Massage Envy to expand in Pittsburgh area
Scottsdale, Ariz. — Massage Envy announced Thursday the signing of a multi-unit Regional Developer agreement with Sol Glastein for the development of 11 new centers in Pittsburgh, Western Pennsylvania and Morgantown, W.V.
Glastein has been a Massage Envy franchisee since 2006 and currently operates two centers in New Jersey.
In 2010, Massage Envy opened 43 locations, bringing the total number of locations to more than 650 units operating in 43 states.
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Small Formats, Big Opportunities
A 3,500-sq.-ft. Walmart? Sounds hard to believe, but the world’s largest retailer broke new ground in January when it opened “Walmart on Campus” on the grounds of the University of Arkansas in Fayetteville. The store, open to students and non-students alike, reflects the sea change that has occurred at Wal-Mart Stores and throughout the industry during the past couple of years as retailers across the board show increased flexibility and a willingness to rethink formats and footprints — most often, by thinking smaller.
Indeed, while Walmart is noncommittal regarding the expansion of its just-opened campus concept, the chain has made no secret of its plans to target urban markets for growth using a scaled-down model.
Speaking to a meeting with investors last fall, Bill Simon, head of Wal-Mart’s U.S. operations, said Walmart plans to open 30 to 40 smaller-format stores (in the 30,000-sq.-ft. to 60,000-sq.-ft. range) across the country in its current fiscal year, mostly in urban markets. Smaller locations along the lines of the company’s convenience-styled stores in Latin America are another possibility. Walmart SuperCenters, around 195,000 sq. ft., will remain the company’s mainstay, but newer ones will shrink slightly to about 180,000 sq. ft., and Walmart will step up its plans to open midsize stores of about 150,000 sq. ft.
Meanwhile, the nation’s second largest discounter, Target Corp., is also incorporating smaller-format urban stores into its business strategy. The company will debut its smaller format in Seattle in 2012, with plans to expand to 10 other markets in such cities as Baltimore and San Francisco (where it will open in the city’s renovated Metreon Center in 2012) during the next few years. Target’s urban prototype will range anywhere from 60,000 sq. ft. to 100,000 sq. ft., with the San Francisco location reportedly coming in at 85,000 sq. ft. >
Target already has some 150 stores in urban areas, including a location in New York City’s East Harlem area that opened last summer. Lessons from those stores are proving useful as it explores smaller formats.
“We know our smaller formats will have edited assortments,” said Jenna Reck, a spokeswoman for Minneapolis-based Target.
Patio furniture that wouldn’t fit in urban dwellings, for example, would likely be eliminated, as would large item quantities. “Urban customers don’t need bulk parcels,” Reck said.
But it’s not just the discount giants that are opening or testing smaller stores — Ann Taylor, Kohl’s, Old Navy, Charlotte Russe, hhGregg, Gap Inc. and a host of other disparate retailers are also getting in on the act. Gap, which operates stores as large as 18,000 sq. ft., has been working to reduce its average store size to about 10,000 sq. ft. Its Old Navy brand is reportedly seeking 15,000-sq.-ft. to 18,000-sq.-ft. sites, down significantly from its past model. Even Sports Authority has a small-store concept, called S.A. Elite, which debuted last August at Cherry Creek Shopping Center in Denver.
Bloomingdale’s is also slimming down. Its newest store, in the renovated Santa Monica Place, in Santa Monica, Calif., occupies some 80,000 sq. ft. of selling space and features carefully edited assortments. Some slower moving categories, such as children’s clothes, were dropped entirely. One thing that wasn’t sacrificed was Bloomingdale’s signature style: The store has an eclectic feel and cool vibe. It also boasts a number of space-saving innovations, including a mobile rack on the second floor ceiling that moves mannequins and clothes across the space.
A telling indication of the downsizing move is the fact that Nike has no plans to open more Niketowns. Instead, it will open “brand experience” stores along the lines of its new prototype at Santa Monica Place at Third Street Promenade, in Santa Monica, Calif.
The two-level, 20,000-sq.-ft. Nike emphasizes customization services and boasts a flexible format that can be easily reconfigured. Even the cashwrap is mobile, and is wired so that it can be moved to other locations.
Flexible formats and downsized stores aren’t exactly new — chains from The Limited to The Home Depot have cut back on store size over the years to accommodate nontraditional locations or reduce operating costs. But a combination of demographic, economic and technological opportunities is propelling these trends forward with a newfound urgency.
“Smart retailers are finding ways to shrink their footprints — without compromising core offerings — to leverage a myriad of real estate opportunities that will only accommodate smaller formats,” said Spence Mehl, senior VP with New York City-based real estate advisory firm RCS Real Estate Advisors. > “We are seeing not only a host of urban real estate opportunities, which are very attractive for growing retailers, but also spaces outside core urban areas at historically low base rents. Those retailers that can control their inventories and shrink their footprints will likely prosper in the years to come.”
Demographically, smaller stores serve opposite ends of the retail spectrum — aging baby boomers who feel overwhelmed by superstores, and younger consumers more accustomed to shopping online. Both groups are showing a preference for the more targeted shopping experience that a smaller store often provides.
“You’re seeing it now, and you will continue to see it,” said Leon Nicholas, director of retail insights of consultancy Kantar Retail, Columbus, Ohio. “This trend toward smaller stores is about making things more convenient.”
Sustainability also is playing a role, said Lew Kornberg, a managing director of Jones Lang LaSalle’s Corporate Retail Solutions division, Chicago, which manages real estate solutions for retailers.
“There’s a movement to reuse buildings that might otherwise have been torn down,” he said.
Expansion opportunities in dense urban markets are perhaps the biggest driver to smaller stores. For many chains, particularly big-box ones, urban areas represent the last frontier for major domestic growth. Such areas, which remain largely untapped by the national players, could potentially yield hundreds of millions of dollars in sales going forward. (Walmart, for example, has no stores in New York City and only two in Los Angeles. Only 47 of its 4,300 U.S. stores are in big cities.)
Retailers’ willingness to adapt their footprints to urban neighborhoods where space is at a premium has not gone unnoticed. This past summer, Walmart overcame strong and long-standing union and political opposition in Chicago, and was given the approval to build new stores. The discounter’s plan to build stores of different sizes was credited with helping to win over the opposition.
But there is more to the downsizing move than demographics and marketplace realities. The fact is some stores simply got too big, said Paul Freddo, senior executive VP leasing and development of Developers Diversified Realty, Beachwood, Ohio.
“Old Navy is an example of a retailer that can be just as successful with an 18,000-sq.-ft. store as they can at 25,000 sq. ft.,” Freddo said.
The financial crisis of the last two years also factors into shrinking store size. For some retailers, opening and operating smaller stores are a way to cut costs. Also, with new development at a virtual standstill, some chains looking to expand were forced to consider new prototypes to fit into buildings vacated by defunct chains such as Circuit City, Steve & Barry’s and Mervyn’s. When Kohl’s acquired a number of Mervyn’s locations, it had to deal with a smaller footprint, a prototype it now is continuing, according to Freddo.
“A smaller size also allows a retailer to reach smaller markets with less density, and to be closer to its existing store base,” he explained.
And even where space might exist, noted Kantar’s Nicholas, consumers are saving time and money by shopping online and via smart phones. Online holiday 2010 sales rose 13% to $30.8 billion, according to Reston, Va.-based comScore Inc.
“The digitalization of retail goes with the shrinking of retail,” Nicholas said. “With so much being sold online, the stores don’t need as much merchandise.” >
Jones Lang LaSalle’s Kornberg cited an example of a shopper who, while standing in a Macy’s store, bought shoes from Zappos.com using a smart phone.
But that’s not the only way technology is affecting retail. Ironically, what is expanding are distribution centers, which must hold the merchandise that is being purchased online or delivered to the smaller stores. As these warehouses become more sophisticated, they can ship to stores more promptly, reducing the need for large backroom areas.
“This allows [retailers] to be leaner and meaner,” Kornberg added.
Beyond size: WSL Strategic Retail CEO Wendy Liebmann sees two fundamental issues for retailers with regard to the physical store: What is included in the mix, and what is eliminated.
“Walmart’s first neighborhood market just did a little of everything, and that didn’t work,” she said.
One point on which many industry experts agree is that going forward, even big-box chains must adapt to the needs and demands of individual locations if they want to be successful.
“We’ve already had the luxury of size and scale,” Liebmann explained. “This is a moment in time when people want local. That doesn’t mean that stores will go away. But they can’t survive with the same format in every location. It has to be customized.”
The key for retailers and real estate companies will be to plan flexible spaces from the beginning of construction.
“It’s always easier to plan on the front end than to retrofit on the back end,” Jones Lang LaSalle’s Kornberg advised.
Despite a successful holiday season, most retailers remain cautious about expansion. And with no substantive new development taking place in the foreseeable future, retailers looking to grow will have to adapt to existing supply, whatever its size.
“We’re living in an interesting time for landlords and retailers,” added Developers Diversified’s Freddo, who said that changes are fostering greater cooperation between the frequent.
“The recession was a wake-up call for both,” he said.
7 For All Mankind to open stores in Canada
Los Angeles — 7 For All Mankind announced it will open its first fully owned store in Canada in March, at Chinook Centre in Calgary.
The company said it plans to open two to three stores annually in Canada during the next four to five years.
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