Growing Disney’s Best 30 Minutes
In May 2011, Disney Store let landlords know it had big plans: The 200-plus store retailer of Disney merchandise announced at the International Council of Shopping Centers’ annual retail real estate convention that it would open 40 stores globally this year, a jump from its originally announced 25. That’s big news from a chain that, like most of its retail counterparts, has had more than its share of struggles as the economy tanked and it was forced to embark on a stringent right-sizing plan.
But during the last 18 months, Disney Store has transformed itself. Today, the chain is not only opening stores but is actively remodeling existing units under a new store design that is highly experiential, even by Disney standards.
Chain Store Age talked with Paul Gainer, senior VP of Disney Store North America, about the newly unfurled expansion track and the new look that will go along with it.
Tell me more about the announcement Disney Store made back in May.
The crux of the announcement was that we would be accelerating the new store design, while maintaining the overall store count at 215. As we see opportunity in market voids, we will add stores and remodel some of our highperforming stores this year. The goal is to accomplish that prior to the 2011 holiday shopping season.
What are Disney’s specific plans going forward, in terms of new locations and remodels?
The goal is over the next five years to be able to roll out the new store design across the entire portfolio. There is a three-pronged program that includes new builds, remodels of existing stores, and relocations where we will move stores within an existing mall to a better location and reopen with the new design.
What are some of the key features of the new design?
Our vision statement is: “The best 30 minutes of a child’s day.” That is our filter for everything that we do, including our products, guest service and, of course, the store design. We are focused on creating that magical experience for a child in the store, and the entire family. There is a pixie path that navigates shoppers through the store and into different neighborhoods, such as the Princess neighborhood, a Cars neighborhood or the Toy Story neighborhood.
In the Princess neighborhood, for example, a child can wave a Cinderella wand at the magic mirror, and Cinderella appears in the mirror. Boys can enter the Cars neighborhood and can customize and build their own car in the store. One of the key store experiences is the Disney Theater, a designated space with a 12-ft. curved screen, and a kind of a jumbo iPod device that allows children to select what they see on the screen. There are many different touchpoints and experiences that allow children to connect with their favorite characters.
How are the redesigned stores performing from both a financial and operational standpoint?
We don’t disclose financial results, but we have seen across the board — from the 20 redesigned stores that we have open to date — double-digit traffic increases in each. We’re seeing that guests are coming to us more frequently and are spending more time in each visit. We’re very excited about those metrics, and the results have given us the confidence to accelerate the new store design rollout.
Talk about what has worked, and what hasn’t.
We see an opportunity to improve the guest service experience. An example would be the mobile POS in the store, as there is an opportunity to rely less on the large cash wrap structure and to service the guest more quickly through mobile POS, from which we can perform full credit card transactions from any point in the store. We are in a much bigger way embracing mobile POS as we move into the holiday season. We had mobile POS in the new stores last holiday as a pilot, and in many cases we are doubling the amount of hardware to increase the service.
What has been your biggest surprise, as well as your biggest challenge, with the redesign and the rollout?
The biggest surprise has been seeing the amount of time people are spending in our stores. It creates more of a focus on how we deal with traffic flow in the store. That is something we expected to a degree, but the amount of time people are spending in the store has been a little surprising. That’s a good problem to have!
The biggest challenge has been through-put. And that’s where mobile POS comes in. Being able to deliver our vision statement, even when it’s a Saturday in December, is a focus for us. The crowds in the store during the holiday have made us rethink how we can operationally make their shopping experience a positive one.
As you open additional stores, what kinds of sites are you eyeing, and how is RCS Real Estate Advisors (New York City) working with you to find and evaluate those sites?
At the highest level, we want to be where the people are. Our shopping demographic is typically moms and families, but we also do very well in high-tourist locations. Our real estate strategy is to start by looking at the “A” and high-grade “B” malls, and you’ll find that the majority of our locations are indeed mall-based. And, yet, our immensely successful Times Square store in Manhattan and High Street store in San Francisco have shown us that high-tourist locations can be big performers, and so we have those kinds of sites in the major markets. We do a lot of “part-art and part-science” traffic flow, analyzing how the mom will shop, how the mom with the stroller will shop, who the co-tenants are in the center.
We look at other retailers where we think mom is shopping, and those are our desirable co-tenants. We are very specific about store size — 4,500 sq. ft. on average and with about 40 ft. of frontage. That very detailed criteria allow us to be very specific with our landlord partners, as well as allow us to be very selective. I have an internal real estate group and leasing group, and RCS is our representative and our frontline partner with the landlords to ensure we get deals done.
What are the best 30 minutes of your day?
Typically it’s when we get to spend time talking about the guest-facing experience. There’s nothing like seeing an idea spark and then delivering that within our visionary framework to the stores. That is probably the best 30 minutes of our day.
Focus on: Solar Power
From Kohl’s to Whole Foods Market, retailers nationwide are utilizing solar power as a way to rein in energy costs. Still, solar energy remains victim of many misconceptions, according to Ben Collingwood, director of national accounts for REC Solar, a San Luis Obispo, Calif.-based solar power provider. Here are some of the most common:
- Solar is not practical for retailers. FALSE
“Retailers large and small are going solar. And these companies wouldn’t be doing so if it weren’t financially attractive,” Collingwood said.
According to Collingwood, today’s retailers are utilizing solar power for the return on their financial investment.
“Going solar allows a retailer to lock in energy rates for the next 25 years or so, creating a hedge against future energy prices,” he explained. “It gives them a competitive edge over chains that don’t have a built-in hedge against rising rates. There will be big differences down the road in operating costs for retailers that invest in solar versus those who do not.”
- Solar systems have a high upfront cost. TRUE and FALSE
A retailer can purchase a solar system outright, which involves a significant cash investment but greater benefits after the initial payback is realized. Or a retailer can enter into a power purchase agreement, which involves no upfront costs at all.
“If a chain purchases the solar system on its own, the electricity produced by the system is free to the chain,” Collingwood said. “So once the payback on the investment is realized, the system is generating profit in the way of free electricity for 20 or 25 years.”
With a power purchase agreement, a third-party provider owns the solar system on the retailer’s property and is responsible for installation and maintenance. The chain pays only for the power produced by the facility, not the equipment or installation.
“Under a PPA, the third party sells the electricity produced by the solar facility to the retailer at a reduced price,” Collingwood said. “The arrangement is cash-flow positive from day one, but the potential for long-term savings is not as great as compared with when a chain owns the system outright.”
Currently, the market is about equally split between retailers that prefer to purchase the system (both Ikea and Costco fall into this camp) versus those who go the PPA route (Kohl’s and Wal-Mart).
“In considering the two options, retailers first need to decide whether they have the cash available to make the investment and, if so, whether they want to put it to work for solar or another investment,” Collingwood said. “But if you are willing to put up your own money, the long-term savings can be double what you would have saved under a PPA.”
- It takes a long time to see a return on investment for solar systems. FALSE
Depending on the area, payback can be in two years or less, according to Collingwood. In general, the payback comes the fastest in areas with high electricity prices, such as New Jersey, Hawaii and California. Solar incentives and solar compliance requirements also hasten the payback.
- Solar systems require substantial investment in system maintenance and upkeep. FALSE
Solar systems, which have no moving parts, require much less maintenance and upkeep than other types of renewable systems, according to Collingwood.
“Maintenance basically requires cleaning dirt off the solar panels once or twice a year. The system also requires a general electric check once a year, with the latter typically performed by an authorized representative,” he explained.
While retailers that own the system can perform the maintenance themselves, most outsource it to the original solar provider. Under a PPA, the third party is responsible for all maintenance and upkeep.
- Solar technology changes quickly. FALSE
The changes in solar technology have been very incremental for the commercially available products that retailers use, according to Collingwood.
- Complications from leasing facilities and operating multi-site locations make going solar difficult. TRUE and FALSE
According to Collingwood, retailers that are exploring a PPA need to consider how long they plan to be in the building. Many PPAs require the retailer to buy the electricity for the next 20 years.
“It does not make sense for a retailer with a short-term lease to enter into a PPA unless the agreement includes the option to relocate the system to another facility,” he said. (REC is one of the few solar integrators who will offer a relocation option. It has a specially designed solar system that does not penetrate the roof, making it easy for relocation.)
The annual State of the Industry Report takes the spotlight in this issue of Chain Store Age, and it makes for some terrific — and illuminating — reading. It’s chock full of great insights and fascinating updates from around the globe.
Prepared by the brand and design experts at Interbrand Design Forum, this year’s report is entitled “Retail Without Boundaries.” It’s a theme that is pervasive throughout the industry today, as technology and economic realities combine to bring down barriers between retail channels, retail segments and trading countries. Overnight, it seems, a landscape in which boundaries were blurred has been transformed into one where there are none.
The report’s subtitle, “Innovation from Around the Globe,” is equally timely. It speaks to the energy and creativity that drives and inspires industry.
From Tesco’s virtual supermarket in a subway station (page 4A) to a groundbreaking drug store (page 12A) to fitting rooms that play music to match the style of clothes being tried on (page 6A), retailers are looking for new ways to engage and connect with customers. As the report so aptly puts it: “The landscape is fairly bursting with innovation.”
The report also contains the Chain Store Age Top 100, our definitive listing of the largest U.S. retailers based on total annual revenues for their most recently completed fiscal year. The list not only speaks to the key role that retail plays in driving the U.S. economy, but also to the resiliency of the industry itself.
There are no big shake-ups on the Top 100. Wal-Mart Stores is still No. 1 by a mile. No other U.S. retailer comes close to the Bentonville, Ark., retailer in annual revenue. But don’t be fooled. From digital innovation to physical store reinventions to brand extensions, many of the individual players on the list are in the midst of profound transformations.
In terms of store growth, this past year has seen many of the Top 100 retailers start to push forward again with expansion. Canada and international locales from London to China are the new hot spots for everyone from Target to Gap Inc.
At the same time, however, there is plenty of growth going on here at home as well. The most active retailers on the list when it came to North American expansion in 2010 were the extreme value players: Dollar General added 544 stores, Dollar Tree another 295, and Family Dollar came in at 200. Those same chains have all committed to ambitious expansion for this year also.
Other retailers that expanded their U.S. portfolios by a significant number included GameStop, AutoZone, O’Reilly Automotive, Advance Auto and Best Buy (with its freestanding Mobile format).
The Interbrand report and Top 100 list reinforce one of the industry’s oldest and most basic truisms: Retailing is always changing, always evolving, and it is how individual retailers respond to those changes that will determine their future.
PS: Just as technology has transformed retail, the same can be said for publishing. Many of the articles in the Interbrand report are accompanied by an icon , which means there is more to see online. To access the bonus content, just snap a photo of the QR code on page 3A with your mobile phone. Or visit interbranddesignforum.com/category/retail-innovation.