REAL ESTATE

The Hispanic Market Comes of Age

BY Jeff Green

One topic that’s been on my mind lately is the growing Hispanic market in the U.S., and what its clout and purchasing power will mean for retailers — and, subsequently, for retail real estate — in the years ahead. “Emerging” is probably too mild of a word to describe the Hispanic market — exploding might be more accurate.

As of 2011, the U.S. Hispanic population was just shy of 52 million (17% of the total U.S. population). That’s up from around 35 million in 2000: an eye-opening 48% increase in just 11 years. By 2060, Hispanics are projected to make up 31% of the U.S. population. We don’t have to look decades down the road to get a sense of how important and influential the Hispanic demographic is for retailers, however: In 2013, Hispanic purchasing power reached $1.2 trillion, and it is projected that the Hispanic population will account for 11% of all purchasing power by 2017. It’s also important to note that the influence of the Hispanic market is being felt everywhere. While large Hispanic markets like Los Angeles and Houston lead the way, the Hispanic market is also growing dramatically in northern markets like Minneapolis, and smaller secondary markets like Omaha, Nebraska.

What is particularly interesting to me is how various developers and retailers are adapting (and, in some cases, not adapting) to this foundational shift in the nation’s demographic makeup. In my mind there are really two broad retail shifts in response to growth in the Hispanic market. One is the continued development and redevelopment of centers designed specifically to cater to and appeal to a Hispanic audience. Most of these are smaller centers and more modest sized formats, and they tend to feature Hispanic-friendly tenants. Often, they feature mom and pop chains, which can pose a bit of an issue for developers in this space. With a comparative dearth of national brands, securing sufficient credit and financial backing can at times become problematic. Hispanic supermarkets are often a big part of these projects (Houston-based Fiesta Markets is a good example), and smaller specialty bakeries and fish and meat markets are a popular choice.

The other significant trend to mention are the steps that national chains are taking to improve their standing and boost their appeal. While some brands — JoAnn Fabrics, Family Dollar, Ulta Beauty — have established themselves as effective co-tenants within a strong Hispanic market, many chain stores have never had an easy time appealing to minority communities. It’s actually far easier to list those chains that have been able to transcend ethnic, cultural and racial lines more effectively than others. MAC Cosmetics has been successful, as have Bebe, Charming Charlie, Forever 21 and Coach.

Compare the broad appeal of those brands to the limited cultural appeal of brands like Abercrombie & Fitch and American Eagle Outfitters. In cases where the appeal to Hispanic shoppers falls short, I see the most glaring failure on the merchandising side, which often reflects an inability or an unwillingness to understand, prioritize and address the needs of this market.

While some retailers are expanding their profile in the Hispanic community, it seems clear that (as of today, at least) the Hispanic population in the U.S. is currently growing at a much faster rate than the retail and retail real estate industries are adapting. There are some bright spots, however. Wal-Mart spent $66.6 million on advertising to Hispanic consumers in 2010, and they projected that they will increase that investment by 100% in 2014. Ram Trucks and Pepsi have both recently tapped Hispanic celebrities for big marketing campaigns. I expect to see more of this — much more of this — from a much broader range of national brands in the years ahead. I also expect to see more attention paid to the kinds of retail experiences and environments that Hispanic shoppers enjoy.

For myself, considering how fast the Hispanic market is growing, and as influential as it is now and will be in the future, I honestly don’t think retailers really have a choice in the matter. If they want to be competitive in the retail landscape of the not-too-distant future, the Hispanic market is a critically important piece of the puzzle.

I’d love to hear your thoughts on the matter — especially any examples you have personally witnessed of brands or stores engaging in Hispanic commercial outreach. What brands do you see making smart choices to expand their appeal? How have shifting demographics driven retail real estate trends in your area? Share your comments below or email me: [email protected].


Click here for past columns by Jeff Green.

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Alco stays focused following Q4 results

BY CSA STAFF

Expenses associated with a rejected merger with Argonne Capital Group and the planned closing of more than a dozen stores took a chunk out of broad-line retailer Alco’s fourth quarter results.

Net sales from continuing operations during the quarter decreased 8.9% to $130.9 million, compared to $143.6 million in the fourth quarter of fiscal 2013, which had an additional week. Excluding the 14th week of the fiscal 2013 quarter, net sales from continuing operations decreased 4.7%.

Same-store sales, excluding fuel centers, decreased 11.7% to $124.8 million during the quarter. Excluding the 14th week of the fiscal 2013 quarter, same-store sales, excluding fuel centers, decreased 7.6%.

Net loss for the fourth quarter of fiscal 2014 was $8.6 million, or $2.65 per diluted share, compared to a net income of $2 million, or $0.61 per diluted share, for the fourth quarter of fiscal 2013. Results in this year’s fourth quarter included impairment charges of $1.4 million associated with the planned closing of 14 stores during fiscal 2015, $0.5 million for costs associated with the relocation of the headquarters to Coppell, Texas, and $0.1 million in expenses attributable to the rejected merger with Argonne Capital Group.

"Fiscal year 2014 operating results reflect the impact of significant change and disruption to our business. Most important, we took steps to fix long-term problems that have hurt Alco’s profitability while dealing with the events associated with the proposed merger that was rejected,” said president and CEO Richard Wilson. “We recorded approximately $2.4 million in merger-related costs and approximately $1.1 million of headquarters relocation costs. During the year, Alco decided to close 22 underperforming stores, and the last of those stores will be closed by the end of the first quarter of fiscal year 2015. We also experienced a net reduction in gross margin dollars of approximately $10 million, primarily due to increased promotional activity in an attempt to reduce inventory and to comparison with the 53-week year in fiscal 2013. Finally, we recognized a large non-cash charge relating to the accounting for deferred tax assets on the company’s balance sheet."

Moving forward, the company plans to remain focused on executing five major initiatives to improve profitability and deliver value for shareholders. These actions include:

  • Maximizing the benefit of its headquarters relocation to the Dallas area, which is enabling Alco to recruit experienced managers, buyers and marketers from some of the nation’s top retail organizations. Wilson added that the company’s new team is largely in place.
  • Expanding gross margins by completing the price optimization initiative with Revionics, which benefits top-line sales and gross margin by adjusting prices store-by-store and item-by-item based on detailed demand data.
  • Improving its real estate portfolio by closing unprofitable stores and opening more productive ones. At the end of fiscal year 2014, Alco had closed or were in the process of closing 22 underperforming stores, and opened three high-performing locations in regions with growing energy-based economies.
  • Upgrading its information technology with a new Enterprise Resource Planning system and a new supply chain service provider.
  • Reducing inventory and associated debt levels by, in addition to the store rationalization and IT upgrades mentioned, making a number of targeted changes in store layout and merchandise mix to appeal to shoppers.

Alco is primarily located in small underserved communities across 23 states. The company has 198 stores that offer both name brand and private label products at reasonable prices.

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Nordstrom Rack launches integrated online and mobile site

BY CSA STAFF

Nordstrom has launched nordstromrack.com, a new e-commerce site and mobile app, built on a shared platform with HauteLook, Nordstrom’s flash sale business. The new site gives customers access to shop Nordstrom Rack merchandise alongside HauteLook flash sale events.

The site experience is designed to offer an integrated way for customers to browse and buy merchandise either through a persistent Nordstrom Rack offering of on trend apparel, accessories and shoes at 30-70% off regular prices or through limited-time, limited-inventory flash sale events powered by HauteLook. Customers are able to shop both sites through a single log-in, shopping cart and can combine items into one easy checkout.

"Our customers have been telling us for some time they want to shop the Rack online and with the launch of nordstromrack.com they can now shop the Rack whenever they’d like," said Jamie Nordstrom, president of Nordstrom Direct. "We were able to leverage the talent of our HauteLook team to build a fast, seamless online and mobile experience – an important milestone in supporting our priorities to meet our customers’ expectation of how they like to shop today."

"By bridging together Nordstrom Rack and HauteLook, we’re giving our customers one of the largest selections of online, off-price merchandise available today," said Terry Boyle, president of Nordstromrack.com and HauteLook. "We’re committed to expanding and deepening our offering as we continue to learn more about how our customers want to shop nordstromrack.com. We believe that ultimately this robust offering will empower our customers to shop online, off-price with confidence."

Additional features include:

  • Two unique iTunes storefront and app icons that lead to a seamless mobile shopping experience for customers to browse and shop both sites within a shared app
  • 90-day return window to any Nordstrom Rack store or by mail
  • Free shipping for orders greater than $100
  • Enrolled customers earn points in the Nordstrom Rewards Program
  • Integrated iOS experience for the iPhone and iPad

The company plans to introduce additional features and functionality with subsequent updates to the site.

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