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More Downsizing?

BY Jeff Green

It doesn’t really surprise me anymore when I hear about another national brand rolling out a smaller store format or compact new prototype. Recognizable names like Target, Walmart and Best Buy have all had some success with smaller formats, particularly when it comes to penetrating new markets. But I think the fact that Kohl’s has now joined the crowd is a little bit different — and a little bit more interesting.

Kohl’s CEO Kevin Mansell announced last May that the department store would be moving away from its customary 90,000-sq.-ft. to 100,000-sq.-ft. stores to layouts around 64,000 sq. ft. for most of their new locations. They’ve already followed through on that plan: Last month, Kohl’s announced the grand opening of eight new stores in seven different states; seven of those stores are this new smaller model.

The downsizing of Kohl’s is especially important and interesting for a couple of reasons: First, it represents a pretty big shift away from a formula that Kohl’s has clung to for quite some time. They have had the same basic prototype for at least 15 years and have been successful. Second, I see this as a fundamentally different situation than with brands like Walmart or Best Buy, who have used smaller layouts primarily as a way to be more flexible and break into new, more urban markets. While it’s true that Kohl’s first experimented with the new format as a way to get into smaller markets, they clearly saw something they liked. Now, they aren’t just opening smaller stores in smaller communities; they’re opening them in all types of markets.

The natural first question to a curious retail analyst like myself is always why? Kohl’s has maintained their success even through the toughest recent years, so there isn’t an obvious indication that they need less space. I think it’s actually more straightforward than that: according to Mansell, the smaller formats have simply been performing better.

The details of how to make a permanent structural shift like this are always interesting to me, as well. As of now, while they will be making renovations and updates, they won’t be downsizing any existing stores — but Kohl’s has obviously figured out a way to fit their merchandise into a smaller space. It’s a combination of more efficiently merchandising a store as well as perhaps cutting out lower performing categories. I wonder if Kohl’s will cut back somewhat on space hogs like home furnishings, which don’t deliver the same sales-per-square-foot punch as apparel? All retailers are focused on their four-wall value and maximizing their sales-per-square-foot, so I’m interested to see what happens.

So what could this mean for retail real estate and big box leasing? If this trend continues, I think we definitely might see some of the biggest boxes a little slower to rent, but for now I don’t foresee a dramatic impact. With these format changes, we may actually start to see some absorption: For every downsizing Best Buy, retailers like Kohl’s can now come in and take over that 65,000-sq.-ft. space.

What do you think? Are you surprised to see Kohl’s join the list of downsizing retailers? Why do you think they are moving toward a smaller format? What do you think about the smaller format? Please make a public comment below or feel free to e-mail me privately at [email protected].


Click here for past columns by Jeff Green.

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NRF expects sales to hop up this Easter

BY CSA STAFF

WASHINGTON — While intentions aren’t always equal to results, if NRF’s predictions are correct, consumers will be shelling out quite a bit of cash this Easter. According to NRF’s Easter spending survey, conducted by BIGinsight, Americans will spend an average of $145.28 on everything from apparel and candy to food and decorations this year, up 11% from $131.04 last year. Total spending is expected to reach $16.8 billion.

“Though the price of gas is on everyone’s mind, Easter is one of the few holidays some consumers are willing to stretch their budgets, especially because many children look forward to treats and new outfits on Easter morning,” said NRF president and CEO Matthew Shay. “Retailers will make sure to offer plenty of promotions on candy, apparel, food and decorations in the coming weeks for eager holiday shoppers.”

Not surprisingly, the majority of Easter spending, according to the survey will be on candy, with 89.3% shelling out more than $2 billion on traditional favorites such as chocolate eggs and jelly beans. The average person will spend more on these items as well: $26.11 on apparel, up from $21.51 last year, and $20.35 on candy, up from $18.55 last year.Nearly half (48.5%) will head to the stores to take advantage of retailers’ spring sales on colorful fashions and accessories, with total spending on those items expected to reach $3 billion.

Americans are also set to fork over more on their Easter meals with the average person expected to spend $44.34, up from $40.05 last year for a total $5.1 billion. Additionally, consumers will spend an average of $20.57 on gifts for their friends and family, $10.50 on flowers and $9.07 on decorations for their home and office. Half (53.6%) will buy greeting cards, spending an average of $7.04.

Though most people will shop at their local discount store (63.5%), department stores can expect a nice treat this Easter as well. Four in 10 (42.6%) – and the highest percent in the survey’s history – will shop at a department store for gifts and other holiday merchandise. Online retailers will see the biggest jump in traffic this year, however. Nearly two in five (18.7%) will shop online, up from 14.8 percent last year and just 11.1 percent in 2008. Others will shop at specialty stores (25.4%) such as a jeweler, electronic store or florist, or a specialty clothing store (9.7%).

Now a common shopping tool for millions of Americans, more than half (52.3%) of tablet owners celebrating Easter will use their device to research products and purchase gifts and other merchandise. Specifically, 25.7 percent say they will purchase something and 36.6 percent plan to research products and compare prices. More than one-quarter (26.3%) will look up company and store information, such as store hours and location, and 15.3 percent will use apps to research and purchase products. Additionally, 43.3% of smartphone owners celebrating Easter will use their mobile device to research and/or purchase items.

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Survey: Importers preparing for surge in consumer spending

BY Marianne Wilson

New York — Importers who sell to America’s major retailers are preparing for a significant uptick in consumer spending this spring and summer according to a recent survey conducted by Capital Business Credit, (CBC), a non-bank lender that services the retail sector.

According to the quarterly Global Retail Manufacturers and Importers Survey, 43.2% of respondents believe that the 2012 spring season will be stronger than 2011, and 40% believe that the 2012 summer season will surpass last year’s sales. And in more good news, fears of a double dip seem to be declining — an additional 40% of respondents believe that the spring and summer retail seasons will be at least as robust as last year’s.

“Retailers have played it very close to the vest for the past several years, fearful of overstocking the shelves. As consumers begin to open their pocketbooks again, importers and manufacturers are finally beginning to see increases in orders and re-orders. This is indicative that a stronger retail and economic recovery is underway,” said Andrew Tananbaum, executive chairman of CBC.

Forty percent of respondents indicated that retailers ordered more merchandise for the spring season as compared to last year; 20% reported that orders stayed the same. An overwhelming 78.3% cited that they are receiving re-orders for spring merchandise — demonstrating stronger consumer demand than was initially anticipated.

Additional results revealed:

  • Of those respondents who experienced an uptick in spring orders, 47% indicated that retailers ordered 3% to 5% more merchandise, and nearly a quarter (23.5%) indicated that customer orders increased by 10% or more.
  • Half of the respondents indicated that prices of consumer goods increased this spring season, while 35% believe they stayed the same.
  • • While demand is increasing, margin pressures remain, with 62% of respondents citing that retailers are still relying on discounting to move product off the shelves.

“While increases in orders are important, retailers are still relying on heavy discounting to move merchandise which is affecting margins across the board,” Tananbaum continued. “Retailers are going to need to work hard to re-train consumers to rely less on discounts.”

Tananbaum added that is the first time in nearly three years that the importers CBC works with are manufacturing more than they did last year and are planning on having to restock shelves.

Looking further ahead, 37% of respondents indicated that they are seeing an increase in orders for the summer season. The overwhelming majority (81.8%) believe that the summer season will perform better than, or as well as, 2011.

CBC polled more than 50 manufacturers and importers for the survey. Respondents consisted of manufacturers and importers in the apparel, housewares, home furnishings, fashion accessories and furniture industries who manufacture some, if not all, of their products in China, India, Vietnam, Bangladesh, Pakistan and the United States.

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J.Smith says:
Sep-09-2012 01:30 pm

Paradox – does this word work for this type of news. So who will pay their bills on time, who will pay their mortgage on-time, whoever spent this money on whatever endeavor can they pay it back. I rather see less spending on all fronts to make me confortable that another person or persons has NOT gone beyond their means. Good news for the economy, retail businesses, me, you please expain to me what am I missing; a surge in consumer confidence, less umemployment as a result of the best spending since 2001. http://bit.ly/N1y0Iq

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