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July/August 2019

Top 10 Retail Center Experiences Must-Have Holiday Tech Facilities Winter Prep

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28

from the editor’s desk

tech viewpoint: a retail tech column

Contents

36

a real estate column

VOL. 95 JULY/AUGUST NO. 4

COVER STORY

10

As the role of the retail CFO keeps expanding, Chain Store Age offers insights and examines trends to help CFOs make decisions in four critical areas: store design/ remodels; facilities maintenance; energy management; and technology, specifically customer experience solutions.

FEATURES

20

Daymond John, retail entrepreneur and a shark on hit television show “Shark Tank,” has a customercentric view of e-commerce.

22

Commentary: Progress for women at the board level has been sketchy, with the same group of women being tapped for multiple boards.

TECH

24

Proper planning for holiday rush — online and off — is critical.

26

Vendor Q&A: Tim Woods of CenturyLink discusses how retailers can deliver highly personalized and profitable omnichannel experiences.

CSA (USPS 054-410; ISSN 0193-1199), is published bimonthly by EnsembleIQ, 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631, on a controlled basis to qualified retailer titles and architects. Real estate and shopping center owners and developers $75 per year. All other nonqualified $125 per year. $190 per year for Canadian subscribers; $275 per year for foreign subscribers, air-mail only. Single-copy price: $20. Periodicals postage paid at Chicago, IL and additional mailing offices. POSTMASTER: Please send address changes to CSA, Circulation Fulfillment Director, P.O. Box 3200, Northbrook, IL 60065-3200. Subscription changes may also be emailed to chainstoreage@omeda.com, or call 847-564-1468. CANADA POST: Publications Mail Agreement # 40612608. Canada returns to be sent to Bleuchip International, P.O. Box 25542, London, ON N6C 6B2. Vol. 95, No. 4, July/August 2019. Copyright ©2019 by EnsembleIQ. All rights reserved.

CHAINSTOREAGE.COM

JULY/AUGUST 2019

5


Contents VOL. 95 JULY/AUGUST NO. 4

40

STORE SPACES

29

Tips for prepping facilities for the winter months.

31

Plus-size fashion retailer Eloquii continues retail comeback.

32

Vendor Q&A: Let’s Pave’s C.B. Kuzlik talks about a critical component of facilities maintenance: parking lot maintenance.

6

31

REAL ESTATE

38 48 54

Top 10 Retail Center Experiences We have seen the future of retail centers and these are them. They’re led by No 1. Easton Town Center (above), which is celebrating its 20th year. All Hail Whole Foods & Publix Readers share their groceryanchored preferences in an exclusive poll; top developers weigh in on the state of the art. Hot Market Jacksonville There’s not enough retail space to go around in North Florida’s boomtown.

JULY/AUGUST 2019

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CHAIN STORE AGE

FROM THE EDITOR’S DESK

Keep Your Eye On…. There’s never been a more exciting time in retail. Yes, some footprints are shrinking and a few have disappeared completely. But at the same time, there are plenty of young and smaller brands — many digital natives — that, inspired by the success of the likes of Warby Parker, Casper and Untuckit are itching to make their mark. The truth is there couldn’t be a better time for new players to grow, both online and off. Shopping centers are eager to fill vacant spaces and enhance their properties with up-and-comers that will appeal to new generations of shoppers. At the same time, most digital natives now understand the importance of investing in physical stores and the synergy it creates with online assets. Here are five of my faves: • Rothy’s: The online women’s shoe brand, whose stylish flats have a devoted following, is opening five stores in the fall, with more to follow in 2020. Sustainability is built into the company’s DNA. Rothy’s shoes are washable and are made out of used materials, including recycled plastic water bottles, and are knitted together, making them extremely comfortable, according to fans. Styles are very limited, but come in a wide variety of colors and priced at $125 to $165 each. Rothy’s popularity is such that other companies are already beginning to copy its designs. • Outdoor Voices: The women’s activewear brand is on a roll, having raised $56.5 million to date. It has grown to nine locations — each one with its own design and vibe — and a tenth store is set to open in Manhattan’s Flatiron District. The product line has expanded to include swimwear, hiking shorts, sneakers, fleeces and more. Outdoor Voices is all about community and staying active, or, in company-speak, “doing things.” Stores offer an array of 8

activities and the brand recently launched an online editorial hub, “The Recreationalist,” dedicated to all things recreation. And more expansion is on the horizon, including a flagship in its Austin, Texas, hometown. Founder and CEO Ty Haney, who started the company when she was just 25, has said she could see an Outdoor Voice store in every state. • Away: Launched online with one product in 2016, this fast-growing brand, which designs and manufactures its own luggage, is soaring to new heights. Away’s total equity funding now stands at $156 million, with the company valued at $1.4 billion, giving it unicorn status. The start-up is betting big on physical retail, with plans to add 50 stores during the next three years. (It currently has five.) It’s also looking expand its product line and develop travel products in new categories such as apparel. •Neighborhood Goods: This retail startup, is looking to reinvent the traditional department store with what is essentially a pop-up strategy. It debuted last November, in Dallas, with a 14,000-sq.-ft. store that combines a revolving selection of brands, events and services, including dining. A variety of leasing and space options make it easy for the brands — many new to physical retail — to set up shop and rotate in and out. (Two other new concepts, Showfields and BrandBox, offer similar models.) Flush with new funding, Neighborhood Goods is headed to Manhattan’s Chelsea Market this fall. • Winky Lux: Instagram fave Winky Lux stands out in the crowded color cosmetics market with its whimsical stylings and unusual “fast beauty” model. It keeps all production cycles within a 45-day span, allowing it to capitalize on of-the-moment trends that appeal to young millennials. A cruelty- and toxin-free product mandate is another plus. Winky Lux has drawn big crowds with experiential pop-ups, where beauty lovers can test and shop its products and immerse themselves in interactive art installations and plenty of Instagramable moments.

Marianne Wilson mwilson@chainstoreage.com

CHANNELS chainstoreage.com > COMMERCE > CUSTOMERS

An EnsembleIQ Publication

Corporate Office: 8550 W. Bryn Mawr Ave., Suite 200, Chicago, IL 60631

Vice President, Group Publisher, CSA, SPECS Chairman Gary Esposito (212) 756-5118, gesposito@chainstoreage.com

Editor Marianne Wilson

(212) 756-5261, mwilson@chainstoreage.com

Technology Editor Dan Berthiaume

(978) 994-1881, dberthiaume@chainstoreage.com

Real Estate Editor and Manager Al Urbanski (646) 957-5224, aurbanski@chainstoreage.com

Online Editor Jennifer Mosscrop

(212) 756-5264, jmosscro@chainstoreage.com

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Publishers of Chain Store Age, Hardware + Building Supply Dealer and Drug Store News. Subscriptions/Customer Service: For subscription problems, call (847) 564-1468, email chainstoreage@omeda.com or mail us full details, including the mailing label from the last copy you received, along with your telephone number. Write to CSA, Subscription Department, P.O. Box 3200, Northbrook, IL 60076-3200. Address changes can be made online at chainstoreage.com/subscribe. Single-copy price: $20. Reprints: To order reprints contact Wright’s Media at EnsembleIQ at wrightsmedia. com or (877)652-5295. Minimum: 100 copies. Permissions: Materials in this publication may not be reproduced in any form without written permission. Direct permission requests to Gary Esposito, Publisher, Chain Store Age, 11-43 Raymond Plaza West, 16th Floor, Newark, NJ 07102. Contact Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 646-2600 or (855) 239-3415, or on the Web at copyright.com for immediate authorization to photocopy from Chain Store Age (ISSN 0193-1199). Editorial Calendars: chainstoreage.com. Back issues: (813) 627-6707. News Tips: Call Marianne Wilson at (212) 756-5261 or e-mail: mwilson@ chainstoreage.com. Letters to the Editor: Must include name, address and daytime phone number for confirmation. We reserve the right to edit correspondence for clarity and space. Send via e-mail: mwilson@chainstoreage.com or via mail: Marianne Wilson, Editor, Chain Store Age, 11-43 Raymond Plaza West, 16th Floor, Newark, NJ 07102

Corporate Officers Executive Chairmain Alan Glass Chief Executive Officer David Shanker Chief Financial Officer Dan McCarthy Chief Digital Officer Joel Hughes Chief Commercial Officer Jennifer Litterick Chief Innovation Officer Tanner Van Dusen Chief Human Resources Officer Ann Jadown Executive Vice President, Events & Conference Ed Several

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COVER STORY

WHAT THE CFO NEEDS TO KNOW...

S

trategist, adviser, communicator, futurist: Retail chief financial officers have seen their role evolve in recent years to the point that, in some cases, they have become virtual partners with the CEO. Once responsible primarily for financial stewardship, the CFO is embracing a growing number of additional roles encompassing strategic planning, technology and perhaps some crystal ball gazing. Some are even taking on COO functions. “We find that the CFO — as an established expert in understanding and managing large amounts of data — is becoming more influential and strategically minded than ever before,“ said Jill Standish, senior managing director and head of retail at Accenture. Some might say that we are, in effect, entering a new era in retail: where value is the new economy, data its currency and the CFO its champion.” According to Antony Karabus, CEO of HRC Retail Advisory, the CFO role has evolved and expanded in recent years to become more strategic as two significant forces converged on traditional retail-

10

ers at a time of modest top-line growth: increasingly less productive real estate and the complexities of e-commerce: “As a result of these issues, the retail CFO is emerging as the key strategic partner to the CEO and executive team,” he said. “The CFO brings a deeply practical, objective and analytical perspective and often brings a healthy dose of skepticism, which is needed to evaluate important decisions and potential investments to protect the current asset base and maintain profitable growth.” A recent McKinsey Global Survey confirmed that the CFO’s role has become broader and more complex. In the past two years, the number of functions reporting to the CFO has risen to about four to more than six. And many finance leaders say they are being asked to resolve issues in areas that are relatively new to them while continuing to mind traditional responsibilities that remain business priorities. In light of the CFO’s expanded role, CSA editors spoke with industry experts to identify issues and trends to help broaden a CFO’s understanding in several key areas: facilities maintenance, store design and remodels, energy management/sustainability and technology. JULY/AUGUST 2019 CHAINSTOREAGE.COM


STORE DESIGN/REMODELS Store environments drive sales, online and off By Debby Garbato

T

here is no exaggerating the importance of stores and, by extension, store design and remodels, in a digital age. Tomorrow’s retail winners will be those that leverage their physical assets and merge the best of online and offline to offer the best possible experience, one that delights customers, builds brand loyalty and sets a retailer apart from the competition. Investing in store design and store remodels is crucial to the process. “In this age of digital, stores are really the key place where you can differentiate your brand,” said Ken Nische, chairman of retail design firm JGA. “Consumers, especially younger ones, want to experience brands, not just the products.” Jill Standish, senior managing director and head of Accenture’s Retail practice, noted that the definition of retail has changed, and so have the measures of success. She advised that when it comes to store design, CFOs should look at marketplace, or a catchment area for measurement, rather than simply a store measurement. “Many retailers have found that having a store presence actually lifts the brand sales for e-commerce for that market,” she added. “This is what happened to Ikea after launching a smaller-store design to reach the urban consumer. When Ikea opened its city stores, it found that the entire market sales went up for that region, including ecommerce sales and sales for its big ‘blue box’ store as well as their city stores.” Unfortunately, some retailers are skimping way too much when it comes to improving the in-store environment. Companies may be under pressure from private equity firms and activist shareholders that are only interested in shortterm financial results. When the veneer rubs off a faux marble counter within 12 months, they have moved on to another financial venture.

CHAINSTOREAGE.COM JULY/AUGUST 2019

“Activist shareholders want the lowest costs so they can sell to the next private equity firm,” said Craig Hale, associate principal of architecture and engineering firm HFA and a former retailer. “They are causing poor facilities to be created that are out of line with company goals. You don’t have to create the highest quality store if it’s only going to be around five, 10 years. But you want to make sure it’s a facility that you can

efficiently operate.” One challenge that can have an adverse effect on the bottom line is when a department, such as procurement, tries to purchase remodeling or design services rather than quantifiable items. “Services, unlike manufactured items, are not an exact science,” advised Hale. “Especially with every project being different. Let your design and construction department drive the purchase of these related services. Otherwise, you might

TARGET’S REMODEL INVESTMENTS PAYING OFF No one is second-guessing Target Corp. anymore. The company raised a lot of eyebrows — and stunned Wall Street — in 2017 when it unveiled an ambitious, multi-year $7 billion plan to upgrade its stores and technology for the digital age, with a good chunk of the money going to store remodels. Two years in, the investment is clearly paying off. Target remodeled 400 stores between 2017 and 2018, with an eye to making them more appealing and maximizing shopper convenience. Another 300 locations are on tap this year as it works toward its goal of completing more than 1,000 store remodels by the end of 2020. The retailer is seeing an average 2% to 4% sales lift for every remodeled store, reported the Chicago Tribune. It has racked up eight straight quarters of growth. Total revenue rose 5% to $17.6 billion in its most recent quarter; same-store sales rose 4.8 % on traffic growth of 4.3%. Neil Saunders, managing director of GlobalData Retail, is one of many analysts who are impressed by Target’s investments in its stores. “One of the success stories at Target has been the revitalization of physical stores, many of which have been refurbished and are providing a much more pleasant and engaging shopping experience,” he wrote in a recent note to clients. “This, along with improvements to the ranges put into stores … have made them more compelling destinations leading to an increase in shopper traffic. Although stores refurbished over a year ago are still seeing healthy growth, there are further gains to be made as additional older-style shops are renewed and refreshed. On this basis, we believe that the contribution to growth from stores will remain elevated for at least the next couple of years.”

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COVER STORY

find you are penny-wise and pound-foolish.” Hale also believes retailers should look at the whole picture when evaluating spending on store redesigns and remodels — even if they plan to be very selective. “Retailers should look at everything holistically, not compartmentalized,” he said. “They must work with other members of the C-suite, with the entire company aligned in one direction.” Remodels: Regularly scheduled remodels were once the rule of thumb. When retailers renewed leases, they automatically renovated and redesigned those locations. But today’s cutthroat omnichannel environment has made companies more risk-averse, resulting in shorter leases, more “facelifts” and fewer, very selective remodels. Some of the funds that have traditionally been spent on redesigns and remodels have been channeled into e-commerce, other technolo-

gies and IT talent. Still, retailers must meet consumers’ expectations in aesthetics and functionality within their physical stores. As ecommerce grows and companies like Amazon make it increasingly convenient, expectations of physical store environments continue to rise. “We’re seeing more facelifts than renovations,” said Antony Karabus, CEO of retail consulting firm HRC Advisory. “Gut-wrenching changes take enormous capital. Today’s remodels are much more strategic. You must decide what particular elements will get the best ROI and which stores drive top-line value and represent the best opportunity for spending. Before, it was an automatic cycle.” He pointed to Gap Inc., which regularly invests in its Old Navy store in Manhattan’s Herald Square, as a good example. This is money well-spent, Karabus said, since the location is a major draw for tourists and

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strongly represents the brand. Store “facelifts” involve updating and improving the appearance of certain areas. They can include new types of window displays, revamped fitting rooms, fresh carpeting or a new look for a destination department. “It’s where you’re spending a relatively modest amount of money — $150,000 versus $500,000,” said Karabus. Shorter leases are changing not only the frequency and intensity of retail upgrades, but the entire financial picture relative to real estate. Leases for apparel and other traditional mall tenants have declined from an average of six years in 2007 to 4.5 years today, indicated a CoStar study. Many of the anchor stores that once drove traffic have been replaced with non-traditional tenants like fitness centers and bowling alleys. “Traditional [lease] investment cycles were once five, 10, 15 years,” said JGA’s Nische. “Retailers still see growing their footprint as a significant investment but are structuring leases with a short-term, more ‘nomadic’ point of view. Often, this is impacting new accounting rules relative to physical investment and fixturing, the amortization of tenant allowances as part of lease negotiations.” ROI: The factors influencing ROI on store design are multi-faceted. There are tangible and intangible gains, measured through traditional and non-traditional metrics, supported by objective and subjective goals. The more holistic the approach, the more lucrative the results, according to Shop!, a global trade association dedicated to enhancing retail environments and experiences. And CFOs should remember that when it comes to the store experience, not everything is objective. “While objective goals of overall sales and instore traffic continue to be of high importance, more subjective goals of brand perceptions and shopper engagement are undeniably proving to hold significant value as they often drive overall sales, albeit less directly and immediately,” noted Shop! in its white paper, “ROI Standards: Store Redesign.” There is also the power of “buzz.” “Online reviews, bloggers, and others are highly influential, whether positive or negative,” the report noted. “The store experience is a key touchpoint that can create passionate brand advocates, or detractors.” JULY/AUGUST 2019 CHAINSTOREAGE.COM


COVER STORY

FACILITIES MAINTENANCE Poorly maintained stores are a customer turnoff By Debby Garbato

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he crucial role that facilities maintenance plays in retail is easily summed up: A store — be it a small in-line boutique or a large freestanding building — is the face of the brand. Ambiance stretches far beyond décor, fancy tech gadgets, products and displays — if stores feel too hot, too cold, shabby or unclean, customers may not return. The negative impressions they leave with can dilute brand image and customer loyalty, erode sales and eat into the bottom line. “When you don’t hear about facilities

maintenance, it’s a good thing,” said Jason Cesare, CFO at Nest. “When you hear about it, it’s not. The importance of perception is dramatic. If I have a bad shopping experience, I may never return.” Facilities executives have long argued that not allotting the funds required to keep stores clean and in top condition can cause customers to shop elsewhere. The sentiment is borne out in a recent study by ServiceChannel, “The State of Brick and Mortar Retail Report,” which found that 64% of shoppers have left

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stores due to poor physical appearance or disorganization. Just as revealing, 67% of shoppers said retailers are too focused on making stores overly tech-forward and not focused enough on the basic customer experience. Restrooms are a key touchpoint, with 20% saying they would not return to stores with dirty bathrooms. Expectations are higher among consumers earning $100K plus. Today’s competitive, omnichannel environment and the rise of e-commerce with its myriad of shopping choices has raised consumers’ expectations of physical stores. Via social media, shoppers are quick to spread the word about disappointing encounters. “There’s almost zero tolerance for bad experiences,” said Brent Pearson, ServiceChannel’s executive director and CFO. “The bar has been raised on real estate and maintenance. People share bad experiences more than good ones. Social media magnifies everything. One person can say, `Can you believe how bad the bathroom is?’ and show a picture. Consequences have never been bigger.” Facilities maintenance is one significant area of every company’s budget that, by its nature, is somewhat variable. Certain areas of the facilities budget are known, including fixed costs such as contracted services, preventive maintenance and planned capital improvements. But other areas, including emergency repairs due to storms and other natural disasters, are unknown. And oftentimes, companies may not know about a problem until something breaks. Facilities managers typically forecast off known and fixed costs and historical trending minus one-time hits, planning a budget to cover what is essentially a “best guess” scenario. The bottom line: Expect changes. No More Spread Sheets: Technology is having a profound impact on facilities management. JULY/AUGUST 2019 CHAINSTOREAGE.COM


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COVER STORY

During the past five years, artificial intelligence-driven (AI) facilities service platforms have been alleviating uncertainties in facilities management. Fueled by growth of cloud computing, big data, the IoT and smart phones, these backend systems monitor equipment, ambient conditions, maintenance schedules, service calls and other variables. They can even project maintenance spending. Store managers and headquarters access information via smart phone apps. “Technology has helped save retailers millions of dollars on their facilities and operational spend, and given them access and insight into facilities programs that they never had before.” said Michael Toth, CIO, Nest. “The CFO now has full transparency into the program and how it is affecting the bottom line.” ServiceChannel’s AI-driven service platforms replace paper records and spread sheets by

aggregating all relevant data and information. Systems warn retailers about potential problems. If a repair is needed, the AI technology uses algorithms to analyze more than 100 million past repair scenarios to find the right price and contractor for that type market. “We capture all the data,” said Buiocchi. “It recommends a course of action based on data and past performance of a similar scope. In five minutes, people can save $50,000 on a roofing job.” Technology drives Nest’s integrated facilities management solution. The company gives clients full transparency into their program, including the spend and operations activities on demand and in real time. The corporate office has access, and individual locations can enter service requests on demand and monitor their status. CFOs have full visibility to tickets and can prioritize jobs for over budget

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locations, only addressing problems impacting health or safety. Technology platforms allow CFOs to project and manage costs. By analyzing multiple units’ history over time, they can forecast a month’s maintenance spend by the third of that month, said Nest’s Cesare. “I can tell what the run rate is in budget and whether I’ll be on or above budget,” he added. Any available tax or utility rebates can be factored in for single or multiple stores. Since platforms amass weather data, additional funds can automatically be allocated to stores in natural disaster-prone areas. Regularly scheduled maintenance — such as replacing HVAC filters quarterly — helps maximize equipment investments. “Maintenance costs are a small portion of preventive maintenance,” said Barry Wood, senior VP and director of operations, JLL. “Deferring maintenance can provide shortterm savings. But it decreases operating efficiencies that raise operating costs and increases equipment replacement frequency.” Combined with technology, routine maintenance can also help determine the actual lifecycle of equipment, alleviating replacement costs based largely on a unit’s age. “Ten years ago, using a spreadsheet, we would take a guess of when we had to replace an HVAC system based on how often we did repairs and how old it was,” said Cesare. “Now, we can load all the data into the system, take pictures as we make repairs, track warranties and predict if the system will go down shortly.” While technology services are raising the bar in facilities management, they are only as effective as their users. If retailers fail to acknowledge and implement data and recommendations, they may not realize a ROI. “Used properly, technology can create operating efficiencies,” said Jll’s Wood. “Used improperly, it can do the reverse. Technology has a premium installation cost and an ongoing cost to insure built-in parameters are followed. That’s where efficiencies are created. If retailers don’t maintain parameters, operating costs increase.”

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COVER STORY

ENERGY MANAGEMENT The smart business decision By Marianne Wilson

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he evidence is overwhelming: Energy management makes good business sense, and can lead to significant — and highly measurable — savings. In fact, it’s one of the most cost-effective investments a retailer can make, allowing a company to reduce a big expense and, in some instances, also improve the shopper experience. There is no mystery as to what makes energy management such a key priority: Energy is the fourth largest in-store operating cost for U.S. retailers on average (after labor, rent and marketing), according to a report by McKinsey & Company. While overall energy costs can differ significantly based on retail sector, location, store age and other factors, investing in solutions and technologies that conserve, monitor and control energy use can lead to reduced operating costs for nearly all retailers. Indeed, when retailers conduct energy audits

for their stores, they typically identify opportunities to reduce energy consumption by 20% to 30%, the McKinsey report noted, and sometimes even higher. “Energy might be more of a controllable expense than the average CFO realizes,” said Erin Hiatt, senior director, sustainability and innovation, Retail Industry Leaders Association (RILA).“ Starting the conservation with the energy manager will open up a lot of opportunities that finance may not be aware of.” But reduced operating costs are only part of the story. Multiple surveys bear out that a commitment to the environment is becoming a must-have for many shoppers. More than 60% of respondents in an Accenture Strategy study said they gravitate toward businesses committed to improving the environment. The Conference Board Global Consumer Confidence Survey, conducted in collaboration with

FAST FACTS • According to the United States Department of Energy (DOE), retail buildings account for the largest energy costs of any commercial sector in the country. • On average nationally, lighting and HVAC in a typical retail building represent about 60% of total use, which makes these systems the best targets for energy savings. For grocery stores and convenience stores, however, refrigeration may use up to 40% of the property’s total energy, according to the EPA’s Energy Star program. • The biggest potential opportunities for savings in the retail environment are in demand reduction, particularly from investments in energy-saving technologies, according to McKinsey & Company. Technical changes can reduce energy consumption by 20% to 30% in the case of HVAC equipment and as much as 50% for lighting. • Small changes can make a difference. H&M examined the impact of open versus closed exterior doors on foot traffic and energy consumption. Finding that closed doors have no discernable impact on foot traffic and have an estimated average per store energy savings of 77,522 kWh and estimated average per store cost savings of $9,987, the fast-fashion giant implemented a closed-door policy in 2016.

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Nielsen, revealed that 69% of North American respondents felt it either extremely or very important that companies implement programs to improve the environment. More and more companies agree. A growing number of retailers and other businesses now see resource management and green energy choices as a win-win: Doing the “right thing” by combatting climate change is good for business and they are publicizing it more than ever, according to a report by Deloitte Insights.” “For businesses that have not yet incorporated resource management and cleaner energy sources into their corporate strategies, the imperative is growing,” stated the Deloitte Resources 2019 Study. “It’s no longer just a way to please current customers and shareholders and cater to new generations, or just a way to save costs. It’s both. Energy management is a win-win, and there’s no time to lose.” Procurement: Many businesses are becoming more flexible in their approach to cutting costs, such as by boosting participation in demand response energy programs, according to Deloitte. And in response to customer demand for cleaner energy sources, nearly half of the businesses surveyed are seeking to procure more electricity from renewable sources. “Energy procurement is becoming a strategic financial decision,” said RILA’s Hiatt. “If an energy team has been pursuing the same type of procurement strategy for a long time, it should be challenged by finance to examine renewable energy options.” Hiatt added that the renewable energy market is evolving very quickly, with more procurement options available with each passing month. “CFOs should be asking energy teams what is going on with respect to renewables,” she said, noting that renewable energy merits investment as much for its financial attributes as its ability to support a retailer’s sustainability goals. JULY/AUGUST 2019 CHAINSTOREAGE.COM


TECHNOLOGY Customer experience solutions deliver on ROI By Dan Berthiaume

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ot only does customer experience technology deliver tangible return on investment (ROI), it is a critical component of modern omnichannel retailing. Solutions that add to customer satisfaction have never been more critical. According to an Accenture study, 61% of consumers stopped doing business with at least one company because of a poor customer experience. Brian Kilcourse, managing partner of Retail Systems Research (RSR), said that retail CFOs evaluating the ROI of customer experience solutions need to understand that in today’s seamless shopping environment, the path to purchase no longer begins inside the store. “Customer-facing technology investments basically trigger the path to purchase, and ultimately result in sales,” said Kilcourse. “CFOs need to understand that the point of purchase begins outside the store; in the digital space, primarily.” According to Kilcourse, CFOs should recognize that as a result of the industry’s ongoing omnichannel transformation, the opportunity to digitally engage with customers before they enter the store cannot be missed. “Dialogue with customers in that space drives eyes to the website and feet to stores,” explained Kilcourse. “The digital space is where demand typically starts in the new world of retailing. Demand and fulfillment have become physically disconnected. In the old world of retailing, both happened in the store.” Kilcourse had stark words for CFOs who do not appreciate how important digital engagement of brick-and-mortar shoppers has become. “Ignore that, and you ignore the fundamental dynamic of how retailers make money,” he stated.

CHAINSTOREAGE.COM JULY/AUGUST 2019

MAKE THE MOST OF MARKETING Retail CFOs should also be aware that customer-experience technology investments can also have a positive impact on the ROI achieved from marketing solution implementations. “The digital domain is inherently more efficient,” said Kilcourse. “You can maximize the effectiveness of your marketing spend by redirecting campaigns, discounts and promotions to customers more likely to take advantage of them.” Customer experience investments can actually have a fairly dramatic effect on the effectiveness of marketing spend, Kilcourse asserted. “You can get more sales for fewer marketing dollars.”

REVERENCE FOR RELEVANCE Another way customer experience technology investments produce ROI is by enabling retailers to provide more relevant value offerings, across all customer touchpoints. “Even in the physical space, customers don’t want the inconvenience of having to deal with huge, standardized assortments in every store,” said Kilcourse. “There is a consumer revolt against the ‘sea of sameness.’” Retailers can leverage the highly personalized data on shopper behavior and preferences they collect from interactions with customer experience solutions to localize assortments and promotions, on a much more granular basis. “When assortment and promotions are done well in the store, you achieve magic,” Kilcourse said. “You increase inventory turns while reducing the inventory you have on hand, and can get faster turns with less inventory. That leads to fewer over- and understock situations, which

reduces the need for markdowns.” In addition, retailers can gain an understanding of which customers use which stores and how they use them, creating a view of causality. “You can fine-tune your brick-and-mortar value offering by customer, location, product, and store,” said Kilcourse. He repeated his dire warning for retailers that do not make the necessary customer experience technology investments to support this level of consumer insight. “If you don’t, surely you’ll be out of business.”

ASSOCIATE-FACING SOLUTIONS DO DOUBLE DUTY Technology that makes store associates more effective in their jobs can deliver ROI by reducing labor costs while also increasing customer satisfaction. “I don’t know a retailer on the planet who wants to spend more on labor,” commented Kilcourse. Therefore, Kilcourse advises retailers to invest in solutions that automate non-customer-facing store associate activities, allowing them to spend more time serving customers. “Technology such as employee enablement or robotic devices lowers your labor spend by increasing employee effectiveness,” said Kilcourse. “It also increases in-store customer engagement, which helps keep shoppers coming to your stores and making purchases.”

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PROFILE Q & A

More Than A ‘Shark’ Daymond John’s best investment was a sock company By Dan Berthiaume Behind the scenes of the hit television show “Shark Tank,” businessman and entrepreneur Daymond John has a methodical and customer-centric view of e-commerce. Chain Store Age recently spoke with John, who helped build FUBU from an entrepreneurial venture running out of his mother’s home in Queens, N.Y., to a global omnichannel enterprise which has earned more than $6 billion. He is a proponent of a heavy focus on customer service and a slow but steady growth plan. Q What do you look for in an e-commerce business as an investor? I look at how they are retaining customer data and their analysis of their customers. How are they growing year-over-year and do they continue to improve their supply chain? Are they improving on getting goods quicker to the customer? Do they provide content to people and get them to be affiliate marketers? Q What is the best e-commerce investment you ever made on Shark Tank? Bombas Socks. When I invested, they were generating $800,000 in annual revenue, and five years later they are generating $100 million in annual revenue. Bombas mostly sells products via e-commerce, though they sell some in partnership with The Gap. They [the founders of Bombas] are lasersharp entrepreneurs who didn’t spread themselves too thin. Bombas’ data didn’t show they were ready to expand yet. Five years later, they are starting to sell t-shirts, and will probably eventually sell some other things. They over-supported their customers for five years and grew their market. For every pair of socks Bombas sells, they give a pair to the homeless. Today’s customer wants to know how buying your product is helping. Charity taught me a lesson. I used to give to charitable organizations, but 20

didn’t want to tell anyone. Now companies are marketing their charitable activities and saying, ‘look what I’m doing.’ Q What is the biggest single business lesson from your own career? There are really two lessons — grow slow and find mentors. You should always grow slow and take your time. Also, find as many mentors as you can, there will be more than one. People don’t know what they don’t know. This is true in life too — take it slow and find people around you whom you can ask for advice, because they have been there. Q How can a small retailer benefit from entering e-commerce? A small retailer has the advantage of having the touch and feel of their customer. You get to know them in a tight sense. You can spread that globally with e-commerce, once you have the proof of concept of dealing with people directly. You can analyze data from people you’re selling to on the e-commerce side, and can see how many units of a product you sell at this number compared to that number. Customers won’t sign up for your mailers at the cash register and you don’t get to see where they go after they leave. However,

with e-commerce, you can easily offer products that match or go with the products being purchased because you have data on what other people who bought that product also bought. Hopefully, in a store, you are too busy to get to every customer. But e-commerce lets you convey a message to customers easily. It provides an easy way to follow up with content that pushes people to the store. You can say, ‘We’ll open a store and make a product available only to you at this price.’ Q How can a smaller retailer effectively compete with major e-commerce players? Some of the big boys and girls are doing creative things. You need to know your strengths and weaknesses. Because you’re smaller, you can over-support with customer service. “Get people to want to work for you. Run a promotion where customers can submit 30-second videos, and the one with the best video gets special product pricing. Make customers your ambassadors through affiliate marketing. Each challenge is different. The challenges will be different for a drug, fashion or grocery retailer. JULY/AUGUST 2019 CHAINSTOREAGE.COM


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COMMENTARY

On Board: Female Representation Not Rising Fast Enough Same small group of women are being tapped for multiple boards By Sarah Alter In my travels lately, there’s a lot of discussion around the latest Fortune 500 report. The headline: Thirty three female CEOs now sit in Fortune 500 ranks. I applaud progress — that’s more women than ever — but without taking a breath, the next words out of my mouth are: “That’s 6.6%. About 43.4 % too low, if we are striving for 50%.” When I was a young girl, I didn’t dream of becoming a nurse or a teacher. Both are honorable professions, but they weren’t in my wheelhouse. I wanted to be in business. And not just in the rank and file — I wanted to be a CEO. I didn’t have female CEO role models, though, because there were so few. There still are far too few. Even as our societal demographics continue to shift, the seats of power within global companies have remained stuck decades in the past. Now that I am a CEO, I can look back on the road traveled. And I’m determined to be one of the executives who smooths the road for the women who come after me. If progress in the CEO ranks has been slower than desired, progress for women at the board level has also been sketchy. This year’s board representation numbers for the Fortune 500 show a trend — the same small group of women are being tapped for multiple boards. We’re not expanding in number, more so in number of board positions held by the same women. Seven women serve on four Fortune 500 boards. Thirty-four women serve on three. Boards want experience. They want Csuite experience. Yet women only comprise 6.6% of Fortune 500 CEOs. And my organization’s research shows a female leadership crisis: Senior women are heading for the exits at a far higher rate than men. Female higher-level managers, executives and Csuite members leave their jobs nearly four times as often as men (26.9% vs. 7.3%). So it becomes a chicken-or-egg conun22

drum. California took the lead to legislate greater equality on boards, which should help get more qualified women into C-suite positions. Board equality legislation is also moving through the legislature in my home state of Illinois, and is being considered in New Jersey as well as a few other states. But I have to be honest: I’m always disappointed when it takes a law to force companies to do what is good, right and just plain smart. The future could be so bright. It turns out I was far from being a unicorn in my aspirations as a 12-year-old. Almost three out of four women (74%, early in their career, want to become executives, according to the Leaders & Daughters Global Survey of 7,000 women in seven countries on five continents. My question is: What happens to change that? From my own experience, it’s potholes in the road to the executive suite. NEW research shows a few issues across the board cause women to leave companies in droves. Just a few key actions could help them stay:

receive support when they accept a new challenge or job. Men’s perception of support from peers and their managers ranks higher, at 63%. And while six out of 10 women say their supervisor entrusts them with a range of assignments that help prepare them for their next role, the remaining 40% are not receiving the corporate stretch roles and breadth of experience necessary to place them in contention for positions of higher responsibility and authority. This leaves women either stagnating in their current role, feeling passed over or promoted without sufficient development or support through the transition. None of these situations bodes well for women reaching the C-suite successfully.

Confronting bias. Combine a lack of female role models in executive management with the sense of isolation that can come from being the only woman in the room — add in a lack of sponsorship — and you have a recipe for female leaders heading to the exits. Only 36% of women surveyed agree there is minimal favoritism within their company. The similar-to-me bias, unless addressed head on within corporate culture, means many executives will hire and promote candidates with similar interests, backgrounds and experience to similar to their own.

Modernizing work schedules. While the world has changed dramatically from the years when men worked and women stayed at home to take care of children and domestic duties, work schedules have not, to the detriment of women with children especially. As Melinda Gates wrote, “We’re sending our daughters into a workplace designed for our dads.” As institutional investors push for greater diversity on boards and in C-suites because of the business case for it, I think we’ll see more progress. And I do think we’ll reach the tipping point sooner than later, where plodding progress becomes a quantum leap. My 12-year-old self certainly hopes so. And my present self is committed to playing a key role in making it happen as rapidly as possible. A quantum leap forward is an eventual certainty. But its speed depends on executives like us furthering the cause. Join me.

Offering transition support/career pathing. When females report on the support they receive from those above them in the corporate hierarchy, only half say they

— Sarah Alter is president and CEO of the Network of Executive Women, a learning and leadership community representing 12,400 members in 22 regional groups in the United States and Canada. Learn more at newonline.org. JULY/AUGUST 2019 CHAINSTOREAGE.COM


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Ask your GC if they have a Certified Retail Superintendent on your project.

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TECH

Holiday Prep Make a list — and check it twice

By Dan Berthiaume Summer may be in full-swing, but savvy retailers are already planning for the upcoming holiday shopping season. There is a lot riding on it: Holiday sales hit $707.5 billion last year and retailers that are not prepared to take advantage of the surge will put themselves at a competitive disadvantage. In fact, with the rise of technology, retailers need more time than ever before to effectively plan for the increased traffic and sales — both in-store and online. It’s essential they take the time to learn and deploy new technologies to attract customers. Also, sharp, sudden increases in customers and spikes in sales volume can put a serious strain on the technology systems that retailers now depend on to keep operations running smoothly. Here is some advice on the steps retailers should start taking now to prepare for the holidays in the technology areas of artificial intelligence (AI), mobile, and warehouse management, as well as a look at what two retailers have done to create POS-level visibility that pays dividends during the holidays and all year long. Artificial Intelligence (AI) Retailers seeking to attract their best customers and keep store inventory properly stocked this holiday season may want to investigate the potential of artificial intelligence (AI) technology. According to Samrat Sharma, data, marketing and strategy leader at PwC, AI helps ensure the right products are sold to the right customers, at the right price. “Getting the right consumers into the store requires more localized activation of AI,” said Sharma. “You need dynamic pricing. There are two forms; some retailers have their own loyalty app which enables them to field promotions that get customers into the store. You can also change pricing for localized demand, 24

time of day and weather. However, this causes a supply chain ripple effect, so you need to leverage AI to make sure out-of-stocks are minimized.” In addition, Sharma said retailers can apply AI technology to address long-cycle weather and seasonality issues as they prepare their holiday product assortment. “A lot of things can impact the shopper, and it’s not easy to get everything absolutely right,” said Sharma. AI and machine learning solutions allow you to deplete your store inventory in the right way, and manage your assortment and mix with external factors you couldn’t predict. The last thing you want is aggregate markdowns. AI lets you manage incentives to get customers in when you want them.” Mobile Omnichannel specialty food and gift retailer Harry & David is familiar with the surges in mobile traffic that accom-

pany the holiday season. Oscar Castro, VP, e-commerce & marketing for Harry & David, said focusing on three key areas of mobile technology is critical to holiday m-commerce success. “To prepare for the mobile holiday rush, retailers should focus on three key areas: speed/performance, the mobile user experience, and marketing optimization,” said Castro. “On-the-go shoppers expect a speedy, efficient experience that works well on a smaller screen.” Rather than simply shrinking the desktop shopping experience, Castro advises retailers to understand how their mobile users’ behavior differs from desktop users. “At Harry & David, we provide customers with curated gift guides, personalized product recommendations, and easy reordering capabilities — such as our ‘gift list’ function, which was integrated into our mobile experience in 2018, and helpful customer reviews,” said Castro. For the 2018 holiday season, Harry & JULY/AUGUST 2019 CHAINSTOREAGE.COM


David unveiled a completely redesigned mobile website. New features aimed at streamlining the mobile experience for busy holiday shoppers included touchfriendly navigation, enhanced checkout, simplified shipping and payment forms, and the integration of Apple Business Chat. “These enhancements allowed us to provide an elevated customer experience to on-the-go holiday shoppers looking to express, connect and celebrate with the important people in their lives,” stated Castro. Castro also advises retailers to listen to customer feedback when developing mcommerce features. This is what prompted Harry & David to integrate a customer service portal for mobile users last year. “The portal enables customers to easily view real-time updates on order status, apply order modifications and receive live chat support all on their mobile devices,” he explained. Warehouse Management All the increases in brick-and-mortar shopping and online ordering can also put a strain on retailers’ back end operations. David Marcotte, senior VP, cross-industry, cross-border and technology for Kantar

Consulting, said retailers must be sure their warehouse management systems are ready for the sharp demand spikes of peak days (such as Black Friday and Cyber Monday). “Retailers should go through the normal process of failure identification and recovery with their warehouse management systems,” said Marcotte. “Almost all order management systems are more than capable of handling peak order volumes. When a peak order issue comes up, it’s almost always an integration issue. Orders don’t go to the pick system correctly, or are not sequenced correctly for picking and fulfillment. Everything develops friction, and over time it all adds up.” Marcotte advised that the failure identification protocol retailers should follow is similar to a Six Sigma process improvement program. “You need to discover where there is friction and loss in the system, and what dependencies aren’t covering it,” said Marcotte. “Then correct it. At peak order times, failures are not surprising, but magnified.” Retailers should also have contingency

plans in place for holiday-related warehouse and distribution issues they cannot fix in time. For example, Marcotte said holiday deliveries will ideally represent an acceptable flex in a delivery management system that might normally run at 70% of maximum capacity. “But you also need a third-party delivery provider as a plan B,” he cautioned. “For the last three to four years, the U.S. Postal Service has been the holiday delivery provider of choice. They can plug into a retailer’s delivery systems quickly, and are dependable and easy to work with.” Marcotte also had some advice for retailers looking ahead to the inevitable surge in returned items that comes in late December and early January. “Never call it returns,” Marcotte concluded. “Call it reverse logistics — the term defines the problem. A system designed to go one way has items go the other way. Invariably, retailers need to create a parallel solution. You need to figure out how you will handle and evaluate returned items in the store to move them up through the inventory system.”

POS Visibility Retailers need to ensure that their POS systems can effectively handle the extra store traffic they will experience in November and December. Two retailers have recently enhanced real-time visibility of customer transaction, and loyalty data at the POS, enabling a faster and more personalized checkout experience. Omnichannel specialty lighting retailer Lamps Plus ties its Manhattan Associates POS solution to the order management system. This enables real-time visibility of all customer transactions, including in-store, online and wholesale. The new POS system also simplifies transaction flows for store associates, who previously had to go deep into a menu to find options. “Everything is on the POS screen — item, price, tax, etc. — across all platforms in real time,” said Daniel Nelson, manager, IBM application development, Lamps Plus. “You can see a customer’s purchase history from the former POS system and online, as well as any customer inquiry from the past decade.” Now, Lamps Plus associates can efficiently provide customers with the service levels they need at the POS, which will prove a boon come holiday time. In addition, specialty nutrition and vitamin retailer The Vitamin Shoppe is leveraging POS and CRM solutions from customer engagement technology provider Aptos to create a 360-degree omnichannel view of each customer. Associates have cloud-based access to customer information at the POS, including real-time rewards. New customers can join the loyalty program at the POS. “We took a completely fresh look at how we could have a greater understanding of our customers’ needs by personalizing and enhancing our loyalty program,” said Stacey Renfro, executive VP and chief customer and digital officer, The Vitamin Shoppe. CHAINSTOREAGE.COM JULY/AUGUST 2019

25


TECH Q & A

Connecting Virtual and Physical Retail By Dan Berthiaume Performed properly, omnichannel retail looks easy to the customer and is complex for the retailer. Fortunately for retailers, managed network technology vendor CenturyLink provides a full suite of cloud, SaaS, and hybrid solutions that support seamless enterprise operations across digital and physical channels. This includes leading-edge technologies, such as artificial intelligence (AI) and machine learning, which are redefining omnichannel retailing. Chain Store Age recently spoke with Tim Woods, general manager, eastern region of CenturyLink, about how secure, next generation technology infrastructure enables retailers to deliver a highly personalized and profitable omnichannel customer experience. Q How are emerging technologies like AI and machine learning changing the way retailers are looking at infrastructure? Retailers are navigating an omnichannel world with an uphill battle of perception and reality. Physical locations are still driving valuable customer experiences and significant portions of revenue, despite the perception that retail locations are dying and going online. While online retail is growing, analysis shows the brick-and-mortar channel is still growing revenue. AI insights allow for data-driven decisions and efficiently run ecosystems to flourish in ways that weren’t possible before. AI and machine learning allow for intelligent customer support, predictive/proactive recommendations for customers, and meaningful business metrics for retailers as they execute strategies and experience. These breakthroughs enable smart retail. As Internet of Things (IoT) evolves, retailers can now collect, analyze and distribute data in ways that create intimacy with customers, and make relevant business decisions based on data and validated in real time. Traffic patterns, supply chain, customer feedback, point of purchase, omnichannel correlations, and so many other data points are at the fingertips of retailers. And it all has to work on an intelligent IT and network infrastructure that is evolving at the same pace your customers and business are growing. 26

Q What security solutions should retailers be seeking when implementing emerging technologies? Retailers have all kinds of data. Customer data is one of the most sensitive types of data, and as a trusted provider of products and services for the customer, you must invest in them and protect them. Protecting your network has never been more pivotal. An intelligent network is the first step. Whether it’s software-defined networking (SDN)/network function virtualization (NFV), network monitoring, or intelligent firewalls, businesses need to realize that in an IoT world, protecting your data is the most important thing you have to do. Reactive security isn’t good enough anymore. That’s why IoT security solutions haven’t always met the demand of the everchanging, rapidly growing retail industry. However, there is a resurgence of getting back to basics. This means securing critical devices and partitioning off your network to make sure the right elements are secure, while other elements have the flexibility and agility needed to address customer and business requirements. Q How can retailers effectively support AI and machine learning solutions on the back end? We see the back end broken into a few areas: IT infrastructure (cloud, on-premises, data centers), network infrastructure (wireless and core network), and applica-

tion/support (applications, OSS/BSS, and human support). Data is only as good as the business decisions and customer interaction you are creating. In order to do that, the foundational elements have to be evolved. Too many times, customers don’t get the full promise of AI and machine learning without the ability to move the data intelligently and efficiently across their infrastructure. Clouds and data centers have to be dynamically capable of handling multiple policies, use cases, and location requirements. Q How can CenturyLink help retailers in deploying these latest emerging technologies? Customers need to move, synthesize and react to data. Those actions need to happen as fast and close to the customer as possible. CenturyLink has the infrastructure and network capabilities from the cloud, all the way down to the edge, making it a perfect partner for smart retailers looking to evolve with their customer base. We have managed services, and expertise to help consult in the IoT, AI, and machine learning journey most customers are facing today. Ultimately, our intelligent network and IT infrastructure along with our managed services/consulting can accelerate business decisions and customer experiences in an IoT world, especially in retail. JULY/AUGUST 2019 CHAINSTOREAGE.COM


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The shark’s-eye view of e-commerce By Dan Berthiaume I recently had the opportunity to interview Daymond John, founder of $6 billion vertical fashion brand FUBU and featured investor on the hit TV series “Shark Tank,” about his philosophies regarding e-commerce. Besides being an engaging and surprisingly low-key interview subject, John had a lot of great first-hand insights into how retailers can build a profitable e-commerce business. (See page 20 for the Q&A with John.) Now that I’ve had a little time to reflect on the conversation, I have collected four broad principles espoused by John that retailers can follow to e-commerce prosperity. Service The term “over-support” came up more than once in my phone chat with John. He repeatedly stressed the importance of e-commerce retailers carefully tending to their customers’ needs. This includes developing a stable supply chain that can get goods in the hands of customers quickly, as well as ensure that customers have a satisfactory online shopping and checkout experience. Service also applies to making sure an e-commerce business gives something back to the community with its profits. John gave the example of online sock retailer Bombas, one of his “Shark Tank” investments, which donates a free pair of socks to the homeless for every pair sold. In addition to constituting good ethics, millennial and Gen Z customers expect the businesses they patronize to have a charitable component. John recommends e-commerce retailers actually build their charitable endeavors into their brand image, and even give customers a choice about where donations from their purchases go. Communication Just as important as serving your customers is communicating with them. Several times, John returned to the theme of e-commerce retailers

leveraging the instant one-to-one communication capabilities of the Internet. Especially for smaller brick-and-mortar retailers, developing personalized bonds with customers at a mass scale is critical to staying competitive with larger online competitors. John added that these smaller players have an advantage in communication over bigger digital players, as they already know their customers at an intimate level and can expand that connection online. This type of personalized online communication also helps create brand ambassadors — customers who socially promote your brand simply because they feel good about it. Analysis My first question to John was about what he looks for in an e-commerce business as an investor. The first sentence of his answer revolved around how well the retailer retains and analyzes customer data. The type of highly targeted customer service and communication John urges e-commerce retailers to perform is impossible without robust analytics capability. He repeatedly mentioned the importance of analysis to everything from pricing, to cross-selling and up-selling, to knowing when and if it is time to expand your assortment. Having the right analytics in place makes doing everything else it takes to succeed in e-commerce possible. Slow and steady John is not a “get rich quick” kind of guy. He cautions e-commerce retailers to grow slowly and wisely, gradually acquiring knowledge and building on their existing strong points. Again, he pointed to Bombas, which spent five years mastering the art and science of selling socks online before expanding their assortment to t-shirts, as a real-life example of intelligent e-commerce success. And this slow, steady growth should include input from those who have done it before. “Find as many mentors as you can,” advised John. “People don’t know what they don’t know. Take it slow and find people around you who you can ask for advice, because they have been there.”

Dan Berthiaume dberthiaume@chainstoreage.com JULY/AUGUST 2019 CHAINSTOREAGE.COM


STORE SPACES

Winter Facilities Prep Summer still has a couple of months to go. But calendar aside, retailers should start making plans now to weatherproof their stores for the winter months. Here are some recommendations to ensure facilities are properly vetted for the cold weather. • Protect the building enclosure. Any maintenance work needed on a building’s enclosure should be done during the mild shoulder months if possible. This includes roof work and building façade work such as exterior walls and glazed curtain wall systems. If moisture gets in a building during the mild months, it should be dealt with immediately and before winter weather sets in. Also, it’s important to make sure that partially built or temporary structures in place leading up to winter can handle the weight of likely snow build-up, advised Scott West, senior mechanical engineer with architecture and engineering firm HFA. Most structural engineers can give actionable feedback on this without much expense, he added. • Schedule an inspection of the HVAC system. A major inspection of the HVAC system in the fall is essential to help ensure the system is ready to handle winter’s increased heating demand — in the most energy efficient manner — and reduce the chance of outages or equipment breakdowns. For increased energy savings, replace "on/ off" thermostats with more advanced "programmable" models that reduce run-time and space temperatures when spaces are unoccupied, recommended Bill Graber, VP, account management, Emcor Facilities Services. Other tips: Add or optimize control of the heating water supply temperature based on either outside air temperature or heating load, and repair any missing or damaged piping and component insulation. • Inspect the roof. Roofs are a major concern during the winter months, especially in areas that get heavy snow. The best way to

protect against winter-related damage is to make sure the roof is in good shape before the season even begins via a comprehensive inspection (by a qualified expert) in the fall that pinpoints possible problems and areas that need to be corrected. Weekly checks throughout the winter are also recommended. And always have a plan for roofing emergencies that identifies shut-off valves for gas, water and electricity.

where possible, are well insulated or have heat tracing in place. Irrigation piping and outdoor water features such as fountains may need to be drained and purged before freezing conditions set in. • Assess the parking lot. Replace or repair potholes (depending on severity), seal cracks, check drainage grates and ensure they are draining properly, and verify that parking bollards and curb stops are secure and in good shape. Check speed bumps for proper marking and needed repair (removable speed bumps should be removed for the winter) and re-stripe faded lines and markings as snow will make faded paint even more difficult to see.

• Freeze protect your spaces. All areas with wet-pipe sprinkler systems should at least have freeze protection heating to prevent pipes from bursting. The biggest risks lie with partially constructed spaces or spaces that have tenant vacancies during the winter months, said HFA’s West. This may mean bringing in temporary space heaters for some spaces. Also, be sure to test the start-up of normal space-heating equipment that is already installed, particularly in vacant spaces where there isn’t a tenant OVER 1,600 BOX present to tell you SIZES IN STOC when a problem arises with space heating.

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Snow Prep Timing is everything when it comes to ensuring facilities are prepared to deal with snow and ice. “Managing snow and ice services for multiple sites across a vast geography can pose many challenges, making it critical to begin service procurement six months before the onset of winter weather,” said Greg Sweetman, director of business development, Case Snow Management. “Snow and ice management is a specialty and often an emergency service, requiring industry knowledge and experience, specialized equipment and materials, and snow-specific liability insurance.” To contract with the right provider, facility managers need to first understand the needs of their portfolio — and how those needs may vary across locations. “Securing a reliable, experienced service provider to scale with your needs sets the foundation for successful winter services, mitigates location delays and closures, and protects you from risks associated with snow and ice management,” Sweetman said.

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STORE SPACES

Eloquii Puts New Spin on Plus Sizes Digitally native brand continues brick-and-mortar expansion In terms of retail comebacks, Eloquii has a pretty good one. The plus-size, fashion brand was launched in 2011 by The Limited, only to be shut down about 18 months later as part of a company restructuring. But Eloquii started a new chapter — one that paved the way for its current success — in 2014, when it was relaunched by members of its original team (and an investor) as an independent, vertically integrated e-commerce business. It has carved itself a unique niche, winning over shoppers with trend-driven styles designed from the start for size 14 to 28 customers. Eloquii expanded to brick-and-mortar in 2017, and recently opened its sixth location, a 2,500-sq.-ft., stylish-looking space in Manhattan’s SoHo neighborhood. In-store services include the brand’s signature complimentary personal styling program. Notably, Eloquii is the only retailer dedicated to sizes 14 to 28 in one of the city’s most popular shopping areas. Additional stores are at Fashion Centre at Pentagon City in Arlington, Va.; The Shops at North Bridge, Chicago; Twelve Oaks Mall, Detroit; The Galleria Shopping Center, Houston; and Dadeland Mall, Miami.

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Eloquii is headed up by Mariah Chase, who was recruited as part of the relaunch and has been CEO ever since. (The brand was acquired by Walmart in 2018, and Chase, her executive team and the company’s approximate 100 employees joined the retail giant’s U.S. e-commerce division.) Chase spoke with CSA about Eloquii's brick-and-mortar operations. Q Does Eloquii expect to open any additional permanent stores this year? We’re always exploring options that offer our customers a choice on how they want to experience Eloquii. We believe offline is an important choice. Q How do the offline and online customers compare? Many of our offline customers come to us for a free personal styling appointment where they spend an hour plus with a stylist. This is a service that’s uniquely suited to offline. We’ve also noticed, more explicitly, the different merchandise preferences between metropolitan statistical areas and specific offline locations. Our Pentagon City customer really wants and needs a strong workwear as-

Eloquii's SoHo store opened in May.

sortment while our Houston Galleria customer demands the most fashion-forward pieces of our collections. These differences excite us about opportunities around automating micromerchandising and allocating in the future. Q How popular is the personal styling service? It’s a steady drumbeat. The personal styling service is a complimentary offering that Eloquii offers at all of our stores. The customers who want it, seek it out and our team offers it to new customers when they visit the store so they know it’s always there for them in the future. Shoppers can sign up to experience one-onone appointments, group styling sessions or stylist parties with Eloquii trend and fit experts. Unique to the SoHo store location, we have an on-site technical designer who works closely with customers, and is trained by the Eloquii in-house design team, to advise shoppers on the brand’s expert fit technique, in real time. We’re really excited about this new service. Q What’s been the most surprising/ insightful takeaway from Eloquii’s brick-and-mortar stores? When we launched in 2014, we believed we would stay online only. What we discovered is there is a true want and need for a strong offline retail presence for our customer. Our customer has clearly voted that the offline experience is a significant part of the way she wants to interact with Eloquii. For our part, we love stores because they offers another touchpoint where we get to know her in person. We love getting to know our customers one-on-one and there’s no better place to do this over time. 31


STORE SPACES Q & A

Focus On Parking Lot Maintenance

For retailers, brand perception starts in a store’s parking lot — and that’s especially true in this time of curbside pickup. Beyond making a poor first impression, a badly maintained parking lot presents safety hazards. Chain Store Age spoke with Let’s Pave president C.B. Kuzlik about this critical component of store facilities management.

Q How important is timing with regard to parking lot maintenance? It is critical for most of the country. We always advise clients to solicit bids early in the year and approve them quickly thereafter so work can be performed during optimum weather conditions. For example, we had a client that asked us to bid a resurfacing project in Michigan in early March. We turned around the quote one week later, but the client did not sign the contract until October. Due to weather delays, the work was not performed until November. And, because of the immense amount of rain that fell in the fall and continued after project completion, along with one of the coldest winters on record, the site experienced extreme freeze-thaw conditions. When the ground froze, the area expanded, raising the newly installed asphalt well above the concrete, which resulted in a trip hazard. Q What is the most common paving error? It is the temptation to think sealcoating is all that needed to restore a parking lot’s luster. The fact is, it’s not a cure-all treatment. Even a perfect application of sealer will not repair cracks and other surface defects in the asphalt (those areas must be treated prior to applying sealer). It might seem sensible to patch or crack seal an area of deteriorated asphalt. But sometimes a parking lot is beyond the point where patching, crack sealing or seal coating will help. If the lot is failing due to lack of maintenance, poor design, sub-base issues or a structural flaw, no number of preventive procedures will solve the problem long term. (It is just throwing money away.) In addition, if the parking lot is approaching 20 years of service life or if 25% to 35% of the total surface area has significant damage, 32

it is generally more effective and economical to rip out and replace the parking lot. Q What are the most common ADA violations in parking lots? The most common violations are missing signage designating ADA parking and missing accessible pavement markings. There are also other violations that are less obvious. For example, we often encounter properties that do not have the proper number of ADA accessible spaces. To be compliant, the ratio of ADA designated parking spaces is based on the total number of spaces available in the parking facility. The location of these spaces is also important — they must be closest to the accessible entrance. Q What goes into proactive pavement maintenance? Being proactive starts with planning and understanding your pavement inventory. During the winter months, work with your paving partner to perform assessments. Pavement assessments should be completed every two to four years. The process begins with a visual inspection to document the overall condition such as surface distress, ride quality and aesthetics. The data collected will help identify repair and replacement needs, prioritize repairs on a site or set of sites, and create budgets for planning up to five years ahead. A comprehensive budget ensures routine projects are timed properly and that there are adequate funds for emergency repairs. An effective plan will also include the cost for materials and labor for each site. Q What services does Let’s Pave offer? We provide preventative and structural asphalt and concrete parking lot maintenance for multi-site commercial properties

nationwide as well as pavement planning and assessments, procurement, project management, and ADA compliance services. Q How does Let’s Pave differentiate itself from the competition? We buy materials and services better than other providers and we keep our overhead low to pass on savings to our clients. We also turn around quotes faster and complete jobs quicker than anyone else in the national model. We attract and retain the best and most experienced employees (our owners have 70 years of combined paving experience), who demonstrate a genuine love for our life’s work and collaborating with clients and value partners. In fact, every national account is personally overseen by an owner for the highest level of accountability. Because our employees enjoy working together and regard each other as family, Inc. magazine recently named us among the nation’s best workplaces. It is a testament to our close-knit culture, which extends beyond our business. We are all committed to and passionate about impacting our local neighbors and folks worldwide through various charitable initiatives. Q If you give retailers one bit of advice regarding parking lot upkeep, what would it be? While it may seem simple, effective paving requires a thorough understanding of your pavement assets and successful management depends on many factors. Do your research on paving vendors. Partner with one that has expertise in paving and pavement management. Ask tough questions and request references. Be sure to carefully examine and compare all bids according to scope, materials and application process to ensure you get what you pay for. JULY/AUGUST 2019 CHAINSTOREAGE.COM


SHOP TALK

L’Occitane en Provence’s store on Fifth Avenue in Manhattan took top honors as Store of the Year in the Retail Design Institute’s L’Occitane en Provence annual International Store Design Competition. The 1,870-sq.-ft. space is rich in experiences, with plenty of Instagramable and interactive moments. Customers can explore brand history and signature products through ever-changing — and interactive — installations that echo the Provencal lifestyle. Designed in house by the French beauty and skin care brand’s international artistic director Daniel Contorni and Paul Blackburn, VP design, concept construction and merchandising for North America, the store was also honored with an Experiential Innovation Award for customer engagement. …. Cannabis and CBD brand Green Growth Products will open more than 70 shops selling personal care and beauty products infused with CBD oil at Brookfield Properties’ shopping centers. The deal will expand the footprint of Green Growth, which also

has an agreement to open stores in Simon malls, to a total of about 280 locations by yearend. Along with opening stores under its Seventh Sense banner, Green Growth is launching a new brand, Green Lily, described as a “mindful-luxe CBD brand dedicated to empowering women,” with four initial locations. … The resale market is booming. Rebag, which trades in luxury handbags, recently opened its seventh store, in the Design District of Miami. The 2,800-sq.-ft. space features such signature Rebag elements as the“ Rebag Bar,” where customers can authenticate and sell a bag in less than 60 minutes. Rebag is looking to open some 30 stores. Designer consignment retailer The Real Real is also expanding, opening its third store, a twolevel, 3,000-sq. ft. space on Manhattan’s Upper East Side. It boasts a curated mix of women’s ready-to-wear, handbags, fine jewelry, watches, art and home pieces, and an expansive consignment office. Gemologists, horologists and authenticators are on hand to give customers complimentary valuations their items. … Flush with new funding, fast-growing online luggage brand Away plans to open 50 new stores during the next three years. It’s also developing travel products in new categories, including apparel, wellness and lifestyle accessories. Company Updates: Retail design consultancy ChangeUp Inc., Dayton, Ohio, acquired Interbrand Retail from Omnicom Group.


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ON THE LEVEL

Retail Real Estate’s Bread and Butter Jobs are plentiful, banks are easing their lending standards, heavy truck sales are up. Despite signs that the U.S. economy is slowing from a robust 2018, these indicators point to continued good times for consumer markets and retailers. They also assure us that investors and developers will continue building more necessity-based shopping centers to serve fast-growing markets in the Southeast, Mid-Atlantic, and Northeast (see our reader’s poll on page 48). A new report on grocery-anchored centers from CBRE makes several predictions for the coming five years that foretell continued expansion for the sector. One hard and fast rule of grocery sales is that their growth rarely exceeds that of overall retail sales, but rarely falls much below, either. Grocery is steady, and a lot of the ups and downs take place among segments within the category. “Looking at the types of stores from which we are buying food, traditional grocery’s share is dropping and club and mass stores are gaining. Smaller specialty groceries are also taking share,” said Melina Cordero, CBRE’s global head of retail research. “As a result, traditional groceries are morphing and providing more nontraditional items.” Over the last 20 years, traditional supermarkets’ share of total food distribution has gone from 71% to 58%, while supercenters and warehouse stores rose from 7% to 22%, according to CBRE. Despite the continued hubbub over home

delivery, it has remained constant at 3% of sales over the past two decades. CBRE maintains that online sales and delivery will continue to increase, however, predicting a share rise of from 5% to 10% by 2022. Big chains will continue to get bigger as they snap up regional players to extend their nationwide base for home delivery of online purchases. “Cost is a major factor of e-commerce grocery sales, and that’s the primary reason it hasn’t grown as fast as other categories. It’s all dependent on how much grocers are willing to invest in their supply chain—on anything from automation to big data to AI,” Cordero said. A study by consulting firm Capgemini found that consumers pay, on average, $8.08 for home delivery while grocers pay $10.01. That’s means supermarket chains will have to increase the margins on their goods to foot the delivery bill, a game many low-cost providers may be unwilling to play. It also means that grocery-anchored shopping centers will continue to thrive and expand and provide valuable neighborhood platforms for the growth of retail chains, restaurants, phone stores and, of course, Starbucks. CONGRATULATIONS, TOP 10! “It’s all about the experience!” is vying for the title of the most overused phrase in retail real estate these days, but in this issue we present the developers that deliver the goods. More than 40 nominations poured in for our Top 10 Retail Experiences list this year, and at least half of them were good enough to make the list. Our choices cover a variety of center types and locations in order to present our readers with a broad representation of the best ideas in the marketplace. We hope you agree with our picks, but if you’re wondering why XYZ didn’t make the list, it’s because you didn’t nominate them. Be sure to do it next year!

Al Urbanski aurbanski@chainstoreage.com @AlUrbanski (Twitter) JULY/AUGUST 2019 CHAINSTOREAGE.COM


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REAL ESTATE

Top 10 Retail Center Experiences of 2019 Some you’ve heard of, some are fairly new, but all the members of this list have one thing in common: They know how to provide superior shopping, dining, viewing, or congregating experiences to customers and, as a result, attract scads of them. By Al Urbanski

1 EASTON TOWN CENTER Nervousness. That’s the one word that best explains the continued success of this Columbus institution 20 years after its opening, said Yaromir Steiner, whose Steiner + Associates manages the property. “We are in the middle of America, not in a sexy place, and we need to listen to our customers in a very humble and modest way to be relevant,” Steiner told Chain Store Age upon being notified that Easton was chosen the No. 1 Retail Experience for 2019. “But, right now, we are nervous. Yes, we are doing well, but we are always looking forward to see what we need to change, how we need to adjust. Our nervousness makes us deserve the award,” he said. The 3 million-sq.-ft., as-detailed-as-Disney retail phenomenon owes its genesis to retail giant Les Wexner, who laid down a new beat and melody for attracting consumers to retail. He envisioned places instead of stores, experiences instead of convenience. He owned a large tract of land near the Columbus airport that was sitting empty, so he enlisted The Georgetown Company and Steiner to realize his vision. Today, Easton’s pedestrian-friendly thoroughfares, dining district, street-level retail (even a light-and-airy take on the enclosed mall) packs both the town center and its three hotels on a daily basis. 40

Easton was the first and is still the best at capturing the feel of a real, live town. The opening of the new Urban District (inset) should add to the experience.

Among its more than 300 tenants are Nordstrom, Macy’s, Louis Vuitton, Tiffany & Co., Crate & Barrel, Apple, Brio Tuscan Grille, Smith & Wollensky and Mitchell’s Ocean Club. “The combination of activity and critical mass and the creation of neighborhoods makes Easton a very special place,” said Georgetown CEO Adam Flatto. “The town center is just one aspect. There are 35,000 office employees, hotels, apartments. Having that density is what makes Easton a dominant destination.” Helping it maintain its grip on that dominance is a $500 million, 16-acre expansion on the northeastern tip of the property. The Urban District will incorporate multifamily residential within the town center in a reconstructed industrial setting ringed by brewpubs, restaurants, and entertainment venues. A 40,000-sq.-ft. Restoration Hardeware RH Gallery store will serve as the retail anchor. Wexner continues to keep his eye on Easton and was pleased to see it make No. 1 on CSA’s list. “At Easton,” he said, “we’re in a constant state of rethinking. Is what we’ve done working? What do we do next? One thing, though, has remained a constant priority — an energizing customer experience. It’s gratifying to be recognized for getting that right.” JULY/AUGUST 2019 CHAINSTOREAGE.COM


Destiny USA achieves the seemingly impossible… capturing entertainment, great restaurants and a shopping experience that presents something for everyone. Al Urbanski, Real Estate Editor Chain Store Age

Destiny USA, Syracuse New York, Sept. 2018

Developing dynamic destinations while redefining what’s next Nearly 50 years of hard work, innovation and the unrelenting pursuit of what’s next have propelled Pyramid to be the largest, privately held developer of enclosed shopping centers in the northeast.

retailers and experiences that redefine the shopping experience and adapt to changing consumer preferences—regardless of whether the industry says they belong in a mall.

Our success is built upon a simple, yet powerful underlying philosophy—a mall is more than a shopping center, it is a destination.

We are forward-thinking, working tirelessly to create healthy, vibrant destinations like Destiny USA and enhance the guest experience, all while keeping an entire industry guessing…

That’s why we think outside of the box, finding exciting new

…What will Pyramid do NEXT?

For more information visit pyramidmg.com


REAL ESTATE

3 2 NORTHPARK CENTER

AVALON

Go to the website directory of any shopping mall and it’s a good bet you’ll find the same items in the dropdown menu: Stores, Dining, Events, Entertainment. There’s likely only one that includes the selection “Art,” and that’s NorthPark, the combination mall-art museum that has been one of Dallas’s top attractions since it opened in the 1960s as the world’s largest climate-controlled retail center. “It’s like a museum, but with the best shopping,” wrote NorthPark’s Top 10 nominator Denise Browning, a Dallas retail real estate professional with no business relationship to the mall. “Even before I moved to Texas it was my favorite in the country.” The 48-foot-tall, 12-ton Ad Astra fills the two-story NorthCourt, the only indoor display of a work by sculptor Mark di Suvero. Upon entering NorthPark, one has a choice of a store directory and an art directory, a numbered guide to the 150-odd works displayed throughout the 1.3 million-sq.-ft. property. Roy Lichtenstein, Jonathon Borofsky, Andy Warhol, Beverly Pepper, and Mick Moon are among the many noted artists represented in the collection, most of them owned by members of the Nasher family that developed NorthPark. “NorthPark owners Nancy A. Nasher and David J. Haemisegger have created an entirely new retail experience, unique in all the world, through the Art of Shopping focus,” said NorthPark director of marketing Kristen Gibbins. “Every year, more than 26 million visitors experience best-inclass retail, as well as the ever-changing artworks in NorthPark.” The mall features four department store anchors: Dillard’s, Macy’s, Nordstrom, and Neiman Marcus. Luxury retailers include Tiffany & Co., St. Laurent, Salvatore Ferragamo, Lacoste, Omega, Canali, and Carolina Herrera. The food and beverage rosters lists Seasons 52, Maggiano Little Italy, La Madeleine French Café, and Bazille.

The newer developments on this year’s list have something in common: Their developers meticulously researched the communities they aimed to serve. “Before the first shovel was in the ground, we were listening to what the people wanted to be sure we were designing an environment that the community craved,” said Liz Gillespie, VP of marketing for Avalon’s developer, North American Partners “Whether you worked there, lived there, or were a visitor there, you had to feel welcome.” Avalon opened in 2014 in what NAP calls Georgia’s first “urbanurb” — a walkable urban experience in suburban setting offering luxury residential, a boutique hotel, and more than 345,000 sq. ft. of retail. It’s as if a trendy chunk of downtown Atlanta has been plucked out and plopped down in Alpharetta. Avalon draws 12 million visitors a year — some of them Atlantans drawn to Avalon’s 24 food and beverage establishments such as Colletta, Marlow’s Tavern, and Kona Grill. Avalon’s retail curation blends the trendy (Bonobos, Kendra Scott, Arhaus) with the tried-and-true (Pottery Barn, Urban Outfitters, Brooks Brothers) with the needs-based (Whole Foods, Drybar, PNC Bank). A dozen or so of the center’s 80-plus shops — among them Apple and Williams Sonoma — relocated there from a nearby mall. A model for 21st century development, Avalon is Georgia’s first “fiberhood,” equipped with an ultra-high-speed fiber-to-thepremises broadband network. Developers and representatives of municipalities from across the country are regular visitors to Avalon, whose success they hope to replicate.

WESTFIELD GARDEN STATE PLAZA In the retail mecca of Paramus, N.J., which draws shoppers from New York City as well as North Jersey, Garden State Plaza has long been the centerpiece. It’s a national retail force, too, landing in the ninth spot on Boenning & Scattergood’s list of top-grossing malls, in between Simon’s Roosevelt Field and King of Prussia powerhouses. As GSP prepares to transform itself into a live-work-shop-play project complete with pubic park, apartments, and a hockey rink, Chain Store Age editors decided it should be recognized for the top-flight experience it has offered to shoppers for more than 60 years. “Garden State Plaza it plays an important role as a national retail incubator and testing ground for emerging and global brands. In addition, the center’s unparalleled luxury offering is accentuated by its commitment to superb customer service,” remarked Colin Shaughnessy, executive VP of leasing. To satisfy a sophisticated customer base, GSP has long striven to be first-to-market with on-trend tenants. Recent arrivals at the mall include the hot Korean beauty brand Innisfree, Lou & Grey casual clothiers, Charles Tyrwhitt menswear, and Tojo Kitchen ramen house. Westfield upgraded the mall interior last year, adding a permanent art collection that Shaughnessy said was curated with the intent of being “as artistically relevant as some of the most dynamic galleries in New York City.” And why not? Garden State Plaza has always been a leader in the art of shopping.

4

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Preferred locations. Compelling opportunities.

New England Development is acclaimed for creating some of the country’s most widely recognized and successful regional centers, as well as multifaceted developments that combine retail, residential, hotel, and office uses. Outlet centers, street-front retail, and airport retail round out NED’s robust portfolio.

FOR LEASING INFORMATION New England Development info@NEDevelopment.com 617.965.8700 ■ NEDevelopment.com 75 Park Plaza, Boston, MA 02116


REAL ESTATE

5

MALL OF AMERICA

Walt Disney World in sunny Orlando, home to hundreds of popular tourist attractions, draws a little over 50 million people a year. Mall of America, in the North Country of Bloomington, Minn., whose other local attractions number just two (the Vikings and the Twins), draws more than 40 million visitors a year. Guest per guest, which ones are harder won? We argue that it’s MOA’s. Never resting on its laurels, Triple Five’s megaexperience encompassing nearly 6 million sq. ft. of adventure (nearly half of it shopping) is constantly upgrading its roster of 500-plus stores. TV star Sarah Jessica Parker stopped by MOA in June to open her SJP shoe boutique, and Nordstrom will soon be opening a Dior boutique. “We see innovation as anything new we can do to improve the experience,” said general manager Jill Renslow. Among her favorite upgrades this year is Park Assist, a camera-based system that shows drivers entering the parking garages what levels have the most open parking spaces, indicated by red and green lights above the spaces. She is also proud of some of the more thoughtful efforts MOA and its tenants are making to keep all customers happy. “We are providing training and resources to encourage flexibility and diversity, and we’re starting to see it show in tenants’ advertising messages and storefronts,” Renslow said. “Khloe Kardashian’s Good American store stocks women’s sizes from 0 to 24 and displays them on mannequins of varying body types.” MOA is also providing tenants more room for experimentation, introducing short-term leases to allow brands to “test-drive” concepts, in the words of Renslow. “We’re always making decisions that will move us forward and keep us fresh,” she said.

DESTINY USA

6

Winter in Syracuse, N.Y., on the southern shore of Onondaga Lake, sees average temperatures in the teens. It’s a windy and snowy cold, too, with the so-called “lake effect” depositing an average of 115 inches of the white stuff a year on the town best known as the home of Syracuse University. It is also the home of Destiny USA, which achieves the seemingly impossible mission of attracting 25 million people a year. The 2.4 million-sq.-ft. property has an entire level dedicated to dining and entertainment. Its Canyon area sports the world’s most extensive indoor ropes course. It has more than 40 dining and drinking establishments and an IMAX theatre. Its 250 shops range from dollar to deluxe. Where else under one roof might one find a Pottery Barn and a 99¢ City? A Francesca’s and a Burlington? A Carhartt and a Brooks Brothers? And with six full-service jewelry stores, it rivals New York’s 47th Street as the place to buy an engagement ring. “It’s been far more wildly successful than we’d ever hoped,” said Stephen Congel, CEO of Syracuse-based Pyramid Management, owner and operator of Destiny USA, who credits an 855,000-sq.-ft., turn-ofthe-century expansion for making it what it is today. “We decided to expand into three nontraditional areas: discount stores, outlets, and entertainment and food and beverage. We have 700,000 square feet of food and entertainment,” Congel said. Destiny USA advertises heavily in New York State, Pennsylvania, and Canada, promoting multi-day packages that include stays at the Embassy Suites Destiny Hotel. But Congel said its visitors hail from all over the globe as well as all 50 states. It may not be destiny to deliver that many people to remote and often blizzardy Syracuse, but it is something on the order of a retail real estate miracle.

44

CHESTNUT HILL SQUARE In the 1980s, New England Development president Stephen Plumeri had an idea that the affluent crowd in Chestnut Hill would flock to a retail palace anchored by Henri Bendel, lined with marble, and staffed with doormen. They didn’t. The Atrium got sold to Simon, which eventually sold it and introduced a more classic Simon execution called The Shops at Chestnut Hill. “There’s an attitude that says focus on fashion and deliver all the brands that she needs, but that’s not the case anymore,” says current NED leasing VP Manny Steiner. “At Chestnut Hill Square, we started listening to what people wanted.” Among the residents of Chestnut Hill are many of the physicians and medical executives who work at Boston’s world-class hospitals. It was decided, then, that the centerpiece of Chestnut Hill Square should be a 60,000-sq.-ft. medical office building. From there grew a necessity-based center for the well-to-do in about 175,000 sq. ft. of retail GLA. NED installed a Wegman’s anchor and was soon followed by tenants like Francesca’s, Soulcycle, The Capital Grille, European Wax Center, Athleta, and Plastic & Aesthetic Surgery Associates. “Does it have to be fashion? No. It can be financial services, the eyeglass retailer, wellness,” Steiner said. “We made some mistakes, but we learned: Don’t think about what you think they should have, listen to what they need and adjust.”

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JULY/AUGUST 2019 CHAINSTOREAGE.COM


WESTFIELD GARDEN STATE PLAZA LIVE, WORK, SHOP & DINE Reimagining the future and creating a new downtown experience alongside parks, gardens, and open green spaces.

Paramus, NJ


REAL ESTATE

8

9 ETON CHAGRIN BOULEVARD

WEST EDMONTON MALL

This Stark Enterprises center in an affluent Cleveland suburb makes your head turn as you drive past the mundane strip centers surrounding it. There, amid diners and bank branches and old office buildings, sits (can it be?) a European village town center. Flower beds, gas lamps, and umbrella tables line a cobblestone walk leading to luxe shops like Kendra Scott, Brooks Brothers, Sur La Table, Orvis, and Tiffany & Co., along with Barnes & Noble and Apple stores. Dining options include Fleming’s Prime Steakhouse, Bravo Cucina Italiana, Mitchell’s Fish Market, and Paladar Latin Kitchen & Rum Bar. The former Eton Collection mall was purchased by developer Bob Stark in 2004, who spent $40 million to turn the enclosed mall inside-out, with distinct storefronts and sidewalk entrances. It’s a renovation strategy that many embattled mall owners are just now starting to employ. In 2013, Stark acquired adjoining office and apartment properties to create the development’s West End. No expense is spared on atmospherics and, in 2018, Eton Chagrin Boulevard won the Project of the Year award Ohio Nursery and Landscape Association. We asked Stark why he never bought the tired old strip center with the barber shop and the dry cleaner across the street and expanded there. “I tried to buy it, but Eton brought so much business to the owner that he refused to sell it,” Stark said with a laugh.

It’s a 5.3 million-sq.-ft. realm of retail and entertainment that attracts 30 million visitors a year and calls itself “The Greatest Indoor Show on Earth.” With 25 rides and attractions, Guinness recognized it as the world’s largest indoor amusement park, as well as North America’s largest mall with 800 stores. It has a 3-million-gallon wave pool and a lake with a replica of Christopher Columbus’s Santa Maria. It is zoned by the City of Edmonton, Alberta, as a shopping center and a zoo. It is West Edmonton Mall, and it was the Ghermezian family’s first brash, bold, and industry-defining statement when it opened in 1981. Their Triple Five Worldwide followed with Minnesota’s Mall of America in 1992 and New Jersey’s American Dream, set to open this year. “We make every effort to ensure our guest’s visit goes far beyond the traditional retail experience. We want them to have magical moments each time they visit,” said general manager Danielle Woo. “From the infinite shopping possibilities to the entertainment throughout the property, we have all aspects of a guest’s adventures covered.” The original concept for the property was inspired by the urban bazaars of Persia, where shopping and entertainment were plentiful and operated in tandem. “We have been focusing on building up our luxury shopping experience, with Louis Vuitton recently joining the ranks of our high-end retailers,” said WEM’s marketing manager Mannat Kahlon. “Concepts like Canada Goose’s sub-zero cold room, where shoppers can test a jacket’s warmth, are a perfect example of retailers using their most creative concepts at WEM.” Exit Antarctica and minutes later be careening down a water slide? Now that’s an experience.

WOODFIELD MALL

10

Simon’s outpost in the Chicagoland suburb of Schaumburg is a prime example of an enclosed mall that’s withstanding the challenge of e-coms and town centers. Indeed, Woodfield is Schaumburg’s claim to fame — one of America’s largest malls at 2.3 million sq. ft. and the town’s largest employer with more than 4,000 earning paychecks at its 300-plus stores, restaurants, and entertainment venues. Sears, Macy’s, and JC Penney still thrive at Woodfield, which also houses Lord & Taylor and Nordstrom. “In our department stores, it’s all about the shopper experience. All of them offer buy-online and try on or pick up at the store service,” said general manager Laurie Van Dalen, a Simon veteran for whom Woodfield is her 10th posting. The mall added a new dining pavilion with Blaze Pizza and Stan’s Donuts to complement destination eateries like Rainforest Café, Cheesecake Factory, and Texas de Brazil. Its Improv Comedy Club is a popular local nightspot, and it recently welcomed Pac-Man Entertainment (whose national marketing manager nominated Woodfield for this honor). Shoppers are equally taken with Woodfield. It ranked No. 1 in a Yelp survey of the Top 25 malls in Illinois. Remarked one reviewer: “Seems while all the local malls are closing stores down, Woodfield continues thriving with customers. You can find almost any store and item you need at Woodfield.” 46

JULY/AUGUST 2019 CHAINSTOREAGE.COM


BEING LOCALLY SMART IS THE CHERRY ON TOP. Finding the right retail space can be a Rocky Road. But Phillips Edison has all the coolest insights to help you find the perfect location. With more than 330 grocery-anchored shopping centers, we’ll provide you with local intel on the markets and communities we serve. Get the scoop on our properties at the Florida Conference & Deal Making on August 25-27. Swing by our Booth 1919 and say hello.

FOLLOW US:

GROCERY FOCUSED. RETAILER CENTERED. PHILLIPSEDISON.COM | 800.875.6585


REAL ESTATE

Whole Foods and Publix Are Retailers’ Favorite Neighbors Read about that and more in Chain Store Age’s poll of readers’ attitudes on grocery-anchored shopping centers. By Al Urbanski estate brokers who sought out locations for retailers. When asked what they observed as the three best regions of the United States for expansion into grocery-anchored centers, the Southeast was retailers’ clear favorite. Thirty percent of them named it and 19% named the Northeast and the Mid-Atlantic, which tied for second. That finding rang true with Jim Thompson, executive VP of

Retailers who have high profiles in necessity-based shopping centers — the fastest-growing sector in retail real estate — say the Southeast is their prime area for expansion and that Publix is the supermarket they’d most like to be sitting next to. That’s one of the key findings of Chain Store Age’s recent poll of the readers of its Daybreaker newsletter. Respondents were qualified as employees of retail chains or as real

HOT REGIONS FOR GROCERY-ANCHORED CENTERS % of retailers saying they are expanding here 30.19%

Southeast Northeast

18.87%

Mid-Atlantic

18.87%

Southwest

13.21% 9.43%

Midwest Mountain States

3.77%

Califorina

3.77% 1.89%

Northwest Plains States

0.00% 0%

SOURCE: CHAIN STORE AGE

48

5%

10%

15%

20%

25%

30%

35%

operations at Regency Centers, one of the nation’s most prodigious developers of grocery-anchored centers. “We have a national platform, but I would say that the Southeast has been a strong growth market for us, probably in the top two along with the Mid-Atlantic,” Thompson said. “Northern California continues to be a good market for us, but really, there’s not a part of the country that I would say is soft. Retail has been surprisingly robust.” More than 13% of poll respondents named the Southwest and 9% named the Midwest. Bob Myers, the COO of Phillips Edison & Company, which owns and operates more than 330 groceryanchored centers, was also in agreement with our readers. “Heavy growth continues in Florida, but as we look at our portfolio, Texas and California are also very active,” Myers said. “Aldi, Kroger, and HEB are expanding in those states.” As for the supermarkets most cherished as center partners by retailers? It’s hardly surprising that 42% of them named Whole Foods, the trophy grocer of centers in $100,000-plus income, college-educated, brimmingwith-kids neighborhoods. Publix finished second, getting props from 40% of retailers. Long

JULY/AUGUST 2019 CHAINSTOREAGE.COM


Mellody Farm Chicago, IL

Village at La Floresta Los Angeles, CA

Ballard Blocks Seattle, WA

Cameron Village Raleigh, NC

A Retail Chorus Our national portfolio includes thriving properties merchandised with best-in-class retailers, but it is our people that make the difference. They are the people retailers want to work with and supporters of their long-term success. This symphonic relationship of owner and operator is what allows Regency properties to stay top of mind and connected to our neighborhoods, communities, and customers. See how we are different. Visit us at RegencyCenters.com.


REAL ESTATE

known as one of the ners mentioned included It’s hardly surprismost professional opAldi, Lidl, Food Lion, Fiing that 42% of erators, and a signifiesta, Weis, and Mitsuwa cant owner of centers Japanese Grocer. them named Whole in its own right, Tri-Land Properties Foods, the trophy Kroger is a business founder Richard Dube, partner few retailers grocer of centers in who started his career can deny. as a location manager $100,000-plus income, for Jewel Food Stores in Following close behind these giants was Chicago and also served college-educated, a specialty operator, as VP of real estate brimming-with-kids for Loblaw, is a cenTrader Joe’s, that’s also a favorite of the ter owner who knows neighborhoods. educated, upscale a few things about crowd and which ofsupermarkets. He notes ten is able to co-exist alongside more that smaller or specialty chains will traditional supermarkets in some continue to thrive in urban neighborlarge centers. hoods or the new wave of “densified” Rounding out the Favored Five were town centers. Wegmans, Kroger, and Walmart — all “The formats that will thrive in the fine picks in Myers’s book. dense urban markets will be limited “I think they’re all winners because to those operators that are capable of they all provide quality experiences and achieving the high sales per square products,” Myers remarked. “They all foot that are necessary to offset the do good sales volumes and have been high occupancy costs,” Dube obleaders in figuring out ways to use tech served. “Dense markets are not demoto make the experience even better.” graphically homogenous. That creates Still, it’s not just big chains with merchandising challenges to have the long histories desired as co-tenants by right product selection.” Daybreaker readers. One of the biggest Other co-tenants vote-getters was “other,” and we asked those voters to name some names. Ban- Of course, retailers want adjacency to

MOST-FAVORED SUPERMARKETS % of retailers most desiring adjacency to these grocers Whole Foods

41.51%

Publix

39.62%

Trader Joes

37.74%

Wegmans

28.30%

Kroger

26.42%

Walmart

22.64%

Stop & Shop

11.32% 0%

10%

20%

30%

40%

50%

GROCERY’S GROWING? WAIT’LL YOU SEE THE NEXT FIVE YEARS

By Richard F. Dube

The grocery business during the next five years will be vibrant with brick and mortar expansion. During the past five years, grocery chains invested heavily in technology to “catch up” with Amazon. But in the years ahead, the large chains will need to redeploy much of that capital to expand and remodel existing stores and build new ones in order to remain competitive. It will be imperative for maintaining a high level of customer experience. Six predictions for the next five years: 1. Aldi and Lidl will continue growth in the “deep value price” segment of the supermarket business. Limited assortment of private label products with quality equal to or better than name brand products is the primary merchandising emphasis of these two deep-discount operators. 2. Traditional formats such as Jewel/Osco, Kroger, and Publix will continue to evolve with a greater emphasis on prepared foods, expanded produce departments, and continued expansion of organic products both fresh and prepared. 3. Traditional supermarkets that have evolved into unique experiences will thrive over the next five years, both from a growth and profitability perspective. These include Wegmans in the Mid-Atlantic, Central Market in Texas, and Byerly’s/Lund’s in Minneapolis. 4. Supercenters such as Wal Mart and Meijer’s will continue to grow and evolve. 5. Costco and Sam’s Club will continue to dominate the club store segment of the brick and mortar retail food market. 6. Smaller independent chains will continue to evolve serving specific “ethnic submarkets”. Examples are Fiesta Mart (Hispanic), Patel’s (Indian Pan Asian), and H-Mart (Korean) Specialty grocers will flourish in the next five years. When Safeway purchased the Dominick’s chain of approximately 100 stores in Chicago and failed to operate the stores profitably, Safeway decided to leave Chicago. That decision opened the market up to savvy independent operators like Pete’s Fresh Markets (15 stores), Tony’s Fresh Markets, (15 stores), and Cermak Fresh Markets (15 stores). All three of these chains started out by serving loyal ethnic markets, but the quality of their products and service have embraced new customer bases while retaining their core Slavic and Hispanic customers. Richard F. Dube is founder and president of Tri-Land Properties

SOURCE: CHAIN STORE AGE

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UN

D

AugER CONST ust RUCTIO 20 N 19

• Conyers, Georgia (Suburban Atlanta) • Interstate 20 and State Highway 138 • 2,500 to 40,000 SF • Hobby Lobby, Northern Tool + Equipment, 105-Room Hotel LEASING:

Paul Sevenich – 800.441.7032

T HE ORI GI N A L Tri-Land has been successfully repositioning

FIXER UPPER

undervalued and underperforming community retail centers in powerful urban/suburban locations for over 40 years. The results have been more than $481 million in dynamic and high-performing retail and mixed-use redevelopment and a long-range, hands-on management and ownership perspective.

1 East Oak Hill Drive Milwaukee, WI

Chicago, IL

Suite 302

Westmont, IL 60559

Indianapolis and Merrillville, IN

trilandproperties.com

Overland Park, KS

Conyers and Smyrna, GA


REAL ESTATE

lates and spin. They bring in a steady flow of health-and-beauty-minded customers.” Concerns over parking availability that accompany fitness tenants still exist, but are now more likely to be accommodated by both center owners and traditional tenants. “With fitness tenants come parking concerns, but most center owners and most traditional tenants have eased parking restrictions. Some gyms have up to 20,000 members, and even boutique centers have 3,000 to 6,000. That’s good traffic,” said Myers, who also added that “fast casual should always be at the top of anyone’s list.” The tenant-side brokers who answered our survey will be eager to know the results of our “best groceryanchored brokers” question — especially if they work for CBRE. The global real estate giant was named by 68% of respondents and was followed, in order, by Colliers, Capital Retail, Retail Brokers Network, Brixmor, and Avison Young.

high-volume, 24/7 supermarkets, but what other co-tenants do they most desire? Another Chicagoan who did well buying up grocery-anchored centers, this one a former school teacher, was Joe Cosenza. As president of Inland Real Estate, Cosenza has completed $47 billion in acquisitions, and he shared with us his all-star center roster: the best grocer in the region, a dry cleaner, a nail salon, a Starbucks, a liquor store, a Panera bread, a bank branch, and an ice cream store. Poll respondents were pretty much in line with Cosenza, naming “coffee shop” and “bank branch” among their top four preferences. The other two, however, are categories that have been surging in recent years — fast-casual restaurants and fitness centers. “Health, beauty, and fitness tenants have been very strong over the past five years,” said Thompson. “A lot of our tenants like to co-exist with boutique fitness businesses like pi-

MOST-FAVORED NON-GROCERY ADJACENCIES % of retailers most desiring adjacency to these retailers Fast-casual restaurant

62.26% 54.72%

Coffee Shop Bank Branch

45.28% 41.51%

Fitness Center Dry Cleaner

20.75%

Hair Salon/Barber

20.75%

Ice Cream Shop

20.75%

Liquor Store

20.75%

QSR restaurant

20.75%

Nail Salons

18.87%

SPECIFIC BRANDS SOURCE: CHAIN STORE AGE

52

9.43% 0%

10%

20%

30%

40%

50%

60%

70%

18,000 CUSTOMERS A WEEK CAN’T BE WRONG By Ron Meyer

Community, necessity and wellness. These are the hallmarks of a Phillips Edison shopping center. For 25 years, our singular focus has been on grocery-anchored neighborhood shopping centers. The reason? Everyone needs to eat. Necessity-based retail, combined with a focus on community and values-alignment, has always been — and will continue to be — a prime area for continued growth and opportunity in the commercial real estate industry. While the media spouts dire predictions for the future of bricks-and-mortar retail, we remain confident in the strength of our retailers and our portfolio. Shoppers will always want to see, touch, smell and feel the products they are buying. In addition, grocers are implementing an outstanding array of new technologies and innovations that will help them continue to stay a step ahead of online retailers. They are responding to changing consumer demands and evolving at a pace unlike anything we’ve seen in the past. Along with technological advances, consumer preferences are also shifting. Today’s shoppers are looking for experiences that align with their values. Grocers are responding by offering healthier options, locally-sourced products, in-store wellness resources and other value-oriented goods and services. Savvy retail real estate owners are meeting this demand by courting retailers that are environmentally and socially conscious and offer products and services geared toward personal well-being. Phillips Edison’s leasing team is working to complement our grocer’s efforts by ensuring that the merchandising mix at each of our 340-plus properties includes necessity-based, internet-resistant retailers such as salons, service providers, fitness centers, and more. These tenants complement our high-volume grocery traffic and increase crossshopping. The over 18,000 customers that visit our centers each week are drawn by a carefully curated blend of experience, values-alignment, and convenience. Ron Meyers is senior VP of leasing for Phillips Edison & Company.

JULY/AUGUST 2019 CHAINSTOREAGE.COM


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Notable Grocery-Anchored Centers SHOPS AT BUTLER: PLAZA NORTH TOWN CENTER

Location: Gainesville, Fla. Size: 2.2 million sq. ft. Owner/Operator: Butler Enterprises Grocery Anchors: Whole Foods, Publix East, Publix West, Aldi, Trader Joes Key Tenants: 150 Tenants including Regal Theater, WalMart, Lowes, Sam’s Club, Dick’s Sporting Goods, Marshalls, Best Buy, Total Wine, Target, Alumni Hall, Kirkland’s, PetSmart, Pink Narcissus-Lilly Pulitzer Boutique, Lululemon pop-up, Hearth & Heart-Mudpie Boutique Construction Status: Existing, adding 450,00 SF lifestyle destination Butler Town Center anchored by Whole Foods (2018)-now in phase two of construction Research shows 76% of shoppers visit more than one grocer a week for their household needs — often three different grocers are on regular rotation for families. Butler’s aim since 1975 when our first Publix opened (Yes, we now have two Publix stores, both high ranking in sales) has been to provide top level convenience and quality — high priorities for today’s shopper — to all our visitors. This makes it advantageous to have all these grocery options in one location. Add the superior infrastructure and connectivity of the 267-acre Butler complex, and this regional destination

“wins” grocery-anchored centers. Shoppers can easily access any of our five grocers and three supercenterwith-grocery stores within minutes of each other to find any specific products they need at the best value. With Gainesville’s top 10 university, as well as rankings for “best place to retire” and “best place to raise a family,” it’s no wonder different grocers are needed to meet the various demographic needs of this rapidly-growing city.

BALLARD BLOCKS II

Location: Seattle Size: 115,096 sq. ft. Owner/Operator: Regency Centers, Principal Enhanced Property Fund (50% JV for Phase II) Grocery Anchors: PCC Community Markets (Phase II); Trader Joe’s (Phase I) Key Tenants: LA Fitness, West Marine, Bright Horizons, TruFusion, Ross Dress for Less, Kaiser Permanente Construction Status: Phase II (Ballard Blocks II) is currently under construction, nearing completion. Ballard Blocks consists of two adjacent, multilevel properties of highly trafficked retail nestled in the heart of Ballard, an urban neighborhood near downtown Seattle. The iconic Ballard neighborhood is one of Seattle’s most distinctive live/work/play communities, situated within two major thoroughfares with over 70,000 vehicles per day. Development is underway for the second phase of the property, with completion estimated by the end of the year. CHAINSTOREAGE.COM JULY/AUGUST 2019

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REAL ESTATE

Hot Markets

Jacksonville

Retail space is hard to find in this rapidly growing metro. By Al Urbanski Jacksonville is growing. North Florida’s anchor city (the biggest in the nation by land area) added an average of 26,000 residents and 21,000 jobs between 2013 and 2017. It’s a trend that is poised to continue with an expected five-year population growth forecast of 102,000 people. According to Marcus & Millichap, that expansion has translated into a 26% increase in consumer spending and significantly raised demand for space by retail tenants. The 900,000 sq. ft. of new retail GLA expected to come on the market in 2019 will not reverse a six-year decline in the vacancy rate, which dipped to 4.9% this year. Leases are already signed for much of the new space coming on line this year, and demand continues to be high in downtown Jacksonville, San Marco, and Riverside. “What used to be retail is being torn down and replaced with multifamily housing, medical offices, daycare centers, or distribution space,” said longtime Florida broker Nick Banks, manager of Avison Young’s Gainesville office. Retail in Jacksonville is fully in the throes of the evolutionary forces affecting retail in the 21st Century. “Big-box retail has been affected by internet sales and is going away in many areas. Meanwhile, high-quality retail is delivering what people want and 54

experiential-based properties are doing really well,” Banks said. That puts a lot of the retail focus on St. Johns County, where upscale population growth has raised demand for high-end retail. St. Johns has the highest median incomes in the Jacksonville metro, according to Marcus & Millichap, and has been a magnet for new-to-market specialty grocers and niche retailers. Simon’s St. Johns Town Center has served as the retail centerpiece there, but new availability is on the way. The bulk of Jacksonville’s retail real estate deliverables for 2019 are in St. Johns County. These include an eight building lifestyle center totaling 200,000 sq. ft. and the 352,000sq.-ft. Durbin Pavilion power center. Atlanta developer Jeff Fuqua has announced plans for a 67-acre, $300 million “village center” in the area that will feature office, residential, and retail that will include a 40,000-sq.-ft. food hall with an indoor-outdoor bar. Fuqua said it will take its inspiration from Jacksonville’s historic San Marco neighborhood. Average asking rents in St. Johns County are $18.03, second in the market to the beach area, which averages $18.44. The Riverside, Mandarin, Southside, and Butler/Baymeadows submarkets command rents in the $15 to $16 range. Average retail rent for the overall metro is $14.87.

jacksonville By The Numbers

900,000 4.9%

sq. ft. retail GLA to be completed in 2019

vacancy rate

$14.87

average asking rent per sq. ft.

0.7%

increase in asking rent over previous year

100,400

five-year population growth forecast

$4,141

monthly retail purchases per household

Source: Marcus & Millichap JULY/AUGUST 2019 CHAINSTOREAGE.COM


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CSA - July 2019  

CSA - July 2019