One of the most fascinating aspects of our ongoing economic recovery is the paradigm shift with respect to commercial development priorities. In the wake of the recession, new development has largely taken a backseat to redevelopment as developers and retailers alike have set their sights on opportunities in core urban markets that have been historically underserved.
Before the downturn, we saw a large number of new retail projects planned in suburban or exurban areas. In fact, the “boom” mentality had taken hold to such an extent that many of those developments were planned assuming future population growth — the retail was there before the “house-tops,” and before the market could really support it. In retrospect, it seems clear that building the top floors of the house before the foundation was bound to catch up with the industry. Sure enough, when the recession hit, not only had many of those projected households never materialized, it seems clear that in many cases, they never will.
At the same time, many brands have been downsizing and experimenting with smaller and more efficient formats and floor plans. In other words, they are moving toward the store footprints and merchandising concepts that succeed in city centers. That gets us to what I see as perhaps the biggest factor of all: opportunity. Even today, many urban areas are significantly under-stored and under-retailed. Think about the astonishing fact that, for several years, Detroit had no chain grocery stores! This in a city of over 700,000 people.
Put all of those elements together — suburban overexpansion, recession, smaller formats — and it’s not hard to see why urban redevelopment seems to be gaining momentum.
While, to some extent, larger forces have encouraged this change in focus, there is no doubt that retailers and development professionals deserve some credit for their willingness to adapt and evolve. The one-story big-box formula has given way to a wide range of new formats and concepts, almost all of them smaller and ready-made for a more urban context.
This creativity and downsizing has led to multi-level urban Target stores, new Walmart locations in Washington, D.C., and the much-discussed opening of a new Whole Foods in Detroit. In the case of the Detroit Whole Foods, the chain not only went with a smaller store size, but also with a more edited and strategic merchandise assortment specifically designed to meet the needs of a market with a larger daytime population. Since its opening in June 2013, the store has exceeded the company’s expectations and shown the consumer appetite for what some may see as a counterintuitive location choice. It is encouraging to watch retailers challenging their own assumptions about what works and where it can work, and realizing that they can be successful appealing to new demographics.
The result of this redevelopment focus is that we are seeing a true revitalization of underserved markets (even in areas where retail selection has been so poor for so long that many urban residents were essentially forced to shop in the suburbs). Together with the improved mass transit facilities in many cities, this can form the beginning of a redevelopment “cascade”: retail and residential and infrastructure working together in a self-reinforcing cycle. With more demand — and more retail resources to meet that demand — the potential is there for long-term positive impact on the urban core.
My takeaway from all of this is that, on the whole, we are not necessarily over-retailed. It’s more about certain categories and locations and formats that may have been overdeveloped. That said, I don’t believe that chains will add stores in a healthy way without a clear strategic approach. The continuing success and growing popularity of new urban store concepts and redevelopment opportunities makes me think that retailers will need to continue to be more data-driven, thoughtful, and flexible with respect to their expansion plans.
Jeff Green is president of Phoenix-based Jeff Green Partners, specializing in retail real estate feasibility, retail expansion planning and market analysis. His regular Chain Store Age column, Retail Rap, can be found on chainstoreage.com/real-estate.
Improving Promotions and Pricing with Disruptive Technology
By Sunil Mirani, CEO, Ugam
The new paradigm of information transparency and the rise of the empowered consumer brings new challenges and opportunities for brands and retailers to create consumer experiences that support effective conversion – be it in-store or on-line. In reality, it’s no longer about physical stores or online, as online is increasingly getting defined as “stores plus,” meaning everything carried in physical stores plus more.
Retailers are constantly seeking to find out what are consumers looking for – what is hot, how much are they likely to pay, how they’re likely to search for or find products. As the volume and velocity of data continues to increase, it becomes more and more important for retailers to sift through massive amounts of data for valuable insights. The rise of Big Data and disruptive technology is now enabling successful retailers to monitor, mine and analyze consumer sentiment to make informed decisions about everything from pricing to assortment and product descriptions. This data is increasingly including signals from social sites like Facebook, Google and Pinterest to decide how to best price and present retail products.
One way of competing on price is by not competing on price, but instead by having differentiated assortment that consumers really want. Take the case of a leading retailer that leveraged assortment intelligence using data from competitor’s websites, social signals like Facebook, consumer product reviews and Google traffic to understand assortment gaps, competitor pricing and promotions, whether or not they needed to develop products, and whether or not they were pricing products competitively.
Thanks to availability of data and new techniques, they were able to systematically and objectively uncover assortment intelligence based on product design (contemporary, classic) and finish (espresso, distressed) and a whole host of variables that was not possible to uncover before. They were able to do it across a whole host of branded and private-label categories in a timely manner.
By leveraging big data and technology, another retailer was able to determine specific product SKUs for which price was the primary dimension of competition. They were not keen on matching the price of the lowest retailer, and instead uncovered meaningful insights from consumer signals, worked with their vendors to add product variants, figured out what product bundles would be more effective, and also made changes to the way the product was merchandised on the site as a way to compete on other dimensions.
In a world increasingly driven by timely data, in which consumers can make purchasing decisions at the click of a button, online price optimization has become critical. Because of this, it’s become critical for retailers to have real-time data in order to make timely pricing decisions that make an impact on their business. If price data isn’t current, consumers may perceive that certain retailers aren’t competitive, which can be especially damaging on high-volume traffic days like Black Friday.
Retail category managers need on-demand access to real-time data supported by simple, intuitive tools that compare and adjust prices, and make intelligent recommendations. Price monitoring and matching alone is no longer enough to remain competitive, and retailers are increasingly turning to technology that provides them with smart diagnostic insights and recommendations that lead to impactful actions.
True on-demand, real-time data is no easy task. Pulling pricing data and consumer signals about millions of products within seconds is definitely a challenge, but this is the information that retailers need to know to remain competitive. They need to be able to see what’s happening from both a competitor and consumer standpoint in real-time and leverage historic data to take action that can positively impact their business.
As we look ahead into second half of 2014 and beyond, we will continue to see blending of product data from multiple sources, the use of disruptive technology and the rise of real-time data all helping retailers understand their competitors and consumers better and enabling them to make impactful decisions to stay ahead of the game. In fact, leveraging current advances in pricing, assortment and social sentiment intelligence techniques available today will help retailers make informed decisions to increase their top and bottom lines and redefine the game rather than just pushing harder in the existing one.
Lighting the Way With LEDs
Increasingly, retailers are using ambient lighting to impact the in-store experience. Andrew Peck of Enlighten Luminaires spoke with Chain Store Age about retail lighting trends and the rapidly expanding use of LEDs.
What are the biggest concerns when it comes to illuminating merchandise?
Retailers are most concerned about the way products look, and enhancing the shopper experience.
Where does LED lighting fit into this scenario?
LED technology is extremely versatile, both in spectrum and character of light. It can significantly impact the way products look and the way shoppers perceive them. By modifying color temperature and light intensity, a variety of effects can be created, making colors appear more vibrant and appealing, or creating nuances for specific promotions, seasons or holidays.
Similarly, LED lighting has an unparalleled ability to subconsciously impact consumers’ moods and feelings, especially toward products. Flattering lighting helps consumers feel good about themselves and the products, leading them to spend more time in the store.
In addition, intelligent lighting can improve the shopping experience by “reacting” to customers’ movements — illuminating products or sections as they maneuver through a store. This enhances the shopping experience and can lead to higher sales.
What are the advantages of LEDs?
One of the main advantages of LED technology is its significantly lower cost of ownership, as measured by electrical consumption, maintenance/replacement costs and government rebates. These savings are achieved through greater energy efficiency — LEDs are a green technology that utilizes a fraction of energy used by traditional incandescent, fluorescent or halogen bulbs — and improved durability. LEDs have a very long life, providing up to 50,000 hours of illumination, greatly extending the time required for replacement of bulbs. LEDS also require near-zero maintenance, allowing retailers to virtually eliminate labor costs associated with changing lamps, repairing ballasts, etc. This also allows sales floors to remain open for business rather than closed at times for maintenance.
Also, LEDs generate approximately 90% less heat than incandescent bulbs, resulting in reduced air-conditioning costs.
And as a green technology, LEDs are environmentally friendly. And LEDs can be controlled digitally, from a computer or mobile device.
As previously mentioned, LEDs are also powerful tools for merchandising and enhancing shoppers’ in-store experiences.
How can Enlighten Illumination Systems help retailers with their lighting needs?
Enlighten offers comprehensive 24-volt merchandising and lighting solutions for chain stores of all types. We help clients maximize ROI with products ranging from LED-powered graphic displays through LED lighting.
We recently unveiled C-Lumé, a revolutionary illumination system for retail environments. This 24-volt ceiling luminaire emits 9,000 lumens of light — perfectly distributed through an Evonic. In addition, special coatings by White Optic provide 97% reflectivity.
C-Lumé combines sleek looks with a compact knock-down design that’s easy to install and is maintenance-free. It eliminates risk of technical obsolescence by being fully upgradeable — LED strips may be replaced or upgraded in less than five minutes.
A variety of performance packages are available, including the ability to control brightness and intensity from any desktop/laptop or mobile devices. Also available are real-time tracking of shopper movement, allowing customization of lighting and promotions, and built-in security features.
What is the scope of Enlighten’s services?
Enlighten specializes in providing retailers with fully integrated 24-volt DC environments that power ambient light, illuminate graphics on walls and power floor fixtures. This energy-efficient system may be centrally controlled from the back office or corporate headquarters.
After we design a customized illumination package, our sister company, MIK Construction Group, installs it anywhere in the country. By working with MIK, the process is seamless and cost-effective since there is no need for additional outside contractors, electricians, etc.
How do you see retail lighting evolving over the next few years?
LED technology has been around for over 50 years, but it will be adopted faster than ever over the next few years. As the technology improves and prices drop, retail lighting will convert to LEDs, with traditional lighting used only in very specialized cases.
Seamless integration of store management functions, such as lighting, air conditioning, security, etc., will also become more mainstream. Thus, lighting and operational functions will operate in “smarter” fashion. Similarly, retailers will increasingly use computers and wireless devices to monitor and control vital activities within the store.
I also see retailers tapping into the ‘human science’ of illumination technology — using intensity and color to direct consumers’ shopping experiences, emotions and purchasing behaviors.