Urban influx, urban infill, and urban migration
Across the United States, cities have been experiencing a development resurgence. Legions of Americans are departing suburbia and returning to urban environments, with millennials leading the migration. Young adults are abandoning the suburban subdivisions they grew up in for denser, more vibrant urban settings. Consequently, once-empty lots, city blocks, and otherwise underutilized properties are being replaced with multi-use buildings that can accommodate new residences, office space, and retail.
It isn’t just new construction and redevelopment that distinguishes these urban infill projects. Urban neighborhoods are being revitalized with a mix of retail that includes emergent, specialty, and value retail concepts. All three complement each other in an urban infill space, providing the right mix of practical and aspirational retail options for daytime workers, full-time residents and visitors. New concepts are emerging specifically to fill niches within these urban spaces.
TargetExpress and CityTarget are examples of a national retailer reconfiguring its layout and rethinking its operational and merchandising strategy with the needs of urban communities in mind. Target’s new “flexible format” stores precisely tailor their merchandise to a local demographic, and are an excellent fit for bustling urban neighborhoods with high foot traffic and a growing population base of full-time residents.
H&M is another value retailer that serves a similar role in its urban locations. At the same time, emergent and specialty brands really help to add valuable flavor and appeal to the local urban marketplace. From downtown Chicago to the Pearl District in Portland, chef-driven restaurants are opening and thriving, and a mix of new and established retailers are both capitalizing on and fueling this ongoing urban renaissance.
Take Hyde Park in Chicago for example, where The University of Chicago, commercial real estate company McCaffery Interests, and local business owners and investors have been collectively involved in transforming the increasingly vibrant 53rd Street corridor. It began with the development of Harper Court, a 12-story multi-use office tower on 53rd Street and South Lake Park Avenue. The new Harper Court building replaces the Harper Court shopping center that was originally built in the 1970s, and features professional office space above a second-floor LA Fitness. Street-level retail includes Villa Shoes and Ulta Beauty. A list of restaurants and specialty dining options includes Chipotle, Native Foods, Porkchop, Starbucks, and the recently opened Jolly Pumpkin brewery. Additionally, the adjacent Hyatt Place attracts plenty of visitors who shop and eat in the neighborhood.
To the west of Harper Court on 53rd Street and Kenwood Avenue is a brand new 13-story multi-use residential high-rise, Vue53, which has 267 residential units above retail. Built on the site of a former filling station, Vue53 is now the new store location of Target’s flexible 20,000-square-foot TargetExpress prototype. Target will micro-target their merchandising mix to meet various demand components that include University of Chicago students, daytime workers, residents and visitors.
On the north side of Harper Court on South Lake Park Avenue and 51st Street are new Whole Foods, Marshalls and Michaels locations. These new-to-Hyde Park retailers are located on the ground floor of City Hyde Park, a new 180-unit high-rise residential building. To the south is Akira, a local women’s specialty apparel and accessories store with multiple locations throughout Chicago. Harper Court has been the centerpiece to an evolving retail and lifestyle urban ecosystem that includes that all-important diverse mix of emergent, specialty and value retail.
Another classic example of an urban infill project featuring both residential and an appealingly diverse mix of retail is in downtown Indianapolis, where the 26-story 360 Market Square residential high-rise is just now coming out of the ground. Whole Foods will occupy 40,000 sq. ft. of street-level retail with approximately 300 luxury units above. A similar project recently opened in the South Plaza neighborhood of Kansas City, at 51st and Main. 51 Main is a new 176-unit luxury apartment building adjacent to the University of Kansas Medical Center. Whole Foods is scheduled to open on the ground floor in 2017.
With the right combination of retail in place, different retail categories all work together to form a cohesive, coherent and synergistic whole. This retail “quilt” is such an important part of the narrative of new urban mixed-use developments and redevelopments. Developers need to ensure that the right retail pieces are in place to satisfy the different needs of expanding communities. A retail feasibility study is an important tool to help make that happen. It provides the kind of meaningful statistical market analysis that can provide insight into the right retail types, and suggestions on the best retail fit for the market/neighborhood in question.
A comprehensive retail feasibility study can also be used to recruit retailers, adding compelling statistical heft and analytical rigor to a development narrative. Demographic projections can be tricky in rapidly emerging urban centers, and leasing plans and recruitment documents need to account for anticipated new households and upcoming residential. The right analysis can deliver that information in the context of both a mid- and a long-term development outlook.
In addition to current market dynamics and retail competition, developers working on retail and mixed-use projects in urban environments need to be particularly cognizant of foot traffic and pedestrian flow. This is because so much of urban retail is street-oriented. Parking is another issue due to convenience and accessibility always being a challenge in urban spaces. However, when executed correctly, the right mix of emergent, specialty and value retail can help elevate an urban mixed-use project–broadening its appeal and optimizing its chances for long-term success.
Jerry Hoffman is president and CEO of Hoffman Strategy Group, a Nebraska-based urban real estate consulting firm. Its website is Hoffmanstrategygroup.com.
Finish Line goes off course in Q3
The Finish Line Inc. widened its loss in the third quarter, falling short of expectations amid slumping sales for apparel and accessories.
The chain reported a loss of $40.4 million for the quarter, compared to a loss of $21.84 million in the year-ago period. On a per-share basis, the retailer said it had a loss of $1. Losses, adjusted to account for discontinued operations (related to its process of exploring strategic alternatives for its Jack Rabbit specialty running stores business and severance costs, were 24 cents per share.
The results did not meet Wall Street expectations.
Finish Line’s consolidated net sales rose 3% to $371.7 million.
Finish Line Macy’s sales increased 33.2%.
Same- store sales increased 0.7%.
“We are disappointed that our third quarter sales and earnings fell short of our expectations,” said Sam Sato, CEO of Finish Line. “Steep declines in apparel and accessories offset a high-single digit footwear comp gain and a 33% sales increase in our Macy’s business. While we continue to work on narrowing our soft goods assortment and aligning our offering with customer demand, our primary focus remains on growing the cornerstones of the company’s foundation — our Finish Line footwear business and our partnership with Macy’s — through enhanced customer engagement.”
Sato noted that the chain is making progress towards its goal of developing a more efficient operating model “that drives increased profitability and greater shareholder value over the long-term.”
“We are now fully benefitting from our enhanced supply chain and are just beginning to realize the $6 million in annualized savings from our actions aimed at streamlining our organizational structure,” he said.
Finish Line cuts its fiscal year 2017 view. For the fiscal year ending February 25, 2017, the company now expects comparable store sales to range between flat to up 1% and non-GAAP diluted earnings per share from continuing operations between $1.24 and $1.30.
For the fourth quarter ending February 25, 2017, the company expects Finish Line comparable store sales to be down between 3% – 5% and non-GAAP diluted earnings per share from continuing operations between $0.68 and $0.73.
Finish Line has approximately 970 Finish Line branded locations primarily in U.S. malls and shops inside Macy’s department stores.
Retailers and their customers benefit from a robust enterprise network
Holiday shopping is no longer what it used to be.
The rise of online shopping and mobile has transformed the way in which consumers purchase gifts. It is no longer black and white for retailers either, as cutting-edge platform and technology adoption is a pre-requisite in order to remain competitive. And all factors are causing new challenges related to managing and supporting back-office and customer-facing systems, as well as meeting evolving customer expectations.
Although forecasting and data analysis helps to lessen the shock-factor of supply and demand fluctuations during the holidays, retailers can still run into trouble if they aren’t careful. For example, many retailers were not prepared for the rapid shift to e-commerce sales circa 2004. Three years later, websites suffered with a dramatic increase in online traffic. In 2013, online spending grew an additional 14% from the previous year.
While technology has advanced, online retailers have also been combatting problems, such as too little inventory in warehouses but excess inventory on brick-and-mortar store shelves for more than a decade. One way retailers can mitigate risk this holiday season is to learn from the past and adopt a secure enterprise network.
Retailers that build the right digital network foundation are poised to be winners this year and next. Despite the RetailNext forecast predicting a 5% decline in sales at brick-and-mortar stores in December 2016, the truth is we don’t know for certain how the rest of December will unfold, and it is no surprise that small shifts in consumer behavior can effect retailers a great deal.
At year’s end, retailers will reflect on their overall preparedness during the 2016 holiday shopping season and strategize for 2017. As the chasm between online and in-store buying behavior grows, a strong network can deliver connectivity, efficiency and communication across the supply chain:
• Connectivity: The coordination of mobile applications, point-of-sale (POS) systems and inventory management programs across multiple locations through a connected network is key. As brick-and-mortar stores grow in number and work to re-engage their consumer base, a smart working network is essential to coordinating the information that runs between each location to headquarters and the cloud. With real-time access to essential business data, including customer preferences and purchasing history, retailers analyzing big data can better accommodate even the most demanding ‘Ebenezer Scrooge-like’ customer.
• Efficiency: Waiting in a long line, not receiving a gift on time, or worse, discovering that it was backordered until after Christmas can be very frustrating. A high performance network can scale, increase productivity and guarantee service uptimes during the busiest, most stressful (nay, most wonderful) time of the year. Brick-and-mortar stores get crowded during the holidays, and websites are more likely to crash with the influx of last-minute holiday shoppers. With a fine-tuned network infrastructure and managed services, retailers can focus more on customer service and less on technology issues.
• Communication: There are many moving parts and teams involved in a solid holiday retail strategy: employees, customers and suppliers should (in theory) be able to communicate effectively during this busy time. If an item is out of stock online, customers have the expectation that they will be provided options to have items either shipped to their residence, or delivered to their local store for pick-up. Access to data through a reliable network ensures that inventory and information are both delivered quickly.
Having a solid distributed enterprise networking strategy is an essential ingredient for success during today’s digital holiday season. Connecting all locations and employees to real-time information, systems and applications is key.
Whether serving customers online or in-store, retailers are able to manage “real-time inventory,” secure POS systems and create a happy holiday shopping experience. With a reliable, secure enterprise network, retailers can ensure that they make it through the holidays joyfully and prosperously while providing top-notch customer service.
Regan Yeldell is senior director, vertical markets for Comcast Business.