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Investing In Neighborhood Retail, Chicago-Style

BY CSA STAFF

L3 Capital invests in what it calls prime urban retail, which includes a lot of street retail in the premier cities. "We own retail properties in several neighborhoods in New York City, Los Angeles and Chicago," said Greg Schott managing piincipal.

At the end of last year, L3 made its first investment in its hometown of Chicago. The company bought four retail buildings along a flourishing four-block retail stretch of Southport Avenue in the Lakewood neighborhood. The cost was $13 million for 17,000 sq. ft.

Tenants include Free People, Lululemon and Southport Grocer & Café, plus renters in the apartments above the street-level retail.

Six months later, L3 bought three mom properties spanning 6,500 sq. ft. on the same stretch of Southport Avenue for $6 million. Tenants are Coobah, a Latin and Cuban fusion restaurant, a boutique called Cerato and a Standard Bank Branch.

0bservers say L3 paid a premium. For instance, the capitalization rate or yield on the second transaction is 4.5%, the lower end of yields for prime urban street retail. 0f course, yields on retail properties rise and fall depending on the income produced.

L3 looks for value-added opportunities, and the Southport investment is just that. The largest L3 Southport building, about 5,500 sq. ft., is vacant. "Southport is a strong retail neighborhood," Schott Said. "We’re looking at that building as an opportunity to scrape and rebuild or to upgrade depending on the tenant."

Which means more income and a higher cap rate.

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Many Happy Returns

BY Dan Berthiaume

It’s no secret that the volume of returned items goes up dramatically during the holidays, and providing a streamlined returns mechanism that effectively guards against fraud is a big and often overlooked part of the in-store holiday experience. Here are two solutions that take a slightly different approach to helping retailers deliver a returns process that rewards good customers, while detecting those with less savory motives.

The Retail Equation offers SaaS-based technology that tracks returns based on the individual shopper and their purchase behavior, rather than based on an item’s receipt. Personal data, such as loyalty card and credit card information, as well as identification shown at the point of return, is all used to help determine which shoppers should be offered a speedy process and which should be flagged for closer scrutiny. Retailers can set thresholds, such as making a certain number of returns in a given time period or returning more than a certain number of purchases at once for automatic flagging.

The solution has been shown to reduce the dollar amount of returns by as much as 8% and reduce shrink by as much as 13%. Retailers can also help control staffing of return personnel as a result of more efficient returns management.

Meanwhile, the OmniTrace and ReturnFlex returns management solutions from Siras also steer away from receipts to track and validate returns. However, rather than focus on customers, Siras technology focuses on validation at the product UID (unique identifier) based on centrally maintained terms and conditions from the retailer and manufacturer. Siras hosts the centralized attribute management made available via Web services. As a result, the product itself is managed and traced across all channels to ensure it is being properly returned, reducing unwarranted returns anywhere from 10% to 50%.

— Dan Berthiaume

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Digital Gift Card Options Abound

BY Dan Berthiaume

Stored value gift cards have become a staple item in many retailers’ holiday assortments. Last year the NRF estimated U.S. consumers would spend close to $29 billion on gift cards during the holiday shopping season, and there is no reason to think the trend is slowing down.

In addition to growing, the gift card trend is evolving as the rest of consumer-facing commerce evolves to become more of a virtualized environment. Digital gift cards are still a relatively new phenomenon, but are becoming more important and offer several important benefits to retailers and consumers, such as:

• Ease of use: Granted, pulling a traditional gift card out of a wallet and swiping it at the register is not terribly difficult, but digital gift cards offer ease-of-use benefits not provided by physical cards.

"You can have access to and manage your gift cards without losing them in the clutter of a purse," said Denee Carrington, senior analyst for Forrester Research, during a telephone interview. "Digital gift cards are easy to remember. You have tools like Passbook that digital cards can live in, and Passbook can notify you whenever you’re near a merchant’s store and give you access to the card."

• Interactivity: Digital gift cards are by their very nature much more interactive than physical gift cards. For example, Carrington said some digital gift cards provide visuals of a "gift" being unwrapped and opened when a user first activates it. In addition to aesthetically pleasing interactive features with soft benefits of customer engagement, there are also some interactive options that offer hard, business-focused benefits.

"You can provide additional gift cards through online promotions and emails," said Carrington. "You can also provide links to additional gift cards through SMS text messages."

This type of quick digital upsell also plays into the fact that for many consumers, gift cards can serve as personal stored value cards. A digital gift card recipient impressed with the convenience may respond to a text promotion linking to a new card for their own further use, as well as for a gift for someone else.

• Shopping companionship: Digital gift cards fit perfectly into the broader evolution of mobile devices into what Carrington termed consumers’ "personal shopping companions." Consumers already routinely use mobile devices in stores to compare prices, obtain product information, check item availability, receive targeted promotions and in some cases even to execute transactions. Having a digital gift card loaded on a mobile device further emphasizes this role it plays in the life of a consumer.

In addition, retailers could tie other mobile promotions into their branded digital cards. For example, digital gift card holders could receive real-time personalized incentives, such as extra gift card credit to purchase an item they are scanning for more information or a two-for-one purchase on a cross-sell product when a digital gift card is used.

None of this is to suggest that digital gift cards should replace traditional gift cards in retailers’ plans for this holiday season, but only that digital gift cards can help boost profitability and customer engagement both during and after the all-important holiday rush. Now that’s a gift that keeps on giving!

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