CSA-Jan/Feb 2023

New talent, expanded roles transforming leadership ranks

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Help Wanted: Retailers in Search of CEOs

There was no shortage of CEO shake-ups in 2022 and the trend has continued in the new year with the abrupt resignation of Sharon Leite, CEO of The Vitamin Shoppe, at the beginning of January.

With Leite’s exit, The Vitamin Shoppe joins the following other companies that, as of Feb.1, are also searching for a new retail leader.

• Conn’s: Chandra Holt, a former Walmart exec, stepped down as CEO of the furniture, appliance and electronics retailer in October, after only 14 months on the job. Former CEO Norman Miller, whom Holt succeeded, has stepped back in on an interim basis.

• Gap Inc.: The apparel retailer has been searching for a new CEO since Sonia Syngal abruptly left the post in July. Meanwhile, industry veteran Bob Martin, the company’s current executive chairman, is serving as interim chief. He’s been on the Gap board since 2002.

• Kohl’s Corp.: Board member Tom Kingsbury is serving as interim CEO while the retailer searches for a replacement for Michelle Gass, who left in December to serve as president of of Levi Strauss & Co. The appointment is part of a succession plan that will see Gass succeed longtime-CEO Chip Bergh within the next 18 months.

• Rite Aid: The pharmacy retailer appointed board member Elizabeth (“Busy”) Burr as interim chief executive following the sudden departure of Heyward Donigan, who held the position since August 2019. Her exit came as Rite Aid has struggled to compete with pharmacy rivals CVS Health and Walgreens, both of which have made extensive inroads into the broader field of health care.

• The RealReal: Company founder Julie Wainwright, stepped down as CEO, chairperson and board member in June. RealReal president and COO Rati Sahi Levesque and CFO Robert Julian are acting as co-CEOs while the luxury resale retailer looks for a permanent CEO.

• VF Corp.: In a surprise departure, Steve Rendle stepped down as president, CEO and chairman of the parent company of The North Face, Timberland, Vans and other brands. VF said that Rendle retired “by mutual agreement with the board.”

• Vitamin Shoppe: Sharon Leite announced her resignation as CEO of the vitamin and nutritional products specialty retailer on her LinkedIn page at the start of January. Leite, who was named to the top spot in 2018, wrote that she was “excited about where I am headed next.” The company said a new chief executive will be announced at a later date.

• PriceSmart: Sherry Bahrambeygui left her post as CEO of PriceSmart, which operates 50 membership warehouse clubs in Latin America and the Caribbean, in February to pursue professional and philanthropic interests. Company founder and chairman Robert Price has stepped in as interim chief.

Until very recently, Under Armour would have made the list above. But at the end of last year, the athletic performance apparel, footwear and accessories brand named 25-year Marriott executive Stephanie Linnartz as president, CEO and board member. According to reports, she was one of 60 candidates considered for the position and was selected due to her digital expertise and success in transforming the hotel chain’s online presence.

CHANNELS > COMMERCE > CUSTOMERS

BRAND MANAGEMENT

Vice President & Group Publisher, SPECS Chairman Gary Esposito gesposito@ensembleiq.com

EDITORIAL

Editor Marianne Wilson mwilson@ensembleiq.com

Technology Editor Dan Berthiaume dberthiaume@ensembleiq.com

Real Estate Editor Al Urbanski aurbanski@ensembleiq.com

Online Editor Jennifer Mosscrop-Setteducato jmosscrop@ensembleiq.com

ADVERTISING SALES & BUSINESS

Midwest & South Sales Manager Michael Morrissey mmorrissey@ensembleiq.com

East & West Sales Manager Lise Slaviero Groh lgroh@ensembleiq.com

Real Estate Sales Manager Al Urbanski aurbanski@ensembleiq.com

EVENTS/MARKETING

Program Director Deena AmatoMcCoy damccoy@ensembleiq.com

Event Director Melissa Murphy mmurphy@ensembleiq.com

Event Coordinator Rita Ruzalski rruzalski@ensembleiq.com

Marketing & Event Administration Coordinator Farida Batuta fbatuta@ensembleiq.com

EVENTS/MARKETING

Senior Creative Director Colette Magliaro cmagliaro@ensembleiq.com

Art Director Michael Escobedo mescobedo@ensembleiq.com

Production Manager Patricia Wisser pwisser@ensembleiq.com

SUBSCRIPTION SERVICES

List Rental mbriganti@anteriad.com

Subscription Questions contact@chainstoreage.com

CORPORATE OFFICERS

Chief Executive Officer Jennifer Litterick

Chief Financial Officer Jane Volland

Chief People Officer Ann Jadown

Executive Vice President, Content & Communications Joe Territo Executive Vice President, Operations Derek Estey

Marianne Wilson mwilson@chainstoreage.com

RETAIL’S TOP WOMEN

CALL FOR NOMINATIONS!

CSA is now accepting nominations for “Retail’s Top Women Awards” program, which is designed to put a spotlight on the achievements of female retail executives in the following categories:

The program encompasses all sectors of the retail industry, including, department stores, discounters, grocers, specialty stores, convenience stores, DTC brands and more.

All Retail’s Top Women winners will be recognized at a virtual gala awards celebration in June.

Only women who work in a senior executive role for a retail company are eligible for consideration.

The nomination deadline is April 3, 2023

For more information or to submit your nomination(s), visit chainstoreage.com/nominate-retails-top-women

C-SUITE EVOLUTION

New talent, expanded roles transforming leadership ranks

By Connie Gentry

Much as retail has been disrupted in recent years, the same holds true for the retail C-suite. From the hiring of talent outside the industry to newly created roles, the C-suite is evolving to keep pace with industry and consumer changes as well as those of society at large.

Transitions in the C-suite are starting at the top. The person tapped to lead retail organizations going forward must possess a different skillset and deeper mindset than CEOs of the past, according to industry experts.

Specifically, retail chief executives must bring a proven track record, a penchant for decisive, fast-moving agility and a passion for team-building — and they don’t necessarily have to be industry veterans. Indeed, they may be total newcomers to the retail industry.

Case in point: Stephanie Linnartz will assume the helm of Under Armour on February 27. After serving as president of Marriott International, the world’s largest hospitality company with 30 brands across roughly 8,200 properties, she will bring fresh insights for strategic growth, omnichannel loyalty, talent development and branding partnerships to the retail space.

Pulling a seasoned leader from the hospitality sector was an interesting choice in the eyes of Brenda Malloy, CEO, at Herbert Mines, which conducts about 110 executive search projects annually, roughly 68% focused on the C-suite.

Recruiting from peripheral industries will likely escalate, and Linnartz, like many CEO selections, is both an interesting and an innovative choice.

“CEOs are hired to drive results,” Malloy said, referencing the well-known axiom: “Past behavior is the best predictor of future performance.”

Quantitative results are a resume prerequisite for the retail corner office, but Malloy said CEO searches are now taking a deeper dive as retail organizations face ongoing disruptions from geopolitical uncertainties and economic challenges. They are also challenged by consumers who have become digital-first omnichannel experts and who base buying decisions on cultural alignment with social and sustainability values as well as the fundamental right product, right price requirement.

“I’m seeing boards emphasize character and personal attributes in the specs for C-suite leadership,” Malloy noted. “Strength of character, for instance, as exhibited by experience with adversity and resiliency. Someone with curiosity, who asks questions and is out in front, but who sets a clear vision with authenticity and accountability. And someone who is humble, with a focus on the organization over their own ego, and who can build a strong leadership team.”

Her favorite metaphor likens the CEO to the conductor of a symphony, someone who understands their role is to lead, not star, in the organization’s performance, and who will orchestrate the transformations needed across the retail enterprise.

Imminent Upheaval

The need for strong, transformative leadership in the C-suite is supported by a recent “Disruption Index” from AlixPartners, compiled from data collected in a fourth quarter 2022 survey of global executives, of which 50% were C-level. A staggering 98% said their business model needs to be overhauled within the

next three years. A third said they have already started changing their business model and 38% expect to change the model this year.

“Retail is experiencing much greater disruption than other industries,” said David Bassuk, partner, managing director and global leader of the retail practice at AlixPartners. “Changing the business model can mean a lot of things. In our space, it’s a dramatic transformation of literally every part of the business, from product and merchandising to the whole journey of how the customer interacts

2023’s Top 10 C-Suite Titles

The following roles that used to be nice-to-have are now must-have positions for many retailers:

• Chief Development Officer: Real estate meets design and construction plus portfolio-wide facilities management;

• Chief Diversity Officer: Equity and inclusion from the board to frontline staff;

• Chief Experience Officer: Engagement and retention of customers and associates;

• Chief Purpose Officer: What the company stands for and why;

• Chief Restructuring Officer: Historically associated with recovery from financial demise, now aligned with proactive, preventive actions to elevate brand performance;

• Chief Revenue Officer: Enterprise-wide, omnichannel revenue generation;

• Chief Supply Chain Officer: To the “right product, right place” mantra, add “right price” and do so with agility and resiliency in the face of any disruption;

• Chief Sustainability Officer: Impacts and improvements on environmental, social and community issues;

• Chief Wellness Officer: Work / life balance and well-being of stakeholders; and

• Chief Transformation Officer: When two or more of the above seats need to be combined into one miracle-working magician.

with you. All of that ripples through the supply chain, inventory management, financials and the back office.”

It’s one thing to drive growth when an enterprise is following a consistent trajectory upward and the environment is more predictable, but given today’s unpredictability, retail C-suites require bold leadership, Bassuk stressed. Contributing to the overwhelming consensus that change is imminent: 80% of CEOs reported being “highly disrupted” within the past 12 months.

“We need leaders who are more creative thinkers, more willing to challenge the status quo but married with strong financial discipline in measuring short- and long-term outcomes,” he explained. “And that’s not the type of person our industry has traditionally rewarded and had in place.” His remarks hearken back to the fact that other industries can be relevant resources for C-level talent.

Stakeholder Expectations

Talent and transformation go hand in hand, but the disruptions and turmoil of recent years have altered stakeholder expectations and elevated the need for retailers to communicate their culture and social commitments.

For Paul Silverglate, partner at Deloitte and leader of the firm’s U.S. executive accelerators in client and market growth, it comes down to the difference between a mission and a purpose.

“A mission is what a company does and a purpose is why they do it,” he said. “Companies need to convey significantly more than profit motive and shareholder value. They have to set forth what the company stands for, what the company’s purpose is, and what their values are.”

Ultimately, the retailer’s purpose and values have to align with those of its stakeholders, including customers, employees and shareholders.

Enter the role of the chief purpose officer, which Silverglate said “helps the organization and the C-suite really understand where their stakeholders’ heads are, where the company is and how to weave those together.”

By creating the roles of chief purpose officer, chief sustainability officer and chief wellness officer, with all reporting to the CEO, the retailer exhibits a visible commitment to issues it deems important.

“In the last few years, we’ve seen companies write open letters about their position on social issues and this is a relatively new phenomenon,” Silverglate said. “The chief purpose officer helps the company put forth what its position is with regard to wellbeing and certain social things going on in the marketplace.”

“What’s important is that companies are communicating thoughtfully about what they stand for and are leading with a purpose,” he added.

Bassuk cited technology and media as industries that have undergone significant transformation and would have learnings applicable to retail. But he also cautions that leaders from other industries don’t always appreciate the nuances of retail.

“It’s a balancing act: the recognition that retail is unique [alongside] the learnings from other industries,” he said. “You can do it at the CEO level, but that has major risks with pros and cons. You can also bring it to the next level down [those reporting to the CEO]; we see it happening with more success in the digital or marketing space.”

As the need for agility and transformation is heightened, retail CEOs are being replaced more frequently, and according to the Disruption Index, 70% of C-level executives fear for their job.

“Because we’ve been through such disruption in recent years, the people in retail businesses are exhausted — they’re tired and overworked,” Bassuk said. “Retail board meetings used to get to the people side of things later in leadership discussions. Now, leading companies have inverted that and the people discussion comes first.”

Without that people focus, he added, transformation of retail business models will be impossible. At its core, retail is a people industry, which is a fundamental differentiator that has even more relevance in the current environment when consumers and employees alike are making values-based judgements.

In the new environment, roles that used to be nice-to-have are now must-have.

“If anything, the chief wellness officer and chief diversity officer should have a bigger seat at the table,” Bassuk said.

Similarly, Natalie Kotlyar, BDO’s national practice leader of retail and consumer products, points to insights gleaned from an annual BDO survey: Within the last two years, Gen Z and millennials responded that the No. 1 decision-making thought that goes into where to purchase, relates to sustainability and inclusion.

“Whether it’s DEI, technology or supply chain, all of the C-level roles are tied together and have to be integrated … for instance, the chief experience officer has to work closely with the chief revenue officer,” Kotlyar said.

Between excess inventories, ongoing frontline labor shortages and inflation, the first half of 2023 poses even more potential disruptions and challenges.

“The first quarter is going to be highly promotional for retailers and that impacts all of the C-level officers,” Kotlyar added.

The most critical aspect for transformation, according to Herbert Mines’ Malloy, is “having the right talent in the leadership team — it’s the combined power of having the right person in each role” across the C-suite.

Connie Gentry is a business writer based in Raleigh, N.C.

“The most critical aspect for transformation, according to Herbert Mines’ Brenda Malloy, is “having the right talent in the leadership team — it’s the combined power of having the right person in each role” across the C-suite. “

Technology: Making The Investment

CFOs urged to look beyond immediate cost reductions

By Dan Berthiaume

Chief financial officers are increasingly playing a critical — and, in some cases, leading — role in approving retail technology investments. But they frequently exhibit tunnel vision when analyzing the full impact that a potential technology implementation can have on the enterprise, according to Ken Morris, managing partner, Cambridge Retail Advisors.

“CFOs typically look at things from a cost reduction perspective,” said Morris. “They pay for an IT project by cutting money in other areas, instead of looking at how it might increase sales, because they never believe sales reports. And that’s a problem.”

Instead of strictly evaluating IT expenditures based on short-term cost reductions (which he acknowledged is often a primary focus of corporate boards and Wall Street investors), Morris advised retail CFOs also to examine the

Tech Investment Drivers

longer-term value that IT projects can produce.He called out two deployments in particular: shifting infrastructure to the cloud and RFID tracking efforts.

“Retailers need to invest in infrastructure to truly be competitive and that means putting things in the cloud, which enables a real-time retail scenario where you can see your inventory in real time,” he said. “You can also see your sales in real time, and not a day later.”

RFID tracking technology typically does not have an immediate cost reduction associated with its implementation — and RFID tags cost more than traditional security tags. But the technology can give retailers a handle on the burgeoning problem of returns fraud, noted Morris.

“You can truly protect your merchandise with serialized inventory,” said Morris.

Other technologies with a longerterm ROI model that Morris advises

According to a new study from analyst firm IHL Group, “Building an Insurmountable Lead – How Technology is Separating Leading Retailers from Competitors,” three specific needs are driving retail technology purchases for 2023:

1Reducing margin loss associated with online transactions for store fulfillment.

According to IHL analysis, this area has seen up to 800% growth as a percentage of revenue since 2019 depending on the segment.

2Reducing the amount of labor required to operate stores. Amid challenges in staffing, retailers are trying to do more with fewer workers. This is driving investments in labor-replacing technologies and solutions that made associates more efficient, such as self-checkout, scan-and-go, electronic shelf labels and automated micro-fulfillment centers.

3Deploying security technologies to reduce impact of theft. IHL data indicates retailers are investing in anti-theft solutions including physical security, predictive and prescriptive analytics, and computer vision to identify threats.

retail CFOs to carefully evaluate include self-checkout and in-store robotics and automation.

“Self-checkout reduces labor costs,” said Morris. “For a lot of retailers, only three-quarters of available store-level jobs are filled because they can’t find employees in certain markets. [The solution is] to automate some in-store workflows, which means investments in self-checkout, assisted checkout and robotics.”

Morris acknowledged that for the CFOs of public retailers, strong pressure from Wall Street investors and corporate boards to produce quarterly growth provides incentive to focus on shortterm profits. However, he urged CFOs, investors and board members always to evaluate the long-range benefits of technology investments.

MARCH 19-21

TWO BIG NAMES AT ONE EVENT!

KEYNOTE

Monday, March 20 at 7:45am

Daymond John, Founder and CEO of global fashion brand FUBU, and one of America’s most popular Shark Tank investors, will demonstrate his marketing prowess and entrepreneurial insights, as well as analyze today’s changing world of business.

For more information or to register, visit www.SPECSshow.com

KEYNOTE

Tuesday, March 21 at 8:20am

Emmitt Smith, pro-football Hall of Fame running back, will discuss his journey from football hero to accomplished entrepreneur, and share tips on how to succeed at business.

Produced by

Gaylord Texan Resort & Convention Center Grapevine, TX

Real Estate Occupancy Costs

CFOs should be prepared for increases in rents and common area maintenance costs

By Al Urbanski

Occupancy costs are the keystone metric used by retailers to determine the financial health of their store spaces in given markets and locations. They are calculated by taking the base rent, adding the triple net costs a tenant pays and then dividing that number by the reported sales for the same period.

The corresponding value tells what percentage of the tenant’s sales are eaten up by the cost of occupancy. It’s standardized and can be compared over time across different geographic locations and against other retailers in the same category.

The new year started with reports that retailers’ real estate occupancy costs had gone down across the board. But an industry-wide average of occupancy cost bears little significance to individual players in retail whose locations, store sizes, and price points vary greatly.

“At a very good mall with an average sales per square foot of $600, occupancy costs of up to 16 or 17 percent are acceptable for tenants because they’re still making money,” said Mark Hunter, managing director of asset services at CBRE. ”But tenants in B or C malls have to have occupancy costs in the 10-to-12-percent range to stay in business there.”

An occupancy cost of 10% would be a balance sheet breakthrough for specialty restaurants whose accepted percentages are in the teens. For fastfood chains that aim for single-digit occupancy costs, locations with 10% calculations might be marked for closure. (See table.)

Datex Property Solutions, a provider of data-driven insights to landlords that compiles monthly changes in occupancy costs, noted wide variations in percentages and variations of occupancy costs across all retail segments.

In November 2022, Datex’s Tenant

The Up and Down World of Occupancy Costs

Variance is determined by comparing YOY percentages and dollars to determine velocity of change.

Track charted small decreases in yearover-year occupancy costs registered by fitness and movie theater chains, yet their percentages remained the highest in the industry, both above 20%.

Occupancy costs rose precipitously for department stores (2.89% to 7.92%), pet supply chains (6.97% to 12.33%), and craft stores (8.24% to 12.33%). Supermarkets saw theirs rise by more than a third, although they still remain in the low range of retail at 3.68%.

‘Supermarkets were clear category winners of the pandemic, but full-year 2022 is very much in line with prior years,” said Datex CEO Mark Sigal. “Pet supply retailers, too, were big winners on a trend that accelerated in 2022. But rents are higher these days, hence, higher occupancy costs.”

Players in the same categories can post occupancy costs that vary widely. In November, fast food providers’ costs

declined to 6% while specialty restaurant operators saw their burdens rise to 17%.

“A restaurant like Chuck E. Cheese that’s known for entertainment and close engagement of customers has struggled coming out of the pandemic,” said Sigal. “Fast food restaurants with pick-up windows thrived.”

Rising Costs: CBRE’s Hunter warns retail CFOs to be prepared for increases in rents and common area maintenance costs in the coming year.

He has charted 5%-to-7% increases to pay janitorial, security, and landscaping services. Rents, too, will continue to increase in growing markets.

“There’s no new development out there,” Hunter said. “Retailers need the space and digitally native brands are going to compete for a lot of it. Supply is limited, demand is growing, and rents are going to go up. It’s the perfect situation for landlords.”

Gaylord Texan Resort & Convention Center Grapevine, TX

Produced By

See why your peers are joining us at the 59th annual SPECS Show:

I’m looking forward to networking and attending SPECS’ educational sessions to expand my knowledge, allow me to learn and improve professionally. I’m excited to share the latest trends with my teams and apply them to new business opportunities.

TINIKA DAVIS Energy/Special Projects Manager

SPECS has become my go-to event of the year for industry connections and emerging building innovation and technology. It allows me to keep up-to-date with new product releases, vendors and partners in a fun and informative atmosphere designed for successful professional interactions.

This March, SPECS will be a one-of-a-kind show that will bring fascinating topics that touch a retailer’s daily life. Experts will speak about issues such as real estate in an ever-changing landscape, current labor trends, maintaining equipment with supply chain delays and shortages, and more. You won’t want to miss listening to industry leaders and catching up with friends and colleagues!

SARA IVERSON SMITH Director of Real Estate, Facilities, and Construction

STEPHEN MATTSCHECK Prototype & Specs Manager, Architecture & Engineering Department

Forecasting The Future: Retail Trends

By Marianne Wilson

The “perception” of recession and heightened expectations for online and in-store shopping are among the trends expected to impact customer behavior in 2023.

“We foresee continued impact from economic challenges as consumers are heightening their expectations for personalized, hybrid and omnichannel shopping, and their redefined focus on wellness for themselves, others and the planet,” said Kathy Risch, senior VP, consumer insights and trends at national sales and marketing services provider Acosta.

The company has identified several opportunities and challenges for brands and retailers as they navigate today’s dynamic and uncertain consumer marketplace.

Here are Acosta’s predictions for retail 2023.

1Recession or Not, Perception is Reality

The ongoing state of inflation, combined with other economic challenges, has resulted in nearly half of all shoppers believing the country is in a recession, despite a lack of consensus among economic experts.

“When shoppers believe we are in a recession, they will behave as though we’re in a recession,” said Risch. “They are doing less, trading down, practicing smart, conservative and creative behaviors that are likely to last.”

Risch’s analysis is reflected in Acosta proprietary shopper insights, which revealed that 61% of consumers are eating out less, 52% are spending less on entertainment and 46% are saving less

2Retail Experiences That Surprise and Delight, In-Store and Online

Shoppers have three key expectations in 2023 for their in-store shopping experiences: enjoyment, convenience and value.

Seamless omnichannel shopper experiences are table stakes and retailers will want to bring in-store experiences online and digital experiences into the store. Related insights include:

• Shopper experience matters – both digital and physical – it isn’t just about price and assortment.

• New retail formats are being tested to keep customers coming back, building loyalty based on experience as well as product selection.

• Tech-enabled in-store design will encourage discovery, browsing and purchasing — from QR codes throughout the store to smart screens that share product reviews when an item is selected from the shelf.

• Connectivity increases, with 5G adoption expected to triple in retail stores by 2024.

• Smaller format big box stores are opening to support convenience, offering specialized services, techenabled stylists and restaurants.

3Personalization Rapidly Evolving

First-party retail data is becoming more targeted to the individual shopper. Value, discovery and trial can be provided on a personalized basis to the shopper based on new technology, including AI, and the retail media explosion. By 2024, U.S. retail media ad spending will exceed $60 billion. Instacart, Walmart and Amazon are in the lead, with others quickly following. Retail media will employ technology for in-themoment deals in aisles.

Nearly all (90%) of grocery sales still happen in stores. There is a $1 trillion opportunity for advertisers to target more accurately with the right data, including in-store AI technology such as electronic shelf labels, which provide nearly limitless

ad inventory and inform shoppers of proximity value offerings.

4Committing to Collective Wellness

In 2023, wellness will assume a holistic, comprehensive position for shoppers – extending from personal wellness (health and happiness) to the family’s health and wellbeing and to the earth and animals.

In related insights, retailers will provide more in-store clinics and other health services — currently a $4.4 billion business.

On a global level, consumers are concerned about sustainability and the concern will escalate in the U.S., with 69% of U.S. consumers rating sustainability as important, regardless of age/gender.

5Transforming into a Hybrid World

While the hybrid evolution was underway in some channels, COVID moved the needle further, faster and deeper, resulting in a new hybrid world. Shoppers will expect brands and retailers to reflect this “new normal.”

Today, nearly half of all shoppers buy many types of products both in-store and online, such as:

• Apparel – 57%;

• Beauty care – 48%;

• Electronics – 44%; and

• Home & kitchen – 50%.

Risch said that brands and retailers will need to continue to make significant shifts in how they provide value, quality, entertainment, service and convenience to shoppers in 2023.

“The most successful organizations will expediate the seamless shopping and branding experience, also understanding that consumers want to make informed, smart, values-driven choices for themselves and their families,” she said.

Herschel Supply Expanding in Brick-and-Mortar

By Denna Amato-Mcoy

Herschel Supply Co. has put down roots in the United States, opening a 2,500-sq.ft. outpost in New York City’s Flatiron District. The store offers one of the largest selections of Herschel products in the world.

Best known for its popular backpacks, the digitally native, design-driven Vancouver, Canada-based brand was founded online in 2009 by brothers Lyndon and Jamie Cormack, who named it after the small Canadian town where they grew up. In creating Herschel, the brothers wanted to “fill a gap in the market and put a modern twist on backpacks,” explained Lyndon Cormack.

Herschel’s lineup has expanded in recent years to include travel baggage and accessories, headwear, wallets and a newly-launched apparel line dubbed Herschel Supply Uniform. The company has also expanded into physical retail.

In addition to its new Big Apple location, the brand has four stores in Vancouver (with an upcoming site planned for Toronto’s Eaton Centre). It also does a robust wholesale business, with U.S. partners that includes Dick’s Sporting Goods, Nordstrom, Urban Outfitters, REI and others.

Chain Store Age’s Deena Amato McCoy spoke with Lyndon Cormack about Herschel’s North American expansion plans.

Why did you choose the Flatiron District for Herschel’s U.S. store debut? While conceiving our expansion plan, we envisioned opening a store where locals and travelers unite. Our first-ever U.S. store sits in the heart of New York City, right where the Flatiron Building splits Broadway and Fifth Avenue — it’s one of our favorite intersections in the world.

We view the store as a testament to our

continued momentum. It marks the beginning of our ambitious retail expansion through 2023.

How would you describe the look and feel of the store?

My brother Jamie and I collaborated with our in-house design team and lead interior designer Rye Johnson to create an immersive customer experience that mirrors the distinctive energy of New York City. At the store entrance, customers are greeted by a large LED screen that displays our brand’s latest campaign imagery.

The space also features a juxtaposition of old and new mixed materials. For example, we’ve paired vintage and secondhand furniture with modern design components such as glass-blown lights from Bocci, which is another Vancouverbased company.

Other design elements include reclaimed oak tables, black-painted oak walls and a tile-wrapped cash desk and dressing rooms. The walls of the store are decorated with displays of Herschel’s signature styles in an assortment of colors.

Hershel Supply is known as being an advocate of local artists. Tell us more about that.

Our mission is to inspire and provide up-and-coming creatives with the means to pursue their artistic interests, which shows up in different ways throughout our business. From a product standpoint, we’ve partnered with individual artists on merchandise collaborations.

We also have initiatives at store-level. In our Flatiron store we will host a rotating “Artist in Residence” program that will spotlight a new artist every three-to-six months. The store features a large-scale gallery wall and additional lounge space for artists to expand their installations.

Will the store host other events?

We dedicate space in all our stores to host community events. In New York specifically, we allocated 1,200-sq. ft. of space above the store’s main floor for community events. We hope to host between two and three community events every month, with the events ranging from sound baths to artist workshops to live podcast tapings.

What business challenges has the company faced in creating a physical store strategy?

We’ve had a successful wholesale business for years, but running a retail organization is different. We recruited and hired a best-inclass team to help us pave a smooth path. We love meeting our customers wherever they shop and having this extension to our business model is the next step in creating a robust global business. So far, it’s proven to be successful for us.

What’s the next step in Herschel’s expansion strategy?

We plan to continue expanding within the U.S., and expect to operate 12 additional locations in North America by the end of 2023. We will focus on key epicenters throughout the U.S. and Canada, including New York City, Toronto, Los Angeles and Calgary.

Herschel Supply’s first U.S. store is located in New York City.

Three Hot-Button Issues

By Marianne Wilson

Retail industry should expect more of the same — constant change — in 2023.

That’s according to Deloitte’s “2023 Retail Industry Outlook,” which is based on interviews with 50 senior retail leaders, 70% of which are from companies with an annual revenue of $10 billion or more. The report also features Deloitte’s economic outlook for the retail industry.

The report noted that retailers are getting squeezed from both sides of the value chain — from increasing operational and supply chain costs to demanding, price-conscious consumers. Nearly all the executives surveyed expect inflation to pressure their profit margins — only onethird are very confident about maintaining or improving profit margins this year.

Six in 10 respondents expect inflation to raise operating costs, and while passing higher prices on to consumers has been the norm, many question how long they can continue the trend.

As the industry deals with these immediate constraints, Deloitte also identified the following “hot-button” issues that are putting additional pressures on retailers:

• Labor issues: Seven in 10 executives surveyed said labor was the number one challenge heading into 2023. As of November 30, 2022, 879,000 retail jobs remained unfilled.

Hiring and retaining employees has been a lingering issue, and competition for hourly workers remains fierce, with retailers forced to offer higher wages and more flexibility. The 12-month moving average of median wage growth for low-skilled workers increased by 6.7% in November 2022, up from 3.8% the year prior.

• Organized retail theft: Some retailers have noted the problem has worsened during the 2022 holiday season and has gotten so dire that costs to cover lost products and security may require closing doors or raising prices.

As many experts anticipate an economic slowdown in 2023, it would not be

surprising to see an even further increase in organized theft. Citing the 2008–2009 downturn, experts noted that retail theft sees an uptick in times of economic stress.

• ESG: Six in 10 executives surveyed said the industry will face increased scrutiny over ESG decisions in 2023. However, when push comes to shove, many retailers say they will choose to focus on margin enhancement opportunities.

More than half are planning minimal to no ESG investments, and the topic did not make the top five list of executive priorities. With only 26% of 250 leading global retailers making commitments to carbon reduction based on Science Based Targets, they (and the world) may not be able to afford these initiatives being on the back burner for long.

Here are other key highlights from the Deloitte report:

• All surveyed executives expect inflation to pressure their profit margins, and six in 10 expecting inflation to raise operating costs. And while passing higher prices to consumers has been standard, nearly all retailers (eight in 10) anticipate diminished

Sales Outlook

consumption this year as a result of financial instability.

• Seven in 10 executives note that supply chain disruption will impact growth, leaving only three in 10 who feel confident in navigating domestic supply chain disruptions.

To combat disruption, eight in 10 executives said they plan to make moderate-to-major investments to modernize their supply chain this year

• The changing consumer will be a key challenge, as two-thirds of executives expect price to be more important than brand or retailer loyalty. Nearly all executives say consumers will expect seamless shopping experiences across all channels.

• Six in 10 executives foresee strengthening digital commerce offerings as a top growth opportunity, with the same number anticipating consumers using social media platforms to purchase products directly. And seven in 10 executives expect retailers to collaborate with social media networks and influencers to grow social commerce.

Thee key economic trends will likely influence retail sales, Deloitte US economists Danny Bachman and Akrur Barua noted in the firm’s “2023 Retail Industry Outlook.”

First, a slowing economy will keep retail sales in check. Retail sales volume had slowed, even as inflation lifts the dollar value of those sales in the pandemic era. Deloitte expects U.S. economic output to slow to 0.9% in 2023 from an expected 2% in 2022, and put the odds of a recession (which would make things worse) at 35%.

Meanwhile, inflation has lowered consumers purchasing power — despite gains in nominal income due to the strong labor market. Nominal average weekly earnings have increased by 8.3% since 2020, but real earnings have fallen by 5%. This will weigh on consumer demand and, as a result, retail sales volume.

Second, inflation has lowered consumers’ purchasing power, despite gains in nominal income due to the strong lab

In the third trend likely to influence retail sales, consumer spending on services has been picking up steadily as consumers return to restaurants and bars, attend sporting events and take vacations similar as they did before the pandemic. The shift to spending on services will weigh on retail sales at stores, but will provide some tailwind to food services and drinking venues.

Deloitte expects real personal consumer expenditures (PCE) on durable goods to contract 1.8% in 2023, while, at the same time, services PCE is expected to rise 3.6%.

ThirdLove Kicks Off Store Expansion

Digitally native brand setting up shop nationwide

By Deena Amato-McCoy

A digitally native retailer known for its inclusive sizing, body positivity and advocacy for women is expanding in brick-and-mortar.

ThirdLove was founded online in 2013 and went on to gain a devoted following. The bra and innerwear brand has since expanded into loungewear and activewear. It is now setting its sights on physical retail, recently opening doors in Washington, D.C., Dallas, Boston, Scottsdale, Ariz., and Philadelphia.

The stores doubled ThirdLove’s portfolio to nine locations — with more to come in the future.

ThirdLove’s brick-and-mortar expansion has been three years in the making. The company’s first try at physical retail dates back to 2019 when it opened a popup in New York City’s SoHo neighborhood. In opening the temporary outpost, the brand was looking to bring its signature digital personalized bra fitting experience to life.

Instead of filling the store with merchandise and keeping inventory on hand, ThirdLove brought in samples to complement its fitting experience. Store employees conducted personal fittings using the company’s 60-second “Fit Finder” tool, a digital questionnaire that helps formulate the best bra size for a customer. This system uses proprietary algorithms developed in-house by its female-led data science and bra design teams to help women find the perfect bra size.

Shoppers also had the option to begin a fitting on their phone or tablet and complete the process in-store with an associate. Once they discovered the correct size, shoppers could try on store samples. After making their selection, shoppers worked with employees to

place an online order and have merchandise shipped to them.

“We wanted our first pop-up to focus on the shopping experience, and give our shoppers our fitting expertise and the opportunity to work directly with our store associate to get the fitting process started,” explained Veronique Powell, VP, strategy & operations, ThirdLove.

The pop-up was a learning experience for ThirdLove. The company came to realize that it wasn’t necessary to cram all its technology into the store experience.

“We learned that fit and comfort and leaving with merchandise in-hand were priorities for in-store shoppers, not our technology trademarks,” Powell said.

The pandemic forced ThirdLove to halt its physical store plans. With plenty of time to rethink its expansion strategy, in 2021 the company partnered with Leap, which offers brands a turnkey platform for expanding in physical retail.

With Leap’s help, ThirdLove started its physical expansion, opening four outposts on the West Coast in early 2022, starting at Fashion Island, Newport Beach, Calif. It was followed by locations in Venice and Walnut Creek, Calif., and San Francisco.

Unlike the brand’s New York City popup, the new stores “are light on technology and more focused on the shopping experience,” Powell said.

ThirdLove stores feature soft tones, sleek fixtures and plush, comfy furniture. Hanging globe lamps and recessed lighting highlight the fabrics of the merchandise. Shoppers can also book appointments online with fit stylists prior to their visit.

“Our stores feel like a warm hug,” Powell said. “Shopping for bras can be intimidating so by adding decor that is comfortable, warm and friendly we are creating an environment that puts our shopper at ease, and makes her feel comfortable and in control.”

ThirdLove stores are proving successful in expanding the brand’s audience, To date, 65% of ThirdLove’s store shoppers are new to the brand. The company plans to keep growing its U.S. retail fleet in 2023, and expects brick-and-mortar to help grow its retail business to between two and three times its current size, Powell added.

To further drive in-store excitement, the company will leverage its recent acquisition of Gen Z-fave Kit Undergarments with dedicated capsules, pop-ins and events, particularly in its home base of Los Angeles.

ThirdLove also has other initiatives on tap for the new year, including expanding internationally with the introduction of a Canadian e-commerce site.

ThirdLove also plans to test new product launches, as well as embark on localized marketing initiatives across direct mail, local partnerships and events. The retailer is also planning an advertising campaign that will span print and radio channels.

ThirdLove stores feature soft tones, sleek fixtures and plush furniture.

Better Roof Management

Ongoing maintenance is critical to maximizing a retailer’s roofing investment, but it often doesn’t get the attention it deserves. Chain Store Age spoke with Dennis Kuhn, division VP of Let’s Roof, the recently launched roofing division of Let’s Pave, about the importance of expert roof management, including maintenance, repair and replacement.

By Marianne Wilson

What are retailers’ biggest challenges with regard to roof maintenance and replacement?

According to our retail clientele, there are two main challenges. The first involves misleading roof assessments. Whether scope bias, system bias or inexperience, retailers are not being given all the information they need to make a sound decision. That’s because many third-party companies lean toward replacement, regardless of the roof issue, as a way of reducing their own liabilities.

Also, many contractors are unfamiliar with new repair options or are limited in their service offering. When retailers are not presented with all the options —especially viable maintenance or repairs—they end up spending more than is necessary. Let’s Roof, however, is willing to present any roof solution that makes sense.

The second challenge is receiving ongoing support and service. Our retail clients have expressed overwhelming concern regarding lack of communication post job. Without this, they have no real insight into the performance of the work. The providers regarded maintenance as an afterthought, and they did not provide the same level of attention as during the initial re-roof or repair. In contrast, Let’s Roof manages the entire lifecycle of the roof, scheduling routine inspections and maintenance to get the maximum value from the asset.

What are the advantages/disadvantages of roof repair versus replacement?

The major differences between repair and reroof are exposure and cost.

With reroof, the advantage is low exposure. A roof system is at peak

performance when it is new. In contrast, repairs could offer higher exposure. There are typically little guarantees that the repair will last long-term. That means retailers may have to consistently fight water intrusion through continued repairs and costs.

Reroofs can be expensive. They are more complex projects that may or may not include demolition of the existing roof system. In the current climate, the costs are continually growing and roof install lead times can be long. Comparatively, repairs can be done quickly and for much less money than a new roof system.

Let’s Roof is a proponent of a third option, which involves repair and maintenance. This strategy provides a much-lower cost alternative to reroof, with a higher success rate then a short-term repair.

How important are regular inspections when it comes to prolonging the life of a commercial roofing system? Regular inspections are very important. From our research, retailers understand proactive strategies, but scheduling and tracking maintenance is easier said than done. Let’s Roof simplifies the process. We can schedule and revisit the work to make sure it is performing —before there is a problem. Through our client portal, we also offer retailers 24/7 access to inspections and results.

What factors into the cost of a roof replacement?

Outside of roof size, system preference and complexity, we have seen additional effects from market conditions, material shortages and rising labor costs.

Because roof costs have been a moving

target, understanding value is more important than ever for retailers. We feel starting with a true roof assessment is a must. From there, we can work through all options to find the best system and long-term management approach to get the most life out of the work, thereby creating value.

What made Let’s Pave decide to launch Let’s Roof?

As Let’s Pave has grown its services and client-base, our customers began to ask if we could help them with other services — including roofing.

From countless conversations with those portfolio managers, we found two major gaps related to roof assessments and ongoing service. Based on this feedback, we assembled a team that has worked for decades with some of the biggest and best roofing contractors and manufacturers in the industry. That experience, combined with two of our company’s core values — being easy to work with and disrupting status quo — has created a commitment to provide unbiased roof assessments, project performance, and lifecycle management that will improve commercial roof management.

What services does the company provide?

Let’s Roof provides complete lifecycle management of your commercial roofing portfolio. This includes:

• Assessing current roof portfolio conditions;

• Partnering on roof portfolio management, needs, and budgeting;

• Seamless roof project execution;

• Continued roof inspection and maintenance; and

• Client-focused, real-time reporting.

Dennis Kuhn, division VP, Let’s Roof.

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Keeping Things Current

BurgerFi deploys new technology for improved customer experience

By Marianne Wilson

BurgerFi has deployed a new solution to ensure the digital menu and marketing boards in its stores keep pace with the most current information.

One of the nation’s fastest-growing better burger concepts, with approximately 125 locations, BurgerFi stores use digital signage to alert customers to product pricing, promotions and special offers. But the company had experienced challenges in updating information consistently across its store fleet because each location managed its own displays — the screens were not networked together within or across locations.

As a result, many screens displayed outdated and inaccurate content, with some signs showing stale images for months at a time. Also, because different locations used digital sign technology from different vendors, BurgerFi had difficulty performing regular maintenance and scheduling emergency repairs.

New Solution: To remedy this situation, BurgerFi sought a uniform, systemwide solution that that could schedule, display and manage digital menu content. The company also wanted to support dynamic pricing changes and promotional offers and integrate digital applications in its network for a better customer experience.

After reviewing options, BurgerFi

Flexible Expansion

selected a cloud-based content management system (CMS) from Hughes Digital Signage. It gives BurgerFi management anytime/anywhere access to all the digital menu boards and marketing boards across all its locations.

Hughes connected each location’s screens to the CMS, enabling the potential for branded content to be scheduled by time of day, audience and promotion. Screens now display dynamic content, including videos, social media feeds and media-rich animations — all pushed out to select screens and locations within the system. BurgerFi can vary display content by region or state, or deliver the same content franchise-wide.

Individual locations also can customize corporate-approved content by integrating social media channels and hashtags.

A flexible footprint model helps keep BurgerFi’s expansion on track.

In addition to expanding its portfolio by opening both corporate- and franchisee-owned restaurants, the fast-casual “better burger” chain is also opening ghost kitchens in Gopuff fulfillment centers across the country in response to the ongoing demand for takeout and delivery options. (BurgerFi entered into a license agreement last year with online delivery platform Gopuff to expand the delivery of BurgerFi items in up to 30 markets nationwide by the end of 2022, following a successful pilot program in Tallahassee, Fla.)

In addition, BurgerFi is expanding its presence in airports. It’s currently operating in Fort Lauderdale-Hollywood International Airport, Buffalo Niagara International Airport, Jacksonville International Airport, and Raleigh-Durham International Airport.

Projected airport openings in 2023 include another location in Fort Lauderdale-Hollywood International Airport and one at Newark Liberty International Airport.

BurgerFi also integrated its digital signage system with Olo, an online restaurant ordering and delivery platform that supports its online ordering, ghost kitchens and delivery programs. The retailer uses the solution to send out daily pricing. Now, when BurgerFi adjusts pricing, the changes update automatically across all menu boards in the system.

Previously, menu board and marketing board content was updated monthly by restaurant managers or staff using a USB stick. Now, BurgerFi’s corporate marketing team can update content as frequently as desired across all locations, in an effort to better engage customers and support product promotions.

BurgerFi’s rollout of the CMS solution includes new screens with integrated signage players at many locations and new signage players on existing screens in other locations, enabling a unified player platform across all sites.

The retailer also obtains access to network management, spanning installation, proactive monitoring and fast remediation, both automated via Hughes artificial intelligence for IT operations capability and on-location, when needed, with field service personnel.

BurgerFi has access to the Hughes portal, 24/7 support, and a nationwide team of field technicians.

In another innovative in-store technology deployment, BurgerFi is leveraging the Oracle Micros Simphony Cloud POS solution as a restaurant hub. The chain is implementing new technologies on the platform such as customized tablets, contactless payments, and tabletop and kiosk ordering to enhance its in-store dining experience.

Utilizing the platform’s enterprise restaurant management capabilities, BurgerFi is also simplifying front- and back-of-thehouse business operations across in-store and online ordering functions.

BurgerFi operates approximately 125 locations.

Meijer Goes Smaller

By Marianne Wilson

Meijer has unveiled its first new format since it introduced a neighborhood market concept in 2018.

The Midwest retailer’s Meijer Grocery concept debuted with two stores in Southeast Michigan, in Lake Orion and Macomb Township. Featuring a footprint of 75,000- to 90,000-sq.-ft., the new format will allow the chain to open in more locations than was possible with its larger supercenter format, which averages about 150,000 sq. ft.

Meijer Grocery stores feature design elements to enhance the shopping experience and provide greater convenience. Wide aisles allow for fast navigation, while rear-access coolers allow employees to refill refrigerated items without crowding the sales floor.

In addition, each location has a

family restroom, equipped with an adult-changing table — a feature also available in several Meijer supercenters — for the convenience and dignity of customers with disabilities and their caregivers. As in all Meijer stores, Meijer Grocery offers free access to Aira, an app-based service that provides live navigation assistance to blind and lowvision customers via their smartphones

Meijer Grocery carries all the “essential” categories a customer might need for a quick trip or weekly restock, the company said. The stores also house a bakery, full-service deli and in-store and drive-thru pharmacy. Locallysourced products are spotlighted in nearly every department.

In addition, the stores feature the same technologies that are available

at traditional Meijer locations, including its “Shop and Scan” feature which allows shoppers to avoid the checkout by paying with their smart phones.

Based in Grand Rapids, Mich., the privately-owned and family-operated Meijer operates 501 supercenters, neighborhood markets, Meijer Grocery and Express stores throughout the Midwest.

The retailer traces its roots back to 1934 when Dutch immigrant Frederik Meijer opened a grocery store in Greenville, Mich., offering staple items at bargain prices.

Rear-access coolers allow employees to refill refrigerated items without disrupting store traffic.

Sustainable Illumination

How to achieve circularity in store lighting

By Addy Oluyemi

Sustainable retail is on the rise as calls for eco-friendly strategies become louder from consumers, shareholders and employees. Yet according to Boston Consulting Group, only a few large retail operations are significantly reducing their climate impact or embedding sustainable behavior throughout their own organizations.

Retailers looking to drive change, specifically in their stores, should embrace a circular lighting approach. It can help maximize the reusability and extension of the lighting installation, enabling them to incrementally reduce their environmental impact and enhance the shopping experience for customers at the same time.

Closing the Loop

Achieving store sustainability is no easy feat. It starts by understanding how our production system must transform. There are three business models commonly used in our economy:

• Linear – products are designed to be used and disposed at the end of life;

• Recycling – at the end of life, some materials are recycled and reused in the same or different use chain; and

• Circular – maximize the (re)usability, serviceability and upgradability of products to preserve value and avoid waste.

According to a recent, WWF (World Wildlife Foundation) report, we use 1.8 times the volume of resources that our planet can sustain. Continuing the linear model of “take-make-dispose” indefinitely is impossible, as it will become increasingly more wasteful and challenging to source our finite materials. The time to shift from a linear economy to

a circular economy is now, and lighting can play a huge role here.

Lighting

Circularity in lighting can take shape in four ways:

• Serviceable luminaires: Fixtures that are upgradeable, connectable, reusable, recyclable and energy-efficient;

• Circular components: Exchangeable and/or recyclable parts, such as drivers, controls and LED boards;

• Intelligent systems: Software that allows you to monitor serviceable luminaires and enable preventive maintenance; and

• Circular services: Ways to prolong product lifetimes and provide stores with end-of-contract options.

Here are three ways to leverage the options in stores to support the sustainability imperative.

1Explore the use of eco-conscious lighting design alternatives, like 3D printed luminaires. Unlike traditional fixtures, 3D printed solutions can be produced with recyclable materials, using no paint, fewer parts and fewer screws to avoid material waste.

Also, when compared to traditional die casting production methods, 3D printing requires less energy, drastically reducing your carbon footprint. If a store needs to be remodeled or enhanced, the raw materials can be reused and luminaires can be reprinted to preserve their value. Each fixture can be made to precise specifications, blending with existing luminaires or integrating highly customized design features such as the company’s brand logo or colors, to complement any store aesthetic.

2Consider switching to a light-asa-service (LaaS) model, which merges lighting design, installation and maintenance into a single, managed contract. Circular services can help enhance lighting performance and extend its lifetime, supporting sustainability objectives. Retailers can return the equipment or reuse or recycle it at end of its lifetime for greater flexibility than before.

3

When connected to built-in sensors and cloud-based software, or the Internet of Things (IoT), retailers can gain even greater control over their lighting, maximizing energy efficiency. Automated dimming schedules, daylight- and occupancy-sensing capabilities and zone creation allow retailers to use light only where and when it is needed. This can reduce a single store’s energy consumption between 25% to 30% in front-of-house operations and 63% to 66% in backof-house areas.

This connected lighting technology can also be scaled to support multiple stores at once for a consistent, sustainable property portfolio.

Eco-Friendly Future

Moving to a circular lighting model can have a big impact on keeping stores upto-date and contributing to a retailer’s sustainability goals.

Beyond energy savings, carbon reductions and eliminating waste, circular lighting streamlines operations, unlocks cost savings and future-readies a business for a brighter tomorrow.

Addy Oluyemi is retail & hospitality end-user marketeer, North America Systems & Services, Signify (formerly known as Philips Lighting).

Lids’ newest store concept is the brick-and-mortar iteration of an ecommerce platform that it launched last year. Located in Jamaica, Queens, the new Lids HD (Hat Drop) operates similarly to its online counterpart, offering exclusive and limited-edition releases. Designers and influencers will also create new collections for the store. Customers will have first access to purchase exclusive hat drops beginning at 11:00 am ET each Friday, before the collection becomes available on the e-commerce platform at noon ET that same day. In another first, Lids has opened its first store on one of the nation’s most prestigious shopping streets: Fifth Avenue in Manhattan. … Nike opened the first North American location of Nike Rise, at Aventura Mall, Aventura, Fla. It’s the third location for the concept, which debuted in 2020 in China, followed by a site in London. Nike Rise is designed to be unique to each city, with a focus on running, training and basketball. Similar to the other locations, Nike Rise Aventura has an area where shoppers can customize their sneakers and apparel and boasts multiple screens displaying local sports, city and athlete data. Two-floor LED screens display real-time sports moments, seasonal brand campaigns and cityspecific member data from the Nike Training Club and Nike Run Club apps. … The Museum of Illusions, an experiential

Comming Attractions

Babies“R”Us is set for its U.S. comeback. The retailer will open a flagship — its first store under its new owners — this summer at American Dream, the massive three million sq.-ft.-plus entertainment and retail center in East Rutherford, N.J. (In 2021, WHP Global acquired Tru Kids Inc., parent company to Toys”R”Us, Babies”R”Us, and more than 20 related consumer toy and baby brands.)

illusions museum designed for visitors of all ages, is expanding its U.S. footprint, with plans to open nine locations this year. The attraction will open its largest location to date in early spring, a 15,274-sq.-ft. site at Project 63, a new four-story retail and hospitality center Las Vegas. It will feature classic as well as “never-before-seen” mentally-stimulating optical illusions, 3D holograms, brainpuzzling exhibits and interactive illusion rooms, along with a retail shop. … Global streetwear brand Culture Kings, an A.K.A. Brands company, has opened its first U.S. store, a 14,000-sq.-ft. flagship at The Forum Shops at Caesars in Las Vegas. Combining Culture King’s signature mix of fashion, sports, culture and music, the high-energy space features a professional recording studio, a half basketball court, a 75-ft. hat wall, live DJs performing daily and gamified activations. It also has a “Secret Room,” dedicated to rare, sought-after streetwear items.

Designed to make shopping for baby an engaging and stress-free experience, the flagship will include a full range of products and services, along with interactive experiences such as a test track to try out strollers, a photo-opp station where parents can announce their new arrival and a “wishing tree,” where friends and family members can share their well wishes for baby.

The store will also spotlight updated versions of the brand’s signature features, including a baby registry lounge, nursery design center with room set displays, center for private events and educational workshops for parents and caregivers, and a “comfort zone” to feed or change baby.

The return of Babies”R”Us to the U.S. retail scene is in line with WHP’s goal to bring both the baby products retailer and Toys”R”Us brand back to life in the U.S. In December 2021, Toys”R”Us opened a two-level, 20,000-sq.-ft. flagship at American Dream

Babies”R”Us will open a flagship at American Dream this summer.

The hat wall at Culture Kings, Las Vegas.

Lids HD

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Supermarkets shrink stores and grow online sales

Grocery-anchored centers were the retail stalwarts of the COVID-plagued year of 2021. Non-grocery tenants in that sector posted record sales and developers and investors vied to acquire centers and chains—especially in high-growth Sunbelt states like Florida, Texas, and Arizona. The trend continued through the first half of 2022. Tenants posted record sales of $1.5 billion and the average cap rate for the properties fell to an historical low of 5.9.

The second half has been another story.

During those six months, said a report from JLL, sales in grocery-anchored centers plummeted by 44% to $852 million and cap rates rose to 6.9%. The global retail services company called it the “tale of two halves in the retail capital markets.”

Despite the fact that consumers have quit buying eggs and produce online and returned to stores, supermarket chains have started investing heavily in creating their own online platforms and are active in partnering with grocery delivery operations such as Instacart, Uber Eats, and DoorDash.

Instacart’s second quarter 2022 sales were 39% higher than in the same period last year, and Uber Eats was signed by Meijer to handle deliveries at all of its 500 stores.

Walmart’s new “Text to Shop” app lets customers place orders via text message. Southeastern Grocers, the holding company of the Winn-Dixie and Harveys supermarket chains, has developed for them an e-commerce service that customers can use to make purchases and

schedule online pickups.

According to eMarketer, online grocery sales in the United States rose from $121 billion in 2021 to $140 billion in 2022 and will continue to rise at an annual $20 billion-plus rate over the next four years.

At the same time, supermarket chains whose store footprints have continued to get larger over the past 40 years are trying out smaller formats—perhaps influenced by Aldi, whose sales floors are typically in the 10,000-sq.-ft. range. The chain was the grocery category expansion leader in 2022 with 49 new locations. Its small-format competitor Lidl now fields 178 stores in the U.S. and continues to expand.

In January, Meijer, whose supercenters range from 150,000 to 250,000 square feet, opened two 90,000-sq.-ft. Meijer Grocery stores in the Detroit suburbs. Schnucks branched out into the convenience store business with a brand called Shnuck’s Express. And Save Mart opened a small-format supermarket in San Francisco.

According to Placer.ai, the cell-tower traffic-tracker, Publix’s small-format chain GreenWise market has logged monthly traffic increases and shopper visits that are longer than those experienced by Publix’s Florida stores.

One big exception to the trend was Texas-based H-E-B. The chain opened 12 stores averaging 100,000 sq. ft., including one in Frisco—its first store in the Dallas-Fort Worth market.

aurbanski@chainstoreage.com

@AlUrbanski (Twitter)

Tenants in groceryanchored centers posted record sales from through 2021 and the first half of 2022. In the second half, receipts plummeted by 44%.

Raymour & Flanigan, Tenant & Landlord

The Northeast’s largest furniture chain owns and operates

two-thirds of the centers in which its showrooms reside.

By Al Urbanski

It was the 1970s when brothers Bernard and Arnold Goldberg, who had successfully run a furniture store in downtown Syracuse, N.Y., for 25 years, decided to expand. They bought two properties in the suburbs and built two new stores.

Today that retailer, Raymour & Flanigan, has 143 showrooms, outlets, and clearance centers scattered throughout the Northeast. Some 50 locations are leased from retail real estate developers like Kimco, Federal Realty, Acadia Realty Trust, and Urban Edge. Raymour is the landlord at the rest.

The Liverpool, N.Y.-based company’s retail real estate portfolio totals gross leasing area of more than 15 million sq. ft. and continues to grow under the leadership of CEO Neil Goldberg, Bernard’s son. In the first quarter of 2023, the company expects to close on a major acquisition in Staten Island as well as complete leases for two additional new store locations.

“We continue to look for locations with the best financial terms we can negotiate, whether that be leasing from a landlord or through an acquisition,” said Scott

Milnamow, Raymour’s senior VP of real estate development. “We have a first-rate real estate operation that manages our properties, coupled with an exceptional brand in Raymour & Flanigan Furniture.”

As both a tenant and a landlord, Raymour holds a rare position in the retail world. Rents collected from the likes of CVS, Starbucks, Barnes & Noble, Aldi, Michael’s, and Burlington give the company a financial hedge not enjoyed by many retailers. Its real estate revenue is tallied separately from the company’s estimated annual $2 billion in furniture sales.

Because most households make furniture purchases once every five years, Raymour’s average 50,000-sq.-ft. showrooms require just 30 or so parking spaces, giving the company room to add outparcels to the properties it purchases. For an outparcel it created at a center it owns in Hamburg, N.Y., it had three national tenants bidding for it. Raymour went with Chick-fil-A.

“We have an advantage over other center owners in that we have a 50,000-sq.-ft. furniture store anchor that’s not going

anywhere,” Milnamow said.

At a center it owns in DeWitt, N.Y., Raymour secured a choice traffic-building tenant with a maneuver few other retail real estate developers would ever be able to employ.

“Trader Joe’s was looking for a good location in that market and we knew the advantage of the number of trips the tenant would bring to the shopping center,” Milnamow said. “So we downsized our Raymour & Flanigan showroom by 12,000 sq. ft. and put them in it. That meant fewer SKUs for us in our store, but since Trader Joe’s opened up that parking lot is constantly filled.”

Raymour’s real estate business has a construction unit to rejigger its centers in such ways, but most of the of the centers it owns are acquired, not developed, by the company. Its real estate business model is focused on driving its core furniture business — and driving ancillary revenue. But in a time when not much new construction of open-air centers is underway, buying centers proves an adroit strategy for a retailer to put new centers exactly where it wants them.

“You go to New Jersey, New York,

A Raymour-owned center on Rte. 1 in North Brunswick, N.J.

Connecticut and how many new projects have gone up in the last five years? So you have Ulta and us and Burlington and Planet Fitness competing for spaces,” Milnamow observed.

In Reading, Penn., Raymour’s real estate unit gave it the flexibility to move its showroom to a better location. It owned a freestanding store in a B-side of the market and an opportunity presented itself to purchase a bankrupt Toys R Us in a better market nearby.

“We didn’t want to close our other showroom, but opening in a center with an Old Navy, a DSW, and Joanne Fabrics was very attractive to us,” Milnamow said. “The new showroom does much more volume than the original store because it is co-tenanted in a better location with a great mix of tenants.”

Central Pennsylvania is an active new expansion zone for Raymour, which opened showrooms in Harrisburg, York, and Hanover in 2022. Two of those locations were Wolf Furniture stores

that the company acquired from Love’s Furniture and Mattresses after its bankruptcy filing. A fourth store was opened in Hampden Township—a former NB Liebman furniture store Raymour acquired from its independent owner, who was retiring. It has also purchased sites in Harrisburg and Lancaster where it will develop new centers.

“We haven’t done ground-up development in forever,” Milnamow said. “Development takes a long time. You have to buy a piece of land and work with a town’s traffic engineers, site planners — and perhaps DEP or DEC and maybe a zoning board. We’ll do it, but we prefer to buy existing real estate

and make the renovations needed. Our construction department is great. We send them in and eight weeks later we’re flipping the lights on and selling furniture.”

One of the more curious requests Milnamow ever got from municipal officials took place in Vineland, N.J., where Raymour acquired a 110,000-sq.-ft. former Kmart box.

“My director told me that the staff at the planning board really wanted an Olive Garden in the town, so we contacted Olive Garden and they loved the location,” Milnamow said. “We then went back to the town for approvals of a Gabe’s and Aldi’s. It was a great collaboration of working with a town and understanding their vision for the development. A win-win for everyone.”

“We have an advantage over other center owners in that we have a 50,000-sq.-ft. furniture store anchor that’s not going anywhere.”

—Scott Milnamow, Raymour’s senior VP of real estate development.

technologies to watch

Looking at the likely direction retail technology will take, here are three innovative technologies which have been growing in prominence and are poised to break out during 2023.

Digital twins

“Digital twins” are interactive virtual models of physical environments, products, and/ or workflows. The technology is becoming increasingly an popular tool for retailers to digitally conduct testing, check compliance and detect problems before rolling out changes in the “real world.”

Lowe’s Cos. unveiled digital twins in two stores. The home improvement giant is leveraging technology from Nvidia to create photorealistic digital replicas of the stores to enable store employees to visualize and interact with nearly all of a store’s digital data.

Lowe’s digital twin solution fuses spatial data with other data from the retailer, including product location and historical order information, and unites it all into a visual package that associates can gain access to on a range of devices, including desktop computers and Magic Leap 2 augmented reality (AR) headsets.

As a result, Lowe’s employees can perform virtual tasks such as checking inventory accuracy, gather and view information on obscured, hard-to-reach items, and testing changes to product placements

In an interview with Chain Store Age, Liza Amlani, principal of Retail Strategy Group, said retailers can also apply digital twin technology to save time and expense in their product development process.

Supply chain sustainability solutions

A growing number of retailers are adopting a variety of solutions that enable them to operate more sustainable supply chains. While the data is mixed, many recent surveys have indicated that consumers prefer to do business with

retailers that have sustainable operations.

In one such effort, Macy’s Inc. is deploying auto-boxer and auto-bagger technology enabling it to create unique packaging that fit odd or oversized items, and reducing box volume and waste up to 50%. The department store retailer also launched a program to use RFID technology to track participation and weights of store cardboard recycling as part of its goal to increase store recycling rates to 80% by 2025.

Meanwhile, eco-friendly shoes and accessories retailer Rothy’s is utilizing Centric product lifecycle management (PLM) technology to enable circular design, manufacturing and distribution of its products.

Machine learning

Machine learning (ML), a subset of artificial intelligence (AI) that analyzes patterns in data to “learn” and adapt in a manner similar to humans, is reaching an inflection point in retail. This once bleeding-edge solution may not yet be a routine retail solution, but it is popping up more frequently in the retailer enterprise.

For example, in the case of case of Just Walk Out frictionless shopping technology, Amazon deploys sensors, optics, and ML algorithms. Just Walk Out sensors and algorithms have also evolved to detect a broad range of products and differences in shopping behavior in full-sized grocery stores.

Also, Walgreens is leveraging the ML capabilities of Blue Yonder’s inventory management technology to improve the accuracy of inventory, shrink and shipping. The pharmacy giant uses ML to see what the probable fulfillment rate is and to support increased customer demand for omnichannel shopping features such as buy-online- pickup-in-store, curbside pickup and same- day delivery.

It is also worth mentioning the game-changing possibilities posed by the recently released and ChatGPT, an AI-based chatbot. It uses ML algorithms to produce conversations and written content with a sophistication far beyond that offered by other AI chatbot solutions to date.

While ChatGPT technology is too new to be currently featured in any retail solutions, look for it to emerge as a retail customer engagement tool sooner rather than later.

Every Tuesday

The premier newsletter showcasing technology and multi-channel, seamless retailing.

From e-commerce and mobility to in-store technology and social media, Connected Retail keeps retail executives in the know about the fast-paced, ever-evolving world of retail tech.

Dan Berthiaume dberthiaume@chainstoreage.com

Digital Transformation

Build-A-Bear Workshop expands its audience

By Dan Berthiaume

Build-A-Bear Workshop is on a roll. The experiential retailer is on track to deliver a double-digit increase in profitability in fiscal 2022 compared to the prior year, which would be the most profitable in its 25 years of operations.

With nearly 500 brick-and-mortar locations, Build-A-Bear remains committed to physical retail. But in recent years, the company has evolved to become a true multi-channel retailer, with its online business contributing to its success.

Chain Store Age recently spoke with Jenn Kretchmar, chief digital officer of Build-A-Bear Workshop, about the company’s ongoing digital transformation efforts. (Editor’s note: This interview has been condensed for clarity and length.)

How and why did Build-A-Bear decide to launch a digital transformation strategy?

In 2017, we were seeing a lot of changes in how customers were experiencing our brand. This included people coming to our website to start to pre-shop to learn more about us. So, we made the decision to invest in a digital transformation to meet our customers where they are shopping.

At the end of 2017, Build-A-Bear went live with a new site in an effort to expand our addressable market. We understood that our customers wanted to have the opportunity to go online, select a bear, select the bear’s sounds or the scents, and then either ship it to themselves for their own personal collection or ship it as a gift to a loved one.

How did customers respond to the new e-commerce site?

The response has been enormous. Up

until the time we launched the new site, we had about 4% e-commerce sales penetration. But at the end of 2022, Build-ABear recorded almost 20% penetration of retail sales online. Customers love being able to shop online in addition to our stores, and it truly has been additive to our business.

What are some other transformation projects that you’re especially proud of?

During the store shutdown period of the COVID-19 pandemic, all of Build-ABear’s brainpower was focused on digital, and we had a very fast acceleration of technological capabilities.

For example, we turned on our omnichannel capabilities. Up until the pandemic, all of our e-commerce orders were fulfilled out of our central warehouse and distribution centers. Following the shutdown, however, we were in a position to fulfill from our stores as well.

We started using about 300 stores as micro-distribution centers. Online orders were able to flow out to the stores, where the associates would take care of the orders — assembling the items and then shipping them out.

In addition, we have been leaning into personalization and digital engagement. Leveraging Salesforce Marketing Cloud, we now create specific email marketing journeys and journeys. These could be social, paid search, display ads, or video channels like YouTube or TikTok.

Build-A-Bear collects that data and looks at it, and then addresses our messages accordingly to make sure that we’re serving up the right content to the right customer to promote brand growth.

What type of reduction in fulfillment time do you achieve when you fulfill from a store instead of a warehouse?

What’s great about fulfillment from the store is the way that our system sends out orders to stores based on geography. With the vast majority of customers selecting economy shipping, we can set a shipping point closest to where that package is destined. Associates pull the online orders that have routed out to their stores and assemble it for shipping or in-store pickup that same day. Through our third-party delivery partner, customers can get their order that day.

Build-A-Bear recently launched a metaverse experience. What made you decide to enter the metaverse?

We were participating in digital gaming for years before Roblox existed. We had a Nintendo game and an online multi-player game, so the metaverse was a natural evolution for us.

Customers can build out a virtual workshop on Roblox and then create a town, build furry friends and name them, and then add on clothing and accessories for them. No brand is better suited for an online building experience. Also, personalization is literally in our DNA.

What kind of technology transformation projects are in the pipeline?

Digital transformation continues to be one of our top priorities. In 2023, we expect to continue with amplification of more personalization. The Build-A-Bear Bonus Club loyalty program is an important part of our relationship with our customers and we expect to continue to leverage that tool to add more benefits, perks and engagement in 2023.

Jenn Kretchmar, chief digital officer of Build-A-Bear Workshop Inc.

Autonomous Foor Cleaning Tech With ‘Cobotics’

The newest trend in retail automation uses machines to work collaboratively with human associates. Chain Store Age recently spoke with Chris Wetmore, VP of sales at ICE Cobotics, to learn how retailers can enhance employee productivity and streamline enterprise workflows, especially in the store, by using “cobotic” technology that combines human and robotic efforts. ICE Cobotics provides in-store autonomous floor cleaning technologies.

By Dan Berthiaume

How would you define ‘cobotics’?

The term “robotics” implies fully automating a task with no human involvement. But cobotics, put simply, is used to describe the intersection of machines and humans working together to accomplish a task.

How can ‘cobots’ help retailers with cleaning stores?

Retailers face many challenges including consistency and availability of labor, as well as no good way to confirm a clean environment. Cobots can help retailers because they are reliable, predictable and can be run consistently throughout the day. Plus, many robots come with fleet management software that helps end users to confirm the cleaning is done. In addition, cobots can take on repetitive and mundane tasks that frontline workers perform on a daily basis. This ultimately helps to improve morale, efficiency and overall job satisfaction.

How can in-store cobots help retailers maximize staff productivity?

At the end of the day, “cobots,” or robots, give time back. In the retail world, this time would ideally be spent taking care of customers, since from a consumer perspective, customer service is a growing preference.

Time given back by the use of in-store cobots also enables staff to focus more of their shifts on high-impact tasks on the sales floor. For example, these could include stocking and replenishing shelves or tidying display. And in grocery stores,

associates with time freed up by cobots could devote more attention toward making sure fresh food or prepared food areas are kept clean.

Another large component of in-store cobots’ positive impact on in-store productivity revolves around the availability of labor. With unemployment rates at all-time lows, more work is being performed by fewer staffers, especially as retailers continue to offer more ways to shop. This means associates have more tasks to manage.

Cobotics helps ensure the work is performed to scope, because in-store cobots can easily be deployed by busy staff, while managers or leaders can use the collected cleaning data to confirm the work is being done.

Can retailers combine automated scrubbers with other in-store functions?

Yes, many automated scrubbers can be paired with other in-store technology, for example, some auto scrubbers can pair with shelf scanning equipment. Stacking automated technologies like this can reduce risk and deliver greater ROI to a retailer, but it can also create other challenges based on how the technologies work independently of each other.

Vendors of these combined automatic technologies will need to work in concert with each other on these combinations, which can potentially slow their development efforts and impact speed to market of solutions.

What solutions does ICE Cobotics offer retailers to help automate instore tasks?

ICE Cobotics has recently launched our third cobot in the cleaning space, Cobi 18, an autonomous floor scrubber. This compact 18-inch scrubber runs autonomously, can be operated easily by anyone, navigates through tight areas in retail environments, and navigates around glass and mirrors. Cobi 18 performs the cleaning task of a manual mop, or manual floor scrubber, with little employee oversight.

Another exciting part of this product is in the offering itself. Cobi 18 is offered through an all-inclusive subscription model that includes all consumables, wear parts, service, software updates and freight. All of this helps to make implementing automation simple and hassle-free.

Cobi 18 also comes with i-SYNERGY, a cleaning performance app that allows the end-user to view machine usage, productivity and other metrics that are aimed at helping staff achieve higher efficiency.

For busy retail managers that may sometimes oversee multiple stores, this service model along with utilizing Cobi 18, makes budgeting straightforward, takes the guess work out of running a fleet of equipment, and helps those in charge to identify opportunities to increase productivity and efficiency for their staff.

In the end, store staff can spend more time focusing on customers, higher-level tasks, and keeping the retail store ready for customers.

Chris Wetmore, VP of sales, ICE Cobotics

Ensuring Supply Chain Success

How Bob’s Discount Future keep goods flowing

By Dan Berthiaume

The Northeast-based Bob’s Discount Furniture is one of the fastest-growing furniture retailers in the United States. With more than 140 stores in 24 states, Bob’s leverages strategy and technology to keep its supply chain flowing smoothly regardless of external pressures.

Chain Store Age recently spoke with Ramesh Murthy, chief supply chain officer and executive VP of Bob’s Discount Furniture, about how the furniture retailer manages its supply chain trends and ensures diversity among its supply chain associates. (Editor’s note: This interview has been edited for clarity and length.)

How does Bob’s ensure its supply chain functions properly?

The first and foremost thing is working very closely with our factories and our carriers to make sure all the goods are here. Last year, Bob’s worked hard to bring in the necessary goods and push them a little bit earlier. We did all of that work upfront — our business is not quite as seasonal as some other retailers.

In addition, Bob’s has adjusted its internal systems and movement of goods so that we can fulfill customer orders from multiple locations. We have more than 160 stores with five distribution centers. Our stores are concentrated primarily in the Northeast, along with some in the Midwest and as far west as Arizona and Nevada.

Most of our goods come in through our New York or Baltimore distribution centers, but we can adjust where they are sent very quickly. Our stores are really showroom stores in that people don’t buy off our floors. We deliver through our last-mile services or through third parties and service providers.

We allow those depots to be serviced by multiple distribution center as well. If inventory is sitting in my Connecticut or New Jersey distribution center, for example, it will merge and go to the

appropriate depot. We’ve also had really favorable and positive support from ocean carriers, so our import goods have been flowing nicely so far.

What supply chain solution do you use to enable inventory merging?

The capability is inside of our SAP tools. We built a bolt-on that works with our SAP enterprise supply chain platform.

What specific steps have you taken to mitigate supply chain disruption?

We’ve just done a job this last year of making sure to expand our sourcing diversification and our sourcing availability. We’re not just sourcing all our goods from one place.

Bob’s has multiple factories, multiple countries, multiple geographies. That was something that we started pre-pandemic and then it got accelerated during it. I don’t think we’re any different in that regard and many other folks.

How does Bob’s promote diversity in its supply chain workforce?

We are trying very hard to make sure we take care of our supply chain associates. We do recruiting and are actively involved in getting more women to take truck driving jobs.

Bob’s also has something we call ‘happy or not.’ Every one of our distribution centers has stations where associates can let us know how they are feeling by hitting a happy face or frowny face buttons — and

they can also send us comments on any of the reasons why they chose one of the buttons. Diversity efforts are most effective if what you do is intrinsic to your behavior.

What is Bob’s primary supply chain focus for 2023?

Bob’s is trying to create redundancy or resilience in every part of the supply chain. We want our network to operate like a single, big network as opposed to each individual node on our network operating separately.

In addition, Bob’s is systematically introducing a concept we call postponement, which is making decisions about where goods will move at the last possible moment. For example, if I decide months ahead of time that I need a certain amount of a product in a specific place, I can only be so smart. But if I make that decision maybe five weeks out, I’m much smarter.

Also, Bob’s has historically been monolithic, with our goods moving as container loads — furniture is big. We’re starting to think about things we can do on the origin side to consolidate and combine goods and drive efficiencies that way.

Lastly, Bob’s is looking at artificial intelligence. We don’t see AI as an enabler of core functions, but we do see it as a really cool way to handle exception management and a large conflict network. AI could potentially monitor and measure key information and alert us to problems much earlier. I think that’s where we’ll start focusing in the early stage on the AI side of things.

Bob’s Discount Furniture operates more than 140 stores across 24 states.

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