EMV Deadline Approaching
The upcoming Oct. 1, 2015, mandate for U.S. retailers to adopt POS systems that can securely accept and process transactions using EMV (Europay, MasterCard, Visa)-compliant, chip-based payment cards is fast approaching. Retailers that are not in compliance with the mandate after that date will be held liable for any fraudulent transaction committed with a chip-based card. However, retailers that have not completed — or started — their compliance efforts should not necessarily panic.
“The liability shift is not a hard date,” said Tom Litchford, VP retail technologies, National Retail Federation (NRF). “It’s mandated by card providers from a risk-management business perspective. Whoever is least secure has the liability.”
According to Litchford, every retailer should examine its own unique situation when creating an EMV compliance strategy. Some retailers may be at higher risk for fraud than others, and not every bank will have all of its payment cards chip-enabled by the deadline, either. For retailers moving forward with compliance efforts, Litchford recommends a five-step process, along with some general advice.
“The longer you wait, the harder it’s going to get,” he stated.
Adding another potential wrinkle to the timing of the shift, the Food Marketing Institute (FMI) has asked major credit card companies to move the deadline into 2016. In April, the FMI sent a letter to Visa, MasterCard, American Express and Discover Financial Services saying the system will not be ready to meet the October mandate. The letter also said retailers have to wait 16 weeks to obtain EMV-compliant hardware and that the mandate takes effect as retailers enter the crucial holiday selling season. At presstime, FMI had not received a response to its request.
NO PANACEA: EMV compliance offers protection against fraudulent point-of-sale transactions conducted with lost, stolen or counterfeited cards. However, it is hardly a panacea against payment fraud or data theft.
“EMV is a great risk reducer, in conjunction with proper security hardening and PCI controls,” said Andi Baritchi, global managing principal, PCI Consulting Services, Verizon Enterprise Solutions. “It does not remove you from your PCI obligation.”
Baritchi referred to the Payment Card Industry (PCI) Security Council standards that require end-to-end encryption to help reduce the risk of online card fraud, as well as data breaches.
Baritchi warned that EMV compliance alone can cost tens or even hundreds of millions of dollars, depending on the size of the retailer. Because of the cost and importance, he said retailers should approach EMV compliance with the help of qualified partners.
“Payment card data is very attractive to criminals as it can be easily converted to cash,” explained Baritchi.
IN THE WORKS
Bauer Hockey: Ice hockey equipment manufacturer Bauer Hockey is throwing its puck in the retail arena. The company will open its first-ever store this summer, in Burlington, Massachusetts, followed by a second location in the fall, in the Minneapolis area.
Designed by Toronto-based Perennial Inc., Bauer Hockey will offer an experiential retail experience that seeks to elevate the brand and the sport of hockey, complete with an indoor ice rink where shoppers can try out equipment. The stores will put an emphasis on product education and fit expertise, and include an area to educate new-to-hockey families and welcome them to the sport. The spaces will also host ongoing events and initiatives for players, parents and the overall hockey community.
Bauer plans to open six to eight stores during the next several years in key hockey markets across the United States and Canada.
Bunulu: One hundred-year-old Florida-based department store retailer Bealls Inc. is developing a specialty store concept — Bunulu — that is scheduled to premier by yearend.
The new banner will target a younger demographic, and feature coastal-inspired active lifestyle apparel and accessories for both men and women. The brand’s website describes Bunulu as the “next generation of outdoor active lifestyle brands. Personalized for the coastal lifestyle.”
According to reports, Bunulu will open three to five locations in the fall. Stores will average about 4,000 sq. ft. and have a casual atmosphere, with wood floors and shelving and beach decor accents.
Combatant Gentlemen: At presstime, the 3-year-old online menswear retailer was set to open its first permanent retail space, a showroom at its headquarters in Irvine, California. The move comes after the company tested brick-and-mortar with pop-ups in Los Angeles, and New York City last December.
Similar to Warby Parker and some other online startups, Combatant Gentlemen owns nearly every aspect of its product, from the design and production to the manufacturing. (It even owns a sheep farm.) The strategy cuts out the middlemen, allowing it to offer smart-looking, all-wool suits for as low as $160. Specializing in suiting and shirts, Combatant Gentlemen also does a big business in “wedding suits” and tuxedos.
Currently, the retailer ships throughout North America. But the United Kingdom and Australia are expected to come on board by the end of the year.
Hamleys: Famed British toy retailer Hamleys is coming across the pond. The 225-year-old company has retained JLL to facilitate a multiple store rollout throughout the United States.
The retailer, which has some 50 stores across Europe, Asia and the Middle East, including its famed seven-story flagship on Regent Street in London. Most recently, it opened its largest store ever, a 73,000-sq.-ft. location in Moscow. The two-level space is divided into nine themed areas that combine retail and entertainment.
In the United States, Hamleys is reportedly seeking locations in such major markets as New York, Chicago and Los Angeles, and is also looking to open about 20 airport locations.
Primark: One of Europe’s fastest-growing apparel chains, Primark, makes its U.S. debut this fall, opening a four-level, 70,000-sq.-ft. store in the former Filene’s space in Boston’s Downtown Crossing. Selling on-trend fashions at value prices, the retailer casts a wide net in terms of demographics. (The Dublin-based company is owned by Associated British Foods.)
Primark plans to open about 10 stores in America by spring 2016. Most of those locations will be realized via a deal with Sears Holdings Corp. In late 2014, Sears entered into an agreement to lease seven standalone stores in the Northeast to Primark, with the first opening in late fall at King of Prussia Mall, King of Prussia, Pennsylvania. Other locations include Danbury Fair, Danbury, Connecticut; Freehold Raceway Mall, Freehold, New Jersey; Willow Grove Park Mall, Willow Grove, Pennsylvania; and the Staten Island Mall, Staten Island, New York.
In total, Sears is leasing about 520,000 sq. ft. of retail space to Primark. Sears will maintain a presence, although with a streamlined format, at six of the seven locations, with the exception of the site at King of Prussia.
Tiger: Known for its low prices, upbeat attitude and design aesthetic, Danish retailer Tiger will enter the United States in May, opening a 5,000-sq.-ft. flagship in New York City’s Flatiron neighborhood. Expect it to be filled with a quirky, ever-changing and colorful mix of exclusive items — ranging from umbrellas and toys to T-shirts and seasonal goods — at affordable prices. (Most of the products will be priced under $10, according to reports.)
Based in Copenhagen, Tiger opened its first store in 1995, and currently has some 435 locations in 25 countries. (The company operates under the name Flying Tiger Corp. in Asia and the United States due to trademark issues.)
More: Australian luxury retailer Sneakerboy is poised to open its first U.S. store, in SoHo. The 2,000-sq.-ft. shop will showcase fancy, high-end sneakers from top designers like Lanvin and Balenciaga, along with special items from such athletic mainstay brands as Nike and Reebok.
Sneakerboy stores in Australia merge the online with the physical experience. They carry no take-home stock. The space is essentially a showroom, albeit a very futuristic one. Customers can browse and try on the artfully displayed goods, and then, via the Sneakerboy app, order and check-out from their phone or an in-store iPad. The merchandise is delivered within three days. The app remembers a customer’s shoe size, payment preferences and purchase history — and uses the information to provide tailored information about new products.
Hot Concepts & coming attractions
From international brands dropping anchor on U.S. shores and online players expanding in the physical space to familiar names with new formats and traditional start-ups, there is no lack of new concepts in the brick-and-mortar arena. Here’s a look at some with the biggest buzz.
An Austin, Texas-based home improvement retailer with a green conscience and niche positioning is ready to branch out. TreeHouse opened in late 2011 in Austin’s Westgate Shopping Center, and has been thriving ever since. Co-founded and headed up by environmental consultant Jason Ballard, the start-up boasts a veteran retailer — one who knows a thing or two about niche retailing — as its chairman: Garrett Boone, co-founder and former CEO of The Container Store.
The company took its time in perfecting its model. But following 10 straight quarters of growth (and 60% year-over-year revenue growth from 2013 to 2014), the retailer recently announced that it is securing a new round of financing for expansion. It is exploring options in California, Colorado and the Pacific Northwest, as well as additional cities in its home state.
TreeHouse bills itself as a first-of-its-kind improvement store, and in many way it is. It does not aspire to be a big-box retailer. Instead, the retailer offers a carefully curated selection of products and services that promote healthful and sustainable living spaces, with an emphasis on performance and design. It scores every product it sells based on health, performance, corporate responsibility and sustainability.
TreeHouse’s Austin store is airy and inviting, with skylights and an open feel. There are lots of displays, product vignettes and graphics that explain how things work and tout the benefits of non-toxic paint and the like. Associates receive 110 hours of training annually to ensure they remain current on products and services.
TreeHouse’s business model has shifted from pure retail to a hybrid of retail plus home solutions and services, which is the strategy it will use as it expands. Customers, for example, can buy a single LED light bulb or bird feeder off the shelf, along with such things as full kitchen design and installation, turnkey flooring solutions and solar programs.
The store has evolved into a 25,000-sq.-ft. hub for everything to do with smart building. And if the company can’t find an off-the-shelf solution for a particular need, it will take matters into its own hands:
TreeHouse just developed the first fully equipped, delivered, and installed rainwater harvesting system that consumers can buy all at once.
Athletic footwear and apparel giant adidas has opened its innovative RunBase store format in the United States, and dedicated it to the world’s oldest annual marathon.
The 2,000-sq.-ft. Boston Marathon RunBase is located on Boylston Street in Boston, close to the finish line of the famed competition. Part retail store, part museum and part runners clubhouse, RunBase is designed for shoppers, runners and tourists alike, and sells adidas footwear, along with seasonal and official marathon apparel and accessories. Interactive 3-D display cases are outfitted with transparent touchscreens.
The space immerses visitors in the history of the Boston Marathon, with exhibits and historic photos from the past 119 years, including race bibs, medals, trophies, jackets and inspirational displays. Interactive screens replay key moments of the race’s history. Visitors can even “run” the race on a treadmill that simulates every step of the famed 26.2 mile course, complete with the corresponding visuals and terrain. There is also a 10-ft., 3-D topographic animated race map.
At its core, the RunBase concept is intended to serve as a community hub and resource for runners, and the Boston store remains true to that mission, hosting events, seminars and clinics. The space includes a changing room with lockers and showers, allowing runners to use the facility as a base for informal runs.
Adidas currently operates six RunBase stores around the globe, including Tokyo, London and Moscow. Although Boston is the first U.S. site, several additional U.S. locations are in the works, and the concept is expected play an important role in increasing its presence in key U.S. cities.
Frank & Oak
Shoppers can get a coffee, a shave and buy some stylish new threads at Frank & Oak, the popular Montreal-based online menswear brand that is also expanding in the physical space.
Founded in 2012 on a members-only model, the vertically integrated company has accrued a loyal following, attracted by its accessible prices, on-target fashions and such human touchpoints as live online chats with style advisers. It puts a big emphasis on personalization and sends members a curated monthly newsletter with customized product suggestions (culled from its monthly collections). They also receive “lifestyle content,” including playlists of streaming music and magazine-style fashion articles. Members (reportedly 1.6 million strong) can choose up to five items to be shipped free of charge, returning what they don’t want and paying only for what they keep. Every package comes with a handwritten note.
Frank & Oak opened its first brick-and-mortar location in fall 2013, followed a year later by a Toronto flagship. It has since opened four pop-up stores throughout Canada, using the temporary (12 to 18 months) locations as a test as it works to expand its footprint. Showcasing the company’s monthly collections, the spaces blend commerce and technology, and shoppers can book one-on-one appointments with associates for help with styles and fittings. The online experience is integrated in-store, allowing shoppers and associates access to order histories and online style profiles.
The stores have a cool, hip vibe and function as community hubs, offering classes and events. The permanent ones come complete with a cafe and a full-service barber shop.
With some 70% of its sales coming from the United States, Frank & Oak recently announced plans to open six U.S. pop-up shops, which will operate under leases that last at least a year. In a twist, the company is leaving it up to customers to decide where the locations will be. Twelve cities are in the running, including Manhattan, Chicago, Boston, Seattle and San Francisco, and consumers can vote for their city by ordering a gift card. The first six cities that achieve a designated target amount, will get a pop-up. (Customers in cities that don’t get the store are eligible for a full refund.)
Trendy teens aren’t the only ones sweet on Nasty Gal, the online retailer that specializes in edgy fashions, served up with lots of attitude. Former J.C. Penney chief and Apple guru Ron Johnson led the company’s recent round of financing, which increased total outside funding in Nasty Gal to $65 million, and joined its board.
Nasty Gal is coming off a busy 18 months. It opened its first physical store in fall 2014, on Melrose Avenue in Los Angeles. In January, founder Sophia Amoruso announced she was stepping down as CEO and handing over the reins to a more seasoned retailer, company president and chief product officer Sheree Waterson, formerly of Lululemon. (Amoruso remains as executive chairman, overseeing creative and brand marketing). The company was upfront about its intent, announcing that Waterson would partner with Amoruso to evolve Nasty Gal into a dominant retail presence.
Exactly what shape that presence will take can be glimpsed in the company’s second physical store, which opened in March on Santa Monica’s Third Street Promenade. Spread out over 6, 500 sq. ft., the space is billed as a style emporium, with focused destination areas throughout. It features a wide range of merchandise that includes vintage finds from iconic designers and new styles from international and local ones. The assortment ranges from high to low price-wise and accessible to aspirational style-wise, with new items coming in weekly.
Nasty Gal’s provocative femininity and cool-girl vibe dominates the interior, from its vivid red and blush color palette to the oversized retro neon sign that reads: “I still remember what I was wearing when it happened.” The two-way mirrored fitting rooms (the customer can see out, but no one can see in) enhance the overall theme.
As to Nasty Gal’s plans for the future, Amoruso gave a hint in the announcement for the store’s opening.
“We plan to apply this knowledge to what will eventually be a dominating retail presence with stores nationwide,” she stated.
Move over Teavana. Canada’s David’s Tea has its sights set on expanding big time in the United States. In April, the Quebec-based specialty tea chain filed a registration with the U.S. Securities and Exchange Commission for an IPO in which it looks to raise a maximum of $75 million, with plans to list on the Nasdaq with the ticker symbol “DTEA.”
Founded in 2008 by David Segal, a tea-loving entrepreneur, and his cousin Herschel Segal, the founder of the Le Chateau apparel chain, David’s Tea has flown largely under the radar. But that’s about to change. It currently operates some 134 stores in Canada and 24 in the United States (all are company-owned), with plans to open roughly 25 to 30 locations in Canada and 10 to 15 in the United States this year, according to its SEC filing. Long term, David’s Tea sees the potential for up to an additional 100 stores in Canada and 300 locations in the United States.
“We believe there is a highly attractive, long-term growth opportunity for our store base in North America,” the company said in its filing. “We see a significant opportunity to increase our brand visibility in the U.S. market, which will be a key area of focus in our marketing strategy going forward.”
David’s Tea doesn’t take itself too seriously. The goal, as stated in its filing, is to “create an inviting atmosphere and stand in stark contrast to common perceptions of tea as a more traditional product.” Stores, which average 850 sq. ft., are designed with a simple, modern aesthetic and accented with bright pops of color. The vibe is friendly and upbeat. The names of its brews — Bubbie’s Baklava, Berry Poppins, Jumpy Monkey and Movie Night (a mix of green tea with apples and real popcorn) to name a few — play up its non-stodgy appeal.
The merchandise mix includes some 150 proprietary loose-leaf teas and tea blends, with 30 new blends introduced annually, along with pre-packaged teas, and tea-related gifts and accessories. Employees (called “tea guides’) are passionate about the product, and are eager to discuss brewing methods and the like — and give out samples.