Malls Making a Comeback!!!
Well, a 0.1% comeback. But hey! Anything suggesting that the next generation(s) might enjoy malls the way I have is music to my ears. According to this article on CNNMoney.com, malls increased their market share of consumer dollars from 2.4% to 2.5% last year. This is a far cry from the alternating stagnation and contraction they’ve experienced in recent years.
The article attributes this success to several factors: first, mall leasing agencies are becoming more creative. For instance, more and more malls are leasing space to Target discount stores. In some areas of the country this has been a common practice for over two decades, but now malls across the country are cashing in on the stability and wide customer base offered by Target anchors.
Also, mall leasing agencies are diversifying the properties inside their malls- the article lists movie theatres, gyms, and hotels. All of these increase the image and drawing power of shopping malls.
Best Buy in China
Remember folks, I’m a retail junkie at heart! I could never pass up a story like this.
Check out this fantastic CNNMoney.com article about Best Buy’s adventures in adapting to Chinese consumer culture. According to the article, Chinese consumers enjoy shopping for technology products in a somewhat chaotic, cluttered atmosphere. They are also described as being “extremely price conscious” and having “strong local preferences”.
This article left me with one interesting question: How does Best Buy (or rather their China-local “Five Star Appliance Company” brand) reconcile the inefficiencies of the Chinese “PC mall” model with a commitment to low prices? Doesn’t the westernized “curated” approach lead to lower prices? The article hints at special “concessions” to manufacturers that make the system feasible. Perhaps I’ll dig further into this in the future!
Australian Consumer Economy in Trouble
Another recently-strong economy is headed in the wrong direction: according to this MarketWatch article, Australia’s consumer spending increased only 0.2% in December, down from 0.4% in November. Analysts had expected an 0.5% increase, so the 0.2% was a nasty shock.
Now, no one can blame Australians for staying home and generally being stingy with their dollars. Back-to-back natural disasters (flooding followed by a cyclone) have wreaked havoc on portions of the country. This affects not only the directly afflicted areas but the overall mood of the entire continent.
Myer Holdings, Australia’s biggest department store operator, has been hit particularly hard. In addition to weather challenges, a stronger Australian dollar encourages their customer base to import goods instead of purchasing at local stores. Still, the company has some tricks up its sleeve: they recently acquired a 65% stake in popular Australian women’s fashion brand Sass & Bide.
Borders in Trouble
Woah, I just plain forgot to post yesterday- UNACCEPTABLE. To atone I will post two (count ‘em) times today. As per usual, I’ll start off with some bad news.
According to this CNNMoney.com article, national book retailer Borders saw their stock plummet 35% during trading yesterday (and another 17% after hours). This was on a report that their long-rumored bankruptcy might happen next week.
Borders is losing out to Barnes and Noble for a number of reasons. For one, they have fewer locations nationwide which hinders their visibility. My own town of Des Moines Iowa has 2 Barnes and Noble locations: one is located in our best mall and the other is a grand freestanding two-story building in an upscale shopping plaza. We have one Borders sandwiched in a somewhat lower-class strip mall.
From my perspective, the #1 reason that Borders loses out is its long-term viability. E-books are the undeniable future of book publishing. Their e-Reader initiative is not nearly as defined or high-profile as Barnes and Noble. B&N’s Nook is easily a top-two technology. Sitting here, I can’t even name Borders’s answer e-reader. A quick look at their website shows that they do not have a standard Borders-branded e-reader. That’s a problem!
Retail Concepts: Retail Squared
Call it “Brick-and-Mortar Makes a Stand”: Large retailers are renting their space out to smaller, self-contained businesses. You know that nail salon you always see when you’re checking out at Wal-Mart? That’s one example.
Regular readers of the Daily Biz know I’m something of a “retail junkie”, so this story from CNNMoney is essentially candy for me. Sears is renting out space to Forever 21. Target is making room for Radio Shack. Discount stores, department stores, big box stores, and even grocery stores are turning into teeny tiny shopping malls and I love it!
The win-win here is a no-brainer: smaller retailers or service providers capitalize on the foot traffic from the large retail space. The larger retailers gain additional customers spilling over from the specialized smaller entities. The larger store also gains valuable differentiation: maybe Wal-Mart is closer, but you need to get a cellphone from the Radio Shack inside a Target. Or the other way around: maybe you prefer Target but you want to pick up dinner from the Subway inside Wal-Mart.
I wonder where “partnering” ends and “renting space out” begins. The article mentions the example of Kroger grocery stores carrying a special installation of Murray’s Cheese. How is that different from having a Levi’s jeans stand inside any other store? The scale? The sourcing? The interactivity? Questions for another time!
Target Makes a Move
Wandering the aisles of Target yesterday I came across an open, bazaar-type expanse where their Christmas products had been some weeks before. “Oh yeah,” my wife said, “this is their new bulk-product push they’re doing.” Huh? My HR-trained, pregnant wife had the scoop on me? She doesn’t listen to business podcasts all day long! She doesn’t read the Journal and the local businesses pages every. single. morning! But there it was; my wife knew more than I did about this one area of business. Of course I couldn’t let it stand. So I did some research and here’s the story:
Target’s “Great Save” is a concentrated seven-week effort to present customers with values and quantity options that cast the retailer in a new light. According to this Reuter’s article, it is being pitched not as a new permanent offering but more as a special marketing event. It is a limited-time opportunity for shoppers to enjoy economies of scale in their shopping without paying membership fees for a Costco or Sam’s Club. There are no current plans to extend the program past February 21, but some of the most popular items might be worked into Target’s normal offerings.
So Target gets to excite its regular shoppers with better-than-normal values. In the process they will likely generate some word-of-mouth promotion and gain valuable new data about the shopping habits of their customer base. Clever, Target. Very clever.
Retail Concepts: “Brick and Mortar”
One of the most important concepts in retail today is customer interaction. Does a company exist primarily on the internet or primarily in physical space? A space where a retail business offers goods in physical space is known as a “brick and mortar” location. According to investopedia.com, a brick and mortar location is
A traditional “street-side” business that deals with its customers face to face in an office or store that the business owns or rents.
Some businesses cater to customers primarily online. Amazon.com is one example. Some businesses cater to customers primarily in brick and mortar locations, such as grocery stores. Increasingly, though, businesses employ a mix: think about Target, for example. While they maintain a strong physical presence across America, many of their products are available for purchase online.
There are many advantages and disadvantages to both online and brick and mortar retail. I will explore these distinctions in future posts. Retail is one of my favorite topics, so I need very little prompting to sink thousands of words into it!
A Delicious Lesson in Adaptability
How does an ice cream parlour survive winter in a wintery economy? This CNN Money article contains several “colorful” lessons on adaptability, agility, and brand differentiation.
The story is about an ice cream business operating out of a town in cold, cold, cold Maryland. Owner Susan Soorenko operates a storefront and a separate wholesale ice cream manufacturing element. This wholesale operation allows her to bring in revenue by targeting corporate functions and selling to the super-hot Whole Foods Market* chain. That sales element helps her offset seasonal dips in consumer demand.
It takes a special kind of owner to juggle wholesale and storefront concerns within a small business. But Susan obviously has her fingers firmly on the consumer pulse. She offers seasonal and gourmet flavors that intrigue banquet caterers. In addition, she knows how to target kids (who will eat cotton candy-flavored ice cream no matter the ambient temp). In my favorite detail of the article, one of her managers notes that “if you didn’t make [the cotton candy ice cream] neon blue, they don’t want to eat it”. To maximize consumer dollars, the storefront offers hot caffeinated beverages that parents might enjoy.
So I see three big lessons in this article:
1) Diversify. The storefront can stay open because it is subsidized by the weather-proof catering and wholesale operation.
2) Maintain agility. Juggling wholesale production and a public-facing operation presents unique challenges, but that type of agility makes #1 on this list possible.
3) Differentiate your brand. How many other ice creameries offer honey-lavendar ice cream alongside bright blue treats for the kiddies? Bold products, while occasionally risky, help small businesses compete for consumer dollars.
Now if you’ll excuse me I’m off to Baskin Robbins to ask if they have honey-lavendar ice cream. Failing that, I’ll just have one of those clown cones.
*Rumor is we’re getting a Whole Foods in Des Moines soon! w00t!!!1!!1!!!!
Mini-Bio: Ingvar Kamprad
Ingvar Kamprand was born in 1926 in southern Sweden. He was an entrepreneur from an early age, buying bulk matches in Stockholm and re-selling them to his neighbors. He used his own bicycle as the delivery vehicle. According to this about.com article he founded IKEA at age 17 using a monetary “reward” Ingvar’s father gave him for performing well in school.
Initially IKEA (his initials “I.K.” + the first letter of his boyhood farm (Elmtaryd) and village (Agunnaryd)) sold all manner of dry goods from wallets to stockings. He hired a local milk van to make his deliveries. Once he gathered too many customers for individual attention, he shifted to a mail-order business model. The second major shift came in 1947, when he added furniture to his offerings. The final piece that cemented his empire came in just four years later when he boldly discontinued every product line except for the furniture.
So in that paragraph above I see two valuable lessons for aspiring entrepreneurs:
- Use what’s available. Young Ingvar first leveraged his bicycle for cheap delivery, then hired an existing service (the local milk van) for delivery of his products. Partnering with existing services is often cheaper and less risky than forging a whole-cloth new solution (especially for a start-up).
- Focus. Ingvar noted that furniture sold well, so he rolled the dice and made that his primary business line. He was then able to tailor his entire approach to maximizing the attractiveness and profitability of that line.
Of course, as someone lucky enough to visit the IKEA store in Minneapolis from time to time, I can attest that he’d do just as well to focus on those yummy cheap cinnamon rolls they offer.
(Additional info for this article came from the official IKEA-USA website.)
(Image courtesy of Wikipedia.org)
Dollar General Announces Expansion
According to a January 3rd press release, Dollar General Corp. intends to open 625 new stores in 2011, creating an estimated 6,000 jobs. While several retail chains have slowly expanded over the past few years (especially restaurant chains), this is the first major large-scale increase announced in a while. 625 stores represents an almost 7% increase in total store locations. In addition, the company intends to remodel or relocate 550 locations.
Sweeping, bold steps such as this may help create a positive feedback loop between consumer demand and job creation. The relationship between employment and consumer spending is something I’ve hinted at in recent posts about consumer confidence and the minimum wage. When consumers believe that the country’s economic conditions are improving (particularly the job picture), they spend more. Increased spending creates jobs. Rinse and repeat!
