leave a comment below or reach out to me at [email protected].


Click here for past columns by Jeff Green.

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News

The Dressing Room: The Final Frontier

BY Dan Berthiaume

In recent years, retailers have aggressively implemented in-store systems to track customers’ every move from the moment they enter till the moment they leave (hopefully including a trip through a checkout lane). Specific details such as how long customers spend in front of a display are also carefully monitored and analyzed. Technology now allows retailers to keep tabs on what customers do in the store almost as rigorously as they follow customer actions online.

Yet one glaring exception to this shedding of light on the mysteries of in-store customer behavior remains – the dressing room. Customers walk into the dressing room with articles of clothing, try them on behind closed doors, and then walk out, possibly buying some, all or none of their selected goods. And most retailers have no insight into any of this activity.

Why the Dressing Room Matters
Conventional retail wisdom dictates that getting customers into the dressing room substantially boosts conversion rates. But better conversion rates are only one benefit retailers can gain from insight into customer dressing room behavior. With real-time insight into what exact items a consumer brings in the dressing room and what items (if any) they purchase, retailers get a much more accurate sense of how effective their assortment and merchandising strategies are.

For example, if customers frequently bring two or three versions of an item and select (or don’t select) a certain color, or tend to select the smallest (or largest) of different sizes, retailers can potentially alter their merchandising and pricing of different variations of that product before the end of the season. When this type of data is paired with individual identification of a customer (such as through a loyalty program or mobile opt-in), a brick-and-mortar retailer gets the type of “shopping cart” view typically reserved for e-commerce sites.

How Technology Can Help
There are several ways retailers can employ leading-edge technology to help navigate the woolly terrain of the dressing room frontier. Chain Store Age has covered the highly automated dressing room process of specialty denimwear retailer Hointer, which uses mobile devices to capture the items customers want to try on and then delivers and retrieves them through automatic chutes, ensuring that Hointer knows precisely what enters the dressing room and what leaves with the customer.

While Hointer’s elaborate, proprietary and automated dressing room system is probably beyond the technical capacity (and budget) of most retailers, the basic idea of having customers request items to try on via mobile phone is effective and in this hypermobile age, fairly simple.

Any type of technology that records what a customer brings into the dressing room, which can include kiosks, scanners and tablets as well as smartphones, provides substantial insight to the retailer and if deployed properly, make the customer’s life easier. Allowing customers to text or email requests for additional items for associates to deliver to the dressing room sheds even more light on the customer’s behavior and decision-making process in the dressing room.

And as mentioned in a recent column, many retailers are starting to tag individual high-end items with RFID tags. This allows retailers to know exactly what items customers bring into the dressing room, bring out, and ultimately buy. Cost likely prohibits the RFID tagging of inexpensive apparel items, but for pricier pieces of clothing this offers about as much insight into the dressing room as retailers will get short of hidden cameras, which we all know are off-limits for numerous reasons of decency, privacy, and the avoidance of massive lawsuits.


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STORE SPACES

Regular Cleaning of Condensor Coil in Refrigeration and Freezer Appliances Results in Maximum Efficiency

BY CSA STAFF

By Richard P. Fennelly

It’s a well-known industry fact that refrigeration and freezer appliances, which are no longer exclusive to supermarkets, are major electricity “hogs” in retail stores.

Unfortunately, many store owners/operators are not following an important maintenance task that is uniformly recommended by the manufacturers of these appliances: monthly or bimonthly cleaning of the condenser coil unit that is contained in the appliances. It is a topic that needs to be front and center for any organization interested in maximum efficiency for these appliances.

The need for such a cleaning protocol largely goes unrecognized because the visually non-appealing condenser coil unit lies hidden behind a panel or grille blocking view of its deteriorating condition over time.

The problem festers until a service technician discovers it on an expensive unscheduled service call when the unit begins to malfunction. With the projected market in refrigerated display cases alone slated to grow from about $8.8 billion dollars in 2012 to about $16.3 billion dollars in 2019, this issue is likely to grow exponentially, especially for plug-in units which might account for almost 68% of this growth.

Since the condenser coils are responsible for dumping the warm air extracted from the enclosed cooling chamber into the outside air, the build-up of dirt or debris on the coils will compromises their heat transfer ability and the cooling efficiency of the unit. And over time, such dirt and debris invariably does form on the coils unless a regular maintenance program is followed. The result: close to a 10% higher electricity bill for each refrigeration unit and close to a 20% higher bill for each freezer unit!

Additionally, the non-maintained units work harder, causing premature appliance aging due to longer run times, and have an increased chance of equipment failure because of higher pressures and operating temperatures. Finally, the store environment becomes less “green” as the coils collect dirt and other debris.

The benefits that come with a condenser coil unit cleaning program are reflected with 75% of those issues deemed most important by the attendees of the recent Star Refrigeration 2013 Roadshow, namely, energy savings/run efficiency (26%); operating cost (18%); reliability (14%); maintenance (14%); and performance (3%). (For survey, go to http://www.starrs2013.com/star-refrigeration-roadshow-2013-survey.aspx .)

What is the best way for the maintenance program to be conducted? Since the plug-in appliances containing these condenser units are located inside the store, the traditional cleaning method has been to use either a combination of brushing and vacuum or, even better, a combination of brushing, vacuum, with a supply of compressed air to assist in the dislodging of dirt or debris that is lodged within the coil structure.

Using compressed air (e.g., from a standard wet/dry vac) is problematic since, unless contained, this air steam will pollute the store environment necessitation additional cleanup. The traditional way in which dislodged debris has been captured has been the use of a container, such as a box, lined with a damp cloth to capture and hold the airborne debris. Often, a two person team was needed for the cleaning operation – one to hold the box/cloth capture device, the other to blow compressed air and vacuum during the cleaning operation.

Most recently, however, more scientifically engineered dust containment bags have been developed that allow for a single person to effectively blow out debris from the coils while vacuuming the airborne debris into a vacuum appliance without polluting the surrounding environment. In many cases, it is not even necessary to have this rather non-technical cleaning task performed by a refrigeration service technician — it is definitely within the capability of the do-it-yourselfer.

Preventative maintenance programs are often the first ones to be eliminated when operating budgets are reduced. This is shortsighted since a well-structured preventative maintenance program for these refrigeration and freezer energy “hogs” can more than pay for itself in energy savings while prolonging the life of such equipment and reducing the cost of maintaining it over its lifetime. It is easy to save from $100-$200 per unit in electric costs as a result of a disciplined condenser coil cleaning program. For stores that contain a multiple of such units, the savings can be in the thousands of dollars. These cost savings go directly to the bottom line.

There has been much talk and press attention given to a whole host of energy efficiency steps that the retail industry can take (energy efficient lighting, better insulation, better protocols for heating and cooling schedules, etc.). These all constitute “low hanging” fruit, most of which by this time has been picked. So how might we continue to squeeze out more efficiencies? Certainly, the scant attention that appears to have been paid to a disciplined PM program for the condenser coils in plug-in cooling appliances needs to change.

Richard P. Fennelly is director of product development at Coilpold.com, manufacturer of the Coilpold dust containment bag for use in the condenser coil cleaning of commercial refrigeration and freezer appliances ([email protected]).

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