Chain Store Age - Sept/Oct 2018 by ensembleiq

CHAIN STORE AGE

SEPTEMBER/OCTOBER 2018

Top 100 Retailers Understanding Blockchain Mixed-Use Centers THE BUSINESS OF RETAIL

The

POWER OF

data

A State of the Industry Report, by

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VOL. 94 SEPTEMBER/OCTOBER 2018 NO. 5

COVER STORY

State of the Industry Report, from Worldpay

Top 100 Retailers

FEATURES

08 10 12 30

Commentary: Innovative partnerships can help retailers stay ahead in today’s marketplace.

TECH

Fast-growing BabyList carves unique niche online with new spin on gift registries. Petco, Nike blend personalization, technology in new store concepts. Holiday shopping predictions include 10 busiest shopping days of the season.

Vendor Q&A Manhattan Associates’ Chris Shaw discusses how omnichannel commerce has impacted retailers’ fulfullment requirements. Blockchain technology expected to impact retail in four key areas.

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 $119 per year. $129 per year for Canadian subscribers; $225 per year for foreign subscribers, air-mail only. Single-copy price: $18. 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. 94, No. 5, September/October 2018. Copyright ©2018 by EnsembleIQ. All rights reserved.

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SEPTEMBER/OCTOBER 2018

Contents VOL. 94 SEPTEMBER/OCTOBER 2018 NO. 5

STORE SPACES

Construction Technology: Three key software needs ...

Meet the SPECS 2019 Advisory Board.

Vendor Q&A: Michael Rose, of Heritage Fire and Security, talks fire protection trends and safety.

McDonald’s goes green in Chicago; embarks on $6 billion store remodeling program.

REAL ESTATE

Mixed Use: By and for the Community. Centers can garner premium rents — if the mix is right.

Starbucks looks to reduce utilities expenses by $50 million during next 10 years.

Restaurant Revolution. Upgraded food and dining options key to mall revitalization

Chicago Update. Rents increasing in the suburbs north of the Loop.

Traditional retail store rollouts are giving way to new, ‘one size fits no one’ model

Mixed-Use Project Profiles. The Levee at East Peoria Downtown, East Peoria, Illinoic Butler Town Center at Stengel Field, Gainesville, Florida Bridgeport, North Suffolk, Virginia

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FROM THE EDITOR’S DESK

What Apocalypse? Here’s what I call the seemingly endless string of reports about the death of physical retail: fake news — or at least 99% fake. Despite all evidence to the contrary, report after report suggests that brick-and-mortar retail is on its deathbed. The headlines may be intriguing. But they aren’t accurate In fact, some 24 years after Amazon set up shop online, physical stores are back in vogue. Even the e-commerce giant is on board, not to mention formerly online pure plays that are opening storefronts. Don’t get me wrong — brick and mortar is not without its challenges, from crushing debt burdens and overexpansion hangovers to 24/7 competition, outdated business models and changing consumer behavior. And there is a spark of truth to those dire headlines in that retail is changing drastically and those brands that fail to evolve and keep pace will be left behind, both online and offline. (But hasn’t this always been the case? The retail landscape is littered with former powerhouses from Montgomery Ward to Blockbuster to Woolworth’s.) What most of the reports ignore is that many retailers are adapting and changing to compete and better meet the needs of consumers. Store closings continue to generate the most attention even as new concepts and formats from traditional players and upstarts are setting the industry ablaze. There has never been more experimentation, more innovation. And about those store closings…. yes, some very well-known retailers are closing stores. But what’s not being as widely reported is all the expansion that is still happening in physical retail. North American retailers will open a total of 06

12,663 stores and close 8,828 stores in 2018, for a net increase of 3,835 store locations. What’s more, the closings are being driven by a handful of retailers, not the overall market. Just 16 companies — led by Rite Aid, Stripes, and Toys “R” Us — represent 66% of retail store closings The data comes by the way of a research report from consulting firm IHL Group, which reviewed over 1,500 retail companies with 50 or more locations. IHL found that for all companies closing stores, 2.5 are increasing their store counts. The report, titled “Retail’s Radical Transformation/Real Opportunities,” also revealed just how much the retail landscape is changing. “Overall retail is very healthy,” said Greg Buzek, president of IHL Group. “…but there are vast differences in retail segments with some growing rapidly and others struggling.” Grocery stores, drug stores (beauty), mass merchants (includes dollar stores, off-pricers) and convenience stores are among the fastest-growing categories, adding a net 2,694 stores in 2018. The increase is on top of 3,115 net new stores in 2017. Fast-food is the fastest-growing category in the restaurant category. “Off-price retailers, dollar stores, grocery and restaurants are seeing great growth,” said Buzek. “It is the apparel and department stores that continue to struggle…the strong growth is at the high end and the low-end side of retail …” The study makes clear that retail is changing — changing drastically. But it also points out that even in today’s disrupted marketplace, brick-and-mortar stores should not lose sight of the basics. “There is a reason that Publix, Wegmans, Apple Stores and Chick-fil-A make multiples of net profit more than their competitors,” the report stated. “Their people and their stores are more inviting and customers like to shop there.”

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, Brand Director (CSA) SPECS Chairman Gary Esposito (212) 756-5118, gesposito@chainstoreage.com

Editor Marianne Wilson

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

Technology Editor Deena M. Amato-McCoy (516) 208-9493, damccoy@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

Regional Sales Manager Michael Morrissey (312) 645-5072, mmorriss@chainstoreage.com

Eastern Sales Manager Lise Slaviero Groh (610) 458-7655, lslaviero@chainstoreage.com

Sales Director-Technology Joel Wethall (847) 302-6796, jwethall@chainstoreage.com

Executive Director of Events Katherine Boccaccio (225) 751-2225, kboccaccio@chainstoreage.com

Event Attendance Manager Melissa Murphy (212) 756-5059, mmurphy@chainstoreage.com

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(212) 756-5268, rruzalski@chainstoreage.com

Marketing Coordinator Farida Batuta (212) 756-5269, fbatuta@chainstoreage.com

Media Production Assistant Betty Dong (212) 756-5134, bdong@lf1925.com

Senior Vice President (HBSDealer, Drug Store News, Chain Store Age) John Kenlon (212) 756-5238, jkenlon@ensembleiq.com

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: $18. Circulation List Manager: Nancy Speilmann, Statlistics (203) 456-3338. Reprints: To order reprints call PARS International at (212) 221-9595, ext. 435, or e-mail LF-Reprints@parsintl.com. 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 Operating Officer, Chief Financial Officer Richard Rivera Chief Brand Officer Korry Stagnito President, Enterprise Solutions Terese Herbig Chief Digital Officer Joel Hughes Chief Human Resources Officer Jennifer Turner Senior Vice President, Innovation Tanner Van Dusen

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COMMENTARY

A New Wave of Growth Innovative partnerships can help retailers stay ahead

By Jill Standish and Frank Layo The U.S. retail market is heating up with exciting partnerships designed to deliver new customer propositions and experiences, and create new growth for retailers. The news of Ikea partnering with Adidas — to understand what people want and need when it comes to exercising, sleeping and eating at home — is a great example of two brands with complementary synergies joining forces to benefit from shared insights. Such insights can be funnelled into R&D and inform new product and service lines. Partnerships are also transforming the in-store environment and giving consumers access to a wider array of products and services. Walmart recently announced that it’s expanding its partnership with digital automotive marketplace, CarSaver, to sell cars from kiosks at Walmart stores. And Kohl’s is leasing store space to discount food grocer, Aldi, in a bid to optimize its existing real estate footprint and increase store footfall by offering customers new value. Over the course of the next 12 months, we’re likely to see more retailers look beyond their brand or industry confines to see what partnerships or innovations they can capitalize on by teaming up with other players, large and small, in the retail sector and beyond.

The reason for the renewed momentum around partnerships is that growth is becoming increasingly challenging to come by — and large retailers are realizing that they cannot achieve it as quickly as they would like by going it alone.”

The reason for the renewed momentum around partnerships is that growth is becoming increasingly challenging to come by, and large retailers are realizing that they cannot achieve it as quickly as they would like by going it alone. According to Accenture Strategy research, less than a quarter of large retailers globally are very confident that they will achieve their 2020 growth targets, and 71% are concerned that current growth strategies are at high risk of disruption. As such, retailers, particularly many traditional brick-and-mortar companies and department stores which have been slow to innovate or failed to keep up with customer trends, are rethinking their growth strategy. Our research suggests that 82% of retail leaders globally say that building ecosystems — where companies join forces with a multitude of players to share customer insights, technology and industry knowledge — is critical to gaining a competitive advantage. Such ecosystems — as proven in other industries, including technology, financial services and consumer goods — can enable rapid innovation, proto-typing and proposition co-creation, as well as helping retailers to access new customer segments or enter new markets. A third of large retailers globally are looking for ecosystem partners today. The beauty of ecosystems is that no single company owns or operates all components of the solution. The value generated from this type of collaboration is much larger than the combined value each of the players could contribute individually. Critically, the risk is distributed equally, which will reassure many retailers. Research shows that 61% of executives at large retailers believe that more than half of their company revenues will be generated from ecosystems in the next five years. In time, even direct competitors will put aside rivalries in a form of “co-opetition” to pursue new growth opportunities.

Retailers pursuing disruptive growth by building ecosystems should consider: Setting the vision: For ecosystems to deliver growth, it’s important for retail leaders to consider what the strategic intent and innovation goals are upfront. When ecosystem players combine their functional, technology and industry strengths and capabilities, they can deliver exciting new customer propositions and open new markets. Identifying the right partners: Selecting the right partners is critical to ecosystem success. Retailers should look for partners with complementary capabilities, a collaborative mindset, industry experience, customer relationships and data to set themselves up for success. They must also clearly define how data will be shared and how success will be measured. Proper governance frameworks can ease fears and reduce friction among participants. Orchestrating the ecosystem: Once companies with distinct capabilities join together with a shared vision and clear outcomes, they can launch and operate their ecosystem. The process involves planning and testing the ecosystem design and piloting the market play. Successful ecosystems will enable retailers to drive new value beyond what they’re able to do in isolation. The creation of ecosystems presents another opportunity for retailers to tap into new sources of growth and get ahead of the waves of change that are currently impacting the industry. With the right partners, collaborative mindset and predetermined measures of success, retailers have a lot to gain. — Jill Standish is senior managing director, global retail lead, Accenture. Frank Layo is managing director, Kurt Salmon, part of Accenture Strategy. SEPTEMBER/OCTOBER 2018

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EMERGING CONCEPTS

BabyList Carves Unique Niche E-tailer blazes new, ‘universal’ path

By Deena AmatoMcCoy BabyList is not your traditional gift registry — not by a long shot. The online upstart — the fastest-growing baby registry in the United States — puts a unique spin on the concept of baby-gift registries with a tool kit that combines a “universal” registry, subscription box and robust editorial content, all backed by the latest technology. Unlike traditional store-specific registries, BabyList allows parents-to-be to put any item from any store on its one registry — with all merchandise curated in one place. And in another major point of distinction, BabyList lets parents request unconventional items – from diaper service subscriptions to children’s museums memberships. They can also register to create cash funds that can be used towards everything from cooked meals to babysitters to college — and, most recently, life insurance. “Every family is unique, and people today don’t want to be constrained to one retailer,” said Natalie Gordon, founder and CEO of BabyList. “Parents-to-be often have between two and three store registries, as well as those with boutiques and on Instagram. However, many parents are also looking for help with favors or cash funds. This is a way to connect with your ‘village.’” Ease of Use: The site is designed for ease of use. Expectant parents start their journey by creating a registry and adding specific items to their wish list. They can also create their registry from a personalized “checklist” tool, answering a series of questions about their lifestyle and preferences. BabyList then creates a personalized checklist of items based on responses, and also suggests additional items tailored to the user’s preferences. Browser bookmarklets enable registers to 010

BabyList

add items to their lists from any retailer on the Web. The site is optimized for Pinterest, enabling users to click a “BabyList Button” to save content from any store on the social media site. Users can also add links from other stores’ registries, and receive alerts when item prices change. Founded in 2011, BabyList is the brainchild of Gordon, a former Amazon software developer, and member of the team that launched AmazonFresh. The inspiration for the new enterprise came when Gordon was pregnant with her first child. Unhappy with existing baby registries, she decided to create a site that would offer a much wider variety of items for expectant parents. “At the time, nothing was easy to share, or had the items that were important to us, then — like a monthly cloth diaper subscription service, or someone willing to walk our German Shepard each morning,” she recalled. Her efforts gained the attention of product manufacturers, which eventually evolved into business partnerships. BabyList began collaborating with these suppliers and started highlighting their products on its Instagram and Facebook pages, which attracted more followers. Since then, the company has also part-

nered with online retailers, a move that expanded the company’s breadth, as well as its income. “We created an affiliate program with some retailers, so each time an item is purchased on their website through our link, we get revenue,” Gordon explained. “We also feature paid advertising for brands to them reach more customers through our site.” The site has developed a fast following — one-third of all first-time families now create a BabyList registry. Seventy percent of BabyList traffic is now generated on mobile devices. YouTube Channel: BabyList is media savvy. Website content is bolstered with a YouTube channel filled with product videos that are uploaded several times a week. Content includes baby gear demos and reviews created by parents, “howto” videos, as well as an informational pregnancy series. To date, 1.5 million people have watched the BabyList product videos. The company keeps expanding with new services. In January, BabyList launched the Hello Baby Box, which is filled with all sorts of trial size products, and includes a “registry cheat sheet” to streamline the registry process. In July, BabyList broke new ground by launching a strategic relationship with Prudential Financial to create a crowdfunded life insurance solution designed specifically for expecting parents. Users who create a Babylist registry now can also select a Prudential policy, asking friends and family to contribute towards the life insurance premium. A custom tool created by Prudential and Babylist helps estimate how much life insurance coverage is needed for each individual family. After funds are gifted to the expecting parents, they will have the option to visit Prudential’s website to apply for a term life insurance policy. “Given our customers’ interest in life insurance, we think that a strategic relationship with Prudential, a company that people have relied on for their protection needs for more than a hundred years, makes perfect sense for our users,” stated Gordon. SEPTEMBER/OCTOBER 2018

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NEW CONCEPTS

New Formats in the Spotlight By Marianne Wilson

Personalization and technology are woven into the in-store experiences in new store formats from Petco and Nike. Here’s a look at the new initiatives

PETCOACH

Petco has brought an online brand it acquired last year into the physical space. The retailer’s new pet-care store concept, PetCoach, offers personalized pet services, products and experiences to address total pet health and wellness. The new format, which debuted in San Marcos, Calif., brings Petco’s previously online-only, veterinary-led PetCoach platform to life in a brick-and-mortar setting — enhanced by digital and mobile tools — that gives customers 24/7 access to support for their pets. (Petco acquired PetCoach in April 2017.) The retailer also is testing a membership offer that for a monthly fee of $9 gives customers access to several free veterinary visits per year, along with discounted rates on other items. With a limited selection of top natural pet food brands, PetCoach is focused on service. On-site offerings include grooming, training, veterinary care, nutrition consultations, day care, self-wash, mobile vet house calls and even dog walking. The

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space is designed to highlight the service offerings, with clear visibility into each service area and gathering spaces for personal interactions and educational events. According to Petco, every service and product in the store has been directly reviewed and approved by a veterinarian. “With PetCoach, we’re reinventing the idea of a traditional ‘pet store’ by providing complete care experiences — from grooming, training and day care to full-service veterinary care — that simply can’t be delivered by mail or by a mass retailer,” said Petco CEO Ron Coughlin, who took the helm of the chain on June 18. Online, customers create custom pet profiles, and book in-store service appointments. They can also access immediate professional pet health advice from licensed veterinarians, order from a curated selection of pet food and supplies, and search a library of content relevant to their pet, including their health and vaccination records, service history and more.

NIKE LIVE

Nike raises the bar on localized shopping with its newest retail concept, Nike Live. The format, which debuted under the Nike by Melrose banner on Melrose Avenue in Los Angeles, uses data from the brand’s digital channels to meet the needs of neighborhood consumers — specifically, local members of the NikePlus loyalty program. The store’s location and inventory were selected based on insights gained from the analysis of digital commerce data of Nike Plus members (from the Zip codes around the location). New apparel, footwear and accessories — specific to local needs regardless of Nike’s broader seasonal priorities — fill the store on a bi-weekly basis (a Nike first). NikePlus members can reserve items to in-store lockers, opening the lockers with their member QR code. They can also scan merchandise barcodes for product information (including stock availability in nearby locations or online) and more via Nike’s new retail service app. In addition, NikePlus members are given an extra incentive to make return visits — they can scan their member QR code at a vending machine-styled “unlock box” every two weeks to receive free product or rewards. The 4,557-sq.-ft. outpost offers a sleek, tech-enhanced shopping experience, with an array of services that range from one-on-one consultations to curbside order pickup and returns. At the centrallylocated “Sneaker Bar,” shoppers can get expert shoe advice and receive “the fastest shoe buying experience Nike offers,” the company said. Other store features include the “Dynamic Fit Zone,” which includes a lounging area, fitting room, spaces for alterations and fittings, and a treadmill where customers can try out Nike footwear. Store associates also conduct one-on-one consultation sessions with NikePlus members in this area. SEPTEMBER/OCTOBER 2018

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The

POWER OF

data A State of the Industry Report, by

Contents 2A Agent of Change 3A Engaging Consumers Intelligently and Creatively 4A, 5A Talking Privacy With Consumers; Fighting Payment Fraud; What Consumers Think 6A, 7A Q&A: A Look Ahead 3A CSA Top 100

Agent of

Change Forthe thepast pastfew fewdecades decadestechnology technologyhas hasdriven drivenretail retailtrends. trends.The Theagent agentof ofchange change For inthe thenext nextdecade decadewill willbe bethe thepower powerof ofdata. data. in Headlinessuggest suggestthat thatinvestment investmentin indata datais isnecessary necessaryto tocompete competeand andeven even Headlines survivein inthe theretail retailspace. space.From Fromdemographic demographicdata datato toonline onlineand andin-store in-storepurchase purchase survive histories,from frompayment paymenttrends trendsto toloyalty loyaltyinsights, insights,data datais isseemingly seeminglyeverywhere. everywhere. histories, Butwhat whatexactly exactlydoes doesititall allmean? mean? But Datais istransforming transformingthe theretail retaillandscape landscapebefore beforeour oureyes, eyes,driving drivingthe theomnichanomnichanData nelrevolution revolutionand andthe therapid rapidchanges changesin inthe theconsumer consumershopping shoppingexperience. experience.Data Dataininnel sightsimprove improvecustomer customerexperiences experiencesand andinfl influence uenceshopping shoppingbehavior behaviorin inways waysnever never sights beforeseen seenin inthe theretail retailindustry. industry. before Retailersare arefifiguring guringout outwhat whatmakes makesconsumers consumerstick, tick,how howto tomake makethem themhappy, happy, Retailers andhow howto tokeep keepthem themcoming comingback. back.In In2018 2018and andbeyond, beyond,making makingthe themost mostof ofdata dataas asaa and strategicresource resourcewill willbe beaakey keyto toretailers’ retailers’success. success. strategic Thisstate stateof ofthe theindustry industryreport reportlooks looksat athow howdata datais isaccelerating acceleratingcommerce commerce This by helping helping retailers retailers understand understand consumer consumer behavior, behavior, fifight ght payment payment fraud, fraud, engage engage by ■ consumers on on their their terms, terms, and and start start aa dialog dialog with with consumers consumers about about privacy. privacy. ■ consumers

SEPTEMBER/OCTOBER 2018

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Engaging Consumers Intelligently and Creatively We’re moving moving beyond beyond the the age age of of We’re innovation and and into into the the age age of of experience. experience. innovation Retailers and marketers need to focus Retailers and marketers need to focus on the the data data that that enables enables and and crafts crafts those those on experiences. Data sits underneath and experiences. Data sits underneath and drives consumer consumer expectations expectations of of seamless seamless drives commerce. commerce. Opening aa dialog dialog for for informed informed converconverOpening sation between retailers and consumers sation between retailers and consumers was once once only only aa distant distant dream dream for for retailers. retailers. was Being able to do so at the point of purchase Being able to do so at the point of purchase is nothing nothing less less than than revolutionary. revolutionary. Properly Properly is harnessed data enables more personalized harnessed data enables more personalized and therefore therefore relevant relevant conversations, conversations, and elevating consumer engagement to an an elevating consumer engagement to art form. form. art However, sometimes the the best best engageengageHowever, sometimes ment is is total total transparency. transparency. Take Take payments. payments. ment The most seamless, fast, and compelling The most seamless, fast, and compelling payments experience experience is is one one where where you’re you’re payments not thinking about payments at all. Connot thinking about payments at all. Consumers should should be be able able to to come come and and go, go, pick pick sumers

up what they need, and use the services that they need without any conversation. It’s increasingly clear that loyalty programs are central to engagement. A 2018 report by Worldpay and Socratic Technologies revealed that 55% of consumers surveyed use membership deals always or most of the time, with the most frequently used discounts tied to loyalty membership. When payment is made retailers should be keeping track of and rewarding that loyalty. Money ought to change hands seamlessly. The friction of having to sort through all your loyalty cards—or even type in your phone number—melts away. The ease of payment and the reward is what sticks. That’s a seamless customer journey charged by data. Consumer expectations are completely changing in this age of experience. The intelligent application of data is the connective tissue that enables those seamless

experiences. Retailers that satisfy those elevated consumer expectations are strongly poised for success in the form of increased visits and customer loyalty. Integrating data from different sources helps develop a broader understanding of who that customer is and what makes them tick. Knowing that a customer is a mom, for example, with kids who maybe travels once a month is important as these are key factors inﬂuencing her purchases. Having that fuller picture helps a retailer understand the potential to grow the customer’s basket size or visit frequency, turning her into a $1,000 a month shopper. Seeing the full picture beyond how she spends allows retailers to better serve her as a customer. Having the right people and processes around your data to nail that— and scale that—provides insights that might change everything from how you advertise to how you stock your shelves. ■

Understanding Consumer Behavior The ultimate ultimate prize prize for for the the retailer retailer is is aa The clear and and complete complete picture picture of of the the conconclear sumer. Retailers Retailers are are increasingly increasingly blending blending sumer. demographic data—age, data—age, gender, gender, househousedemographic hold type—with type—with purchasing, purchasing, payments payments hold and other other insights insights to to better better understand understand and consumers. If If you you are are only only looking looking consumers. CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

through the lens of what shoppers have done in your store, you’re missing a huge part of the picture. Take a grocer that has a customer spending $400 per month in her store. The customer has been loyal, shopping in the store almost once a week for over a year, which sounds great. But a

wider view might reveal that the customer is spending $1,200 a month on restaurants, quick serve— and other grocery. Knowing that gap exists opens prime marketing opportunities to better serve that customer and increase the value of the relationship. ■ 17

Talking Privacy With Consumers

Retailers face both rising consumer expectations and evolving regulatory requirements around data privacy. Privacy is extremely important to consumers, but it also offers a great opportunity for retailers to open a dialog with consumers. Retailers can show that they are deserving of consumer trust by demonstrating value in the data exchange. If the value they are getting isn’t well understood, consumers may feel used. It’s harder to establish trust when data drives retargeting and popup ads that annoy consumers. On the other hand, intelligent use of data that delivers real value and improves consumer experiences starts a virtuous cycle. When retailers improve the shopping experience and reward consumers by leveraging their data, they aren’t as likely to worry about the retailer invading their privacy. 18

They’re more likely to appreciate the retailer for being smart. A little give and take can go a long way toward building relationships with consumers. Research conducted in 2018 by Worldpay and Socratic Technologies revealed that more than half (52%) of consumers are willing to offer personal information in exchange for free shipping. Retailers do need to demonstrate good stewardship of personally identiﬁable data and payments data from a security standpoint. Protecting against worst-case scenarios like data breaches is vital. But retailers who get it right are demonstrating to customers the value they receive in return for the use of their data. Customers are likely to reward those efforts with greater trust, repeat visits and bigger baskets. ■ SEPTEMBER/OCTOBER 2018

CHAINSTOREAGE.COM

Fighting Payment Fraud

Nothing puts the brakes on retail commerce like theft. Fraud is a clear and present threat to consumer conﬁdence and retailer bottom lines. Data is now an essential tool in the ﬁght to safeguard and secure commerce, anywhere and everywhere it takes place. Attacking fraud relies on many of the same principles of data analysis that enable better understanding of shopping

behavior. Fighting fraud starts with understanding what ‘good’ looks like, rather than trying to always understand ‘bad’ transactions. Data allows you to understand how someone’s spending so potential fraud is flagged the instant something doesn’t look right. Data leveraged with the right tools helps prevent fraud before it ever takes place. The hard work is connecting the dots and leveraging machine learning to block bad transactions while letting the good ones through. Getting it wrong either way is a big deal. You’re either losing money to fraud or you have an upset customer because they were declined. The goal is to maximize acceptance of good transactions while locking out the bad. Fraudsters aren’t packing up and going home. They’re going to find leaks, and they’re going to find a way through. Data offers the raw material for retailers to build meaningful defenses. Retailers with visibility into enough data to strike that balance will have a strong leg up on the competition by ensuring a hassle-free and safe shopping experience for the consumer. ■

Data Breaches:

What Consumers Think Worldpay and Socratic Technologies conducted a survey of 500 consumers to learn more. Here are some highlights.

• About one in four consumers (24%) have been impacted by a data breach that compromised their payment card information. Across generations, Gen Xers are the group with the highest incidence rate at 26%. Retirees have the lowest incidence rate at 20%.

• After a data breach, consumers recall retailers and restaurants notifying them by mail and offering credit and identity theft monitoring. Mailed letters are the most common action reported by survey respondents at 39%. Credit and identity theft monitoring are the second most popular action with 37% of participants reporting. Email notiﬁcations are a close third at 31%.

• Consumers believe that mass merchants are the chief victims of recent data breaches. Survey respondents are most aware of data breaches reported by large mass merchants at 51%. This is followed by department stores at 23%.

• When a data breach affects their personal information, consumers expect to be notiﬁed and offered credit and identity theft monitoring. Survey participants expect an email notiﬁcation with 75% of respondents reporting. This is followed by credit and identify theft monitoring (60%) and mailed letters (60%).

• Among restaurants, respondents most often hear about data breaches in the quick-service sector. Consumers are most aware of data breaches at fast casual/quick service restaurants (20%), followed by family dining (10%) and coffee shops/cafes (6%).

• Millennials have the highest expectations when it comes to email notiﬁcations and credit and identify theft monitoring. The youngest generation has the highest expectations for these services to be offered, with 83% of Millennials expecting

CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

email notiﬁcations and 68% looking for credit and identity theft monitoring.

• Most consumers are satisfied with the steps taken by retailers and restaurants following data breaches. In the survey, 86% of total participants express their satisfaction with the responses they received from merchants following data breaches. • The majority of data breach victims continue to patronize retailers and restaurants that have come under attack. Among the victims of data breaches that participated in the survey, 61% indicate that they “probably” or “definitely” would continue patronizing a retailer or restaurant that was attacked. For survey participants that have NOT yet been victims of a data breach, only 50% report that they “probably” or “definitely” would continue patronizing a retailer or restaurant that exposed their data. ■ 19

Q&A:

A Look Ahead Nicole Jass, Senior Vice President, Integrated Payments, Fraud, and Data Products at Worldpay, discusses what she sees on the horizon for data’s influence on retail.

Worldpay: What do you ﬁnd most exciting about connecting data trends to customer engagement? Nicole Jass: It’s a thrilling time for retail. There is a real sense of shared optimism about how intelligent use of data improves both consumer experiences and retailer bottom lines. Connected data is transforming and elevating the very nature of engagement across the retail landscape. Retailers are reducing friction in payments, realizing the immense promise of loyalty programs, and becoming more responsive to consumer needs. I love the retailers who are connecting all of the dots for their shoppers. I frequent many retailers that are doing a great 20

job of using data to create unified experiences across channels. These companies tie everything together from curated emails that understand each consumer’s shopping history, to being able to checkout right there while you’re buying in-store, to fantastic app experiences. The brands that are getting it right are the ones that surround the customer and get them the apps, the in-store experience and the marketing campaigns that resonate. They’re all tied together—and that’s the magic. Obviously it’s compelling for the retailer because it’s going to be able to drive more loyalty, but I get excited about it as a shopper to have those more meaningful experiences.

W: How How have have loyalty loyalty programs programs W: evolved as as competition competition increases increases and and evolved using data data analysis analysis becomes becomes more more using prevalent? prevalent? J: At At best, best, we’re we’re making making ourselves ourselves J: invisible. Think Think about about times times where where invisible. you pay pay for for transportation transportation without without you exchanging money money or or even even swiping swiping aa exchanging card. You You can can also also think think of of amusement amusement card. parks that that incorporate incorporate an an entire entire expeexpeparks rience into into aa bracelet bracelet or or an an app. app. The The rience fuel is is data. data. fuel Data drives drives the the expectation expectation of of the the Data consumer that that it’s it’s all all seamless. seamless. II can can consumer come and and go go as as II need, need, the the money money is is come transacting without without me me thinking thinking about about transacting it and and you you should should be be rewarding rewarding me me for for it spending that that money. money. The The friction friction of of spending having to to search search through through cards cards goes goes having away. The The connective connective tissue tissue is is collectcollectaway. ing and and connecting connecting the the data. data. ing W: What’s What’s next next on on the the horizon horizon W: for retailers retailers seeking seeking insight insight from from for consumer data? data? consumer J: II think think of of the the ways ways retailers retailers are are J: using consumer consumer data data in in three three buckets: buckets: using better and and more more thoughtful thoughtful adveradverbetter tising, intelligent intelligent measurement measurement and and tising, attribution, and and fifinally, nally, strategy. strategy. attribution, Advertisers have have made made great great strides strides Advertisers in using using omnichannel omnichannel shopping shopping data data to to in better connect connect with with their their audiences— audiences— better that story story is is well well understood. understood. MarketMarketthat ers have have been been using using data data to to demondemoners strate value value through through more more granular granular strate measurement tools. tools. That That attribution attribution measurement piece still still needs needs work work but but is is progressprogresspiece ing nicely. nicely. The The future future horizon horizon is is leverlevering aging data data to to inform inform strategy—how strategy—how to to aging take aa fresh fresh look look at at footprint footprint stratestratetake gy, or or omnichannel omnichannel experiences, experiences, for for gy, example. Used Used right, right, data data can can inform inform example. optimized confi configurations gurations of of stores stores optimized in aa given given region region and and can can help help decide decide in what kind kind of of merchandise merchandise to to put put in in what SEPTEMBER/OCTOBER 2018 CHAINSTOREAGE.COM

each store based on demographics and localized sales patterns. Data can help with everything from content curation to understanding how people are spending online to inﬂuence local stores. Nearly all retailers are on a mission to collide the worlds of online and in-store because the consumer expects there to be this really cohesive experience anywhere they touch a brand. It’s a deﬁning anchor of omnicommerce—they’re just not separate anymore. Being able to connect the experiences so consumers can focus on the value of their purchases instead of the means to obtain them is critical. That fusion starts with connecting the data. The future is about the ability to connect the dots, make retailers’ marketing dollars go further, and ensure that what they’re spending on is actually driving consumer behavior.

that’s so natural to us, and especially how we shop.

W: What should we expect now that artiﬁcial intelligence is maturing and making its way into the retail market?

Think about walking into a store, saying “Hey,” to your phone or watch, “Where do I ﬁnd x?” You’re directed to the proper aisle, grab your item, and walk out the door with the simple words “pay with my Amex” or “pay with my Visa.” That’s data and AI en-

J: One of the most relevant and inﬂuential applications of artiﬁcial intelligence is voice. Voice is an interface

The brands that are getting it right are the ones that surround the customer and get them the apps, the in-store experience and the marketing campaigns that resonate….They’re all tied together—and that’s the magic.

abling truly seamless retail experiences. Voice is a fascinating interface that promises inﬁnite practical utility. Voice is naturally plugging into our total experience. If you watch children interacting with Siri and Alexa—it’s not novel to them. It’s grounded in how they think of the world. Retailers talk a lot about enabling conversations with consumers. Now those conversations are literal, not just ﬁgurative. W: E MV is winning the battle against fraud in-store, but the omnichannel merchant still needs to be diligent about fraud online. How can a payments partner help retailers address card not present fraud? J: Data is extremely powerful in combatting fraud. The key is if you understand the good and what’s working, you can more easily see when something doesn’t work. Look for a partner that understands this. If you get it wrong and decline a good transaction, that’s a poor customer experience. You can lose customers by declining good transactions You need to get it right when they hit submit. ■

About Worldpay Worldpay is a leading payments technology company with unique capability to power global integrated omni-commerce. With industry-leading scale and an unmatched integrated technology platform, the company offers clients a comprehensive suite of products and services globally, delivered through a single provider. Worldpay processes over 40 billion transactions annually through more than 300 payment types across 146 countries and 126 currencies. The company’s growth strategy includes expanding into high-growth markets, verticals and customer segments, including global eCommerce, Integrated Payments and B2B. Worldpay, Inc. was formed in 2018 through the combination of the No. 1 merchant acquirers in the U.S. and the U.K. The ﬁrm trades on the New York Stock Exchange as “WP” and the London Stock Exchange as “WPY.” Visit us at www.worldpay.com.

CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

TOP

Retailers 2018

mid a disruptive and evolving retail landscape, Walmart Inc. still stands likes a colossus. The retail giant has topped Chain Store Age’s Top 100 ranking of the nation’s largest retail companies (based on annual revenue) for more than 20 years. It is the largest retailer the U.S. and the world has ever seen. The past year marked a new milestone for Walmart as it topped $500 billion in revenue, becoming the first U.S. corporation to do so. Walmart’s revenue is more than double that of the country’s second largest company, Exxon Mobil ($244.4 billion). Walmart’s transformation from a traditional brick-and-mortar retailer to a high-tech innovator has been nothing short of remarkable. While physical stores remain a cornerstone of its success and strategy, Walmart has been investing heavily in its digital operations — and shows no signs of backing off. The company’s $3.3 billion acquisition of Jet.com in 2016 not only gave Walmart a new online platform, but added a new, tech-savvy retailer to its C-suite via the appointment of Jet founder Marc Lore as CEO of Walmart’ U.S. e-commerce operations. Under Lore, Walmart has been on an online acquisition spree, adding, most recently, such hip brands as Modcloth and Bonobos to its portfolio. The deals not only brings new online talent into Walmart, but also allow the retailer to target younger, more affluent customers, something that is also part of its playbook. The chain’s revamped website and other efforts, such as its new

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apparel lines and mattress and bedding brand, also play into the same. Walmart is also integrating more and more technology into its stores and leveraging them as valuable physical assets. From frictionless checkout to curbside pickup of online grocery orders to such click-and-collect innovations as in-store pickup towers, the chain keeps expanding its omnichannel options. It’s also testing self-driving cars in Arizona for grocery pickup. AMAZON Walmart’s biggest and fiercest rival, Amazon, is No. 2 on the list for the second consecutive year. The online behemoth is growing by leaps and bounds — its North American revenue jumped 42% last year. With its grasp on retail secure, the company continues to burnish its reputation as an industry disruptor, with package delivery, pharmacy and healthcare just a few of the newer items on its agenda. And at press time, reports said Amazon was considering opening some 3,000, cashier-less Amazon Go stores by 2021. Innovation is woven into the very fabric of Amazon. The company holds more patents (7,096 as of Jan. 1, 2018) than any other retailer. The patents span a wide array of emerging technologies, from machine learning to artificial intelligence to robotics. Amazon also invested $16.1 billion in R&D activity last year, more than any other U.S. company. STABILITY For all the changes the retail industry

has experienced in recent years, the Top 100 rankings have remained extremely consistent in recent years, particularly in the upper echelons. The list remains dominated by retailers with extensive store fleets. But while the retailers that dominate the list remain fairly stable year-over year, it is by no means business as usual for these companies. The lines that separate traditional retail from online retail are rapidly disappearing and for a majority of the Top 100, omnichannel is the name of the game. From Macy’s to Best Buy to Kohl’s, retailers are shuttering poor performing locations and/or trying on smaller footprints and investing in digital capabilities. Even companies that were slow to embrace the convergence of physical and online are getting in the act. Costco Wholesale Club, No. 3 on the list, has been ramping up its offerings with two-day grocery delivery and same-day fresh delivery. It has also given in-store employees in select locations tablets to facilitate online orders. METHODOLOGY: The annual Top 100 ranks companies by total revenue (as opposed to only retail sales) as reported in each firm’s most recently completed fiscal year. The numbers for privately owned companies that do not release annual reports and/or financial statements are estimates based on independently published reports and CSA research. In addition to annual revenue, the metrics in the Top 100 include net income and store count. For retailers based in North America, the data reflects the company’s total global store network (except where otherwise noted.) For foreign-based companies, such as Ikea, only the metrics relating to the retailer’s North American division are given (except where otherwise noted). SEPTEMBER/OCTOBER 2018

CHAINSTOREAGE.COM

Walmart Inc.

Bentonville, Ark. 1/31/2018 www.walmart.com

Amazon.com

Costco Wholesale Corp.

The Kroger Co.

Walgreens Boots Alliance

The Home Depot

CVS Health R

Seattle 12/31/2017 www.amazon.com Issaquah, Wash. 12/14/2017 www.costco.com Cincinnati 2/3/2018 www.kroger.com

Deerfield, Ill. 8/31/2017 www.walgreens.com

Atlanta 1/28/2018 www.homedepot.com Woonsocket, R.I. 12/31/2017 cvshealth.com

Target Corp.

Minneapolis 2/3/2018 www.targetstores.com

Loweâ&#x20AC;&#x2122;s Cos.

Mooresville, N.C. 2/2/2018 www.lowes.com

Albertsons

Boise, Idaho 2/24/2018 www.albertsons.com

Alimentation Couche-Tard

Laval, Quebec 4/29/2018 www.couche-tard.com

Ahold Delhaize

Chantilly, Va. 12/31/2017 www.aholddelhaize.com

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

2016 Store Count

500,343,000

485,873,000

9,862,000

13,643,000

11,718

11,695

177,866,000

135,987,000

3,033,000

2,371,000

485*

126,172,000

116,073,000

2,679,000

2,350,000

741

122,662,000

115,337,000

1,907,000

1,975,000

2,782

2,796

118,214,000

117,351,000

4,101,000

4,191,000

13,200

100,904,000

94,595,000

8,630,000

7,957,000

2,284

2,278

79,400,000

81,100,000

6,622,000

5,319,000

9,803

9,700

71,879,000

69,495,000

2,934,000

2,737,000

1,822

1,802

68,619,000

65,017,000

3,447,000

3,093,000

2,152

2,365

59,924,000

59,678,000

463,000

-374,000

2,318

2,324

52,394,400

37,904,500

1,680,500

1,208,900

12,740

10,869

46,119,320

40,823,839

1,954

1,990

42,151,000

39,403,000

1,000,000

1,228,000

1,008

1,610

35,865,000

33,184,000

2,608,000

2,298,000

4,070

3,812

34,560,000

34,274,109

2,025,688

1,167

1,136

Best Buy Co.

Richfield, Minn. 2/3/2018 www.bestbuy.com

The TJX Cos.

Framingham, Mass. 2/3/2018 www.tjx.com

Publix Super Markets

Lakeland, Fla. 12/31/2017 www.publix.com

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available, *: Whole Foods Market (472); Amazon Books (13) CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

Walmart is the first retailer in history to exceed

$500 billion in annual revenue.

60%

of retailers believe that their company will likely face disruption from more innovative, nimble and customercentric organizations;

60%

also believe their firms are not investing quickly enough to keep pace with the speed of technology change and consumer expectations. Source: 2018 Retail Mobility Insights Report,â&#x20AC;? from Oracle Retail

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42%

of retailers said that faster delivery of online orders is their top customerfacing priority, and many plan to use physical stores to achieve that goal. Omnichannel services such as buy online, pick up in-store are an in-store priority for 21%; 15% cite ship-fromstore as a fulfillment priority.

Source: “State of Retailing Online,” from Forrester and the NRF)

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

2016 Store Count

31,059,744

23,153,800

502

497

24,837,000

25,778,000

1,547

619,000

852

829

23,471,000

21,986,600

1,538,960

1,251,100

14,534

13,320

23,000,000

340

329

22,386,800

21,315,900

2,884,700

2,817,700

27,339

24,464

22,245,500

20,719,200

1,714,300

896,200

14,835

14,334

21,528,968

32,845,073

943,470

405,300

2,550

4,536

20,000,000

19,620,000

750

19,095,000

18,686,000

859,000

556,000

1,158

1,169

18,889,000

17,515,000

1,700+

18,519,000

14,962,000

9,700

8,707

16,702,000

22,138,000

-383,000

-2,221,000

1,002

1,430

16,600,000

16,000,000

242

230

16,300,000

16,000,000

196

275

Apple Inc. ER

Cupertino, Calif. 9/30/2017 www.investor.apple.com

Macy’s Inc.

Cincinnati, Ohio 2/3/2018 www.macys.com

Dollar General Corp Goodlettsville, Tenn. 2/2/2018 www.dollargeneral.com

H-E-B

San Antonio 10/31/2017 www.heb.com

Starbucks Corp.

Seattle, Wash. 10/1/2017 www.starbucks.com

Dollar Tree

Chesapeake, Va. 2/3/2018 www.dollartree.com

Rite Aid Corp.

Camp Hill, Pa. 3/03/2018 www.riteaid.com

Pilot Flying J

Knoxville, Tenn. 12/31/2017 www.pilotflyingj.com

Kohl’s Corp.

Menomonee Falls, Wis. 2/3/2018 www.kohlscorporation.com

Verizon Wireless ER

Basking Ridge, N.J. 12/31/2017 www. verizonwireless.com

7-Eleven (US and Canada) E Dallas 2/28/18 www.7-eleven.com

Sears Holdings Corp. Hoffman Estates, Ill. 1/28/2017 www.searsholdings.com

Meijer E

Grand Rapids, Mich. 2/3/2018 www.meijer.com

Wakefern Food Corp. Keasbey, N.J. 10/1/2017 www.shoprite.com

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available 10A

SEPTEMBER/OCTOBER 2018

CHAINSTOREAGE.COM

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

2016 Store Count

15,855,000

15,516,000

848,000

676,000

3,594

3,659

15,137,000

14,498,000

437,000

354,000

366

349

14,985,000

12,215,757

1,944,000

1,887,000

4,620

4,180

14,664,780

12,650,000

1,750

1,600

14,157,000

10,912,000

45,000

650,000

114

2,363

14,134,732

12,866,757

1,362,753

1,117,654

1,622

1,533

Gap Inc.

San Francisco 2/3/2018 www.gap.com

Nordstrom

Seattle 2/3/2018 www.nordstrom.com

The Sherwin-Williams Co.

Cleveland 12/31/2017 www.sherwin-williams.com

Aldi E

Batavia, Ill. 12/31/2017 www.aldi.us

Supervalu

Eden Prairie, Minn. 2/25/18 www.supervalu.com

Ross Stores

Dublin, Calif. 2/3/2018 www.rossstores.com

AT&T Wireless ER

Dallas 12/31/2017 www.att.com

13,394,000

13,435,000

2,200

2,900

12,632,000

12,574,000

983,000

1,158,000

3,075

3,074

12,506,000

12,547,000

68,000

24,000

872

1,013

12,495,995

12,095,302

50,301

44,224

215

210

L Brands Inc.

Columbus, Ohio 2/3/2018 www.lb.com

J.C. Penney Co.

Plano, Texas 2/3/2018 www.jcpenney.com

BJ’s Wholesale Club Westborough, Mass. 2/3/2018 www.bjs.com

Bed Bath & Beyond Inc.

Union, N.J. 3/3/2018 www.bedbathandbeyond.com

12,349,301

12,215,757

424,858

685,108

1,552

1,546

11,553,815

11,079,450

-467,821

-392,160

483

480

11,484,200

10,500,000

704

730

10, 995,660

10,290,540

475

460

Hudson’s Bay Company C Toronto, Ontario 2/3/2018 www.hbc.com

Southeastern Grocers

Jacksonville, Fla. 12/31/2017 www.bi-lo.com

Trader Joe’s E

Monrovia, Calif. 6/30/2018 www.traderjoes.com

AI spending will reach

$7.3 billion

annually by 2022—up from an estimated

$2 billion

in 2018. Spending will be strongest in customer service and sentiment analytics (54%). Source: “AI in Retail: Disruption and Opportunities 20182022,” from Juniper Research

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

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On average,

41%

of consumers receive between one and two packages from Amazon per week.

44%

of consumers have used some kind of sameday delivery service in the past year. Source: “Future of Retail 2018,” from Walker Sands

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

2016 Store Count

10,950,000

9,500,000

300+

10,888,676

10,635,676

1,280,869

1,241,007

5,814

5,609

10,240,000

11,021,000

181,000

529,000

1,394

1,441

10,000,000

9,600,000

245

240

10,000,000

9,141,000

800

756

9,709,700

9,367,800

783

754

9,567,000

8,979,000

-1,012

7,285

9,380,000

8,553,000

4,536,000

1,460,000

2,200

2,000

9,373,784

9,576,679

475,505

459,622

5,183

5,189

9,224,600

8,607,900

34,700

353,200

7,276

7,535

8,977,726

8,593,096

1,133,804

1,037,691

5,019

4,829

8,900,000

9,300,000

415

400

8,771,000

8,682,000

972,000

642,000

8,700,000

8,300,000

Menards E

Eau Claire, Wis. 12/31/2017 www.menards.com

Autozone

Memphis, Tenn. 8/27/2017 www.autozone.com

Office Depot

Boca Raton, Fla. 12/30/2017 www.officedepot.com

Hy-Vee M

West Des Moines, Iowa 9/30/2017 www.hy-vee.com

Wawa M

Wawa, Pa. 12/31/2017 www.wawa.com

Quik Trip M

Tulsa, Okla. 4/30/2017 www.quiktrip.com

eBay Inc.

San Jose, Calif. 12/31/2017 www.ebay.com

T-Mobile ER

Bellevue, Wash. 12/31/2017 www.t-mobile.com

Advance Auto Parts

Roanoke, Va. 12/30/2017 www.advanceautoparts.com

GameStop Corp.

Grapevine, Texas 2/3/2018 www.gamestop.com

O’Reilly Automotive Springfield, Mo. 12/31/2017 www.oreillyauto.com

Giant Eagle Inc. E

Pittsburgh 6/30/2017 www.gianteagle.com

QVC

West Chester, Pa. 12/31/2017 www.qvc.com

Wegmans Food Markets

Rochester, N.Y. 12/31/2017 www.wegmans.com

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available 12A

SEPTEMBER/OCTOBER 2018

CHAINSTOREAGE.COM

Army & Airforce Exchange Service

Dallas 2/3/2018 www.aafes.com

Dick’s Sporting Goods

Coraopolis, Pa. 2/3/2018 www.dickssportinggoods.com

Casey’s General Stores Ankeny, Iowa 4/30/2018 www.caseys.com

PetSmart E

Phoenix 1/31/2017 www.petsmart.com

IKEA North America E Conshohocken, Pa. 8/31/2017 www.ikea.com

Foot Locker

New York City 3/2/2018 www.footlocker.com

Staples

Framingham, Mass. 1/28/2018 www.staples.com

Bass Pro Shops Springfield, Mo. 12/31/2017 www.basspro.com

Tractor Supply Co.

Brentwood, Tenn. 12/31/2017 www.tractorsupply.com

WinCo Foods M

Boise, Idaho 3/31/2018 www.wincofoods.com

Ascena Retail Group Mahwah, N.J. 7/30/2017 www.ascenaretail.com

Dillard’s

Little Rock, Ark. 2/3/2018 www.dillards.com

Signet Jewelers Ltd.

Hamilton, Bermuda 2/3/2018 www.signetjewelers.com

Cumberland Farms M

Framingham, Mass. 9/30/2017 www.cumberlandfarms.com

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

2016 Store Count

8,600,000

8,300,000

376,000

384,000

2,700

8,590,472

7,921,981

323,445

287,396

845

797

8,391,124

7,506,587

317,903

177,485

2,073

1,978

8,310,000

7,000,000

1,600

1,500

8,278,469

6,789,000

7,782,000

7,766,000

284,000

664,000

3,310

3,363

7,630,000

18,247,000

-1,497,000

1,185

1,583

7,340,000

4,600,000

177

7,256,382

6,779,579

422,599

437,120

1,853

1,738

7,020,000

6,500,000

119

6,649,800

6,995,400

-1,313,800

93,800

4,807

4,906

6,261,493

6,256,971

221,324

169,220

292

293

6,253,000

6,408,400

486,400

531,300

704

751

6,178,798

6,201,000

600

566

42%

of Gen Z shoppers (those ages 18-22) prefer to shop in-stores vs online, a further

34%

prefer to shop instores and online equally, and

23%

percent prefer online only. Source: Profitect

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

13A

51%

of shoppers who used buy online, pickup in-store at least two times in the past 12 months made unplanned purchases when they went to retrieve their order. On average, shoppers spent

$40

more on unplanned purchases when making a click-andcollect pickup.

Source: â&#x20AC;&#x153;The Rise of the Click and Collect Superconsumer,â&#x20AC;? from OrderDynamics

Burlington Coat Factory

Burlington, N.J. 2/3/2018 www.burlingtoncoatfactory.com

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

6,084,766

5,590,950

384,852

215,873

629

592

5,884,506

4,854,737

555,234

409,760

1,074

974

5,880,000

4,488,300

397,500

591,000

1,332

1,043

5,572,320

7,900,000

481

550

6,689,020

6,741,200

568

550

5,388,400

5,125,500

147,400

161,200

4,418

4,363

5,361,960

5,197,292

390,498

378,159

1,371

1,367

5,350,000

5,221,000

2,953

2,933

5,292,359

5,083,812

259,545

305,387

631

629

5,270,980

5,200,439

189,832

152,828

1,416

1,432

4,976,553

4,825,335

-2,272,000

-12,308

295

241

4,910,000

4,300,000

791

740

4,900,000

4,700,000

245

230

4,900,000

5,250,000

238

Ulta Beauty

Bolingbrook, Ill. 2/3/2018 www.ulta.com

Tapestry

New York City 6/30/2018 www.tapestry.com

Racetrac Petroleum E

Atlanta 12/31/17 www.racetrac.com

2016 Store Count

Sheetz E

Altoona, Pa. 9/30/2017 www.sheetz.com

Ace Hardware

Oak Brook, Ill. 12/30/2017 www.acehardware.com

Michaels Stores Irving, Texas 2/3/2018 www.michaels.com

AVB Brandsource

Tustin, Calif. 12/31/2017 www.brandsource.com

Williams-Sonoma

San Francisco 1/29/2017 www.williams-sonoma.com

Big Lots Inc.

Columbus, Ohio 2/3/2018 www.biglots.com

Under Armour

Baltimore 12/31/2017 www.underarmour.com

Hobby Lobby

Oklahoma City, Okla. 12/31/2017 www.hobbylobby.com

Academy Sports & Outdoors Katy, Texas 12/31/2017 www.academy.com

Defense Commissary Agency Fort Lee, Va. 9/30/2017 www.commissaries.com

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available 14A

SEPTEMBER/OCTOBER 2018

CHAINSTOREAGE.COM

100

2017 Revenue [000]

2016 Revenue [000]

2017 Net Income [000]

2016 Net Income [000]

2017 Store Count

2016 Store Count

4,900,000

5,010,000

2,744

2,733

4,735,400

4,819,500

4,438

4,708

4,720,895

3,380,360

-244,614

-194,375

4,720,000

4,340,000

975

944

4,705,993

4,949,472

-531,759

-406,110

4,664,612

4,046,385

158,440

124,306

285

253

4,570,565

4,341,795

-138,914

12,948

323

305

4,500,00

4,200,000

214

207

4,290,000

3,700,000

294

293

Speedway LLC

12/31/2017 Erin, Ohio www.speedway.com

Luxottica Group (North America) R

Port Washington, N.Y. 12/31/2017 www.luxottica.com

Wayfair

Boston 12/31/2017 www.wayfair.com

Discount Tire

Scottsdale, Ariz. 12/13/2017 www.discounttire.com

Neiman Marcus

Dallas 7/29/2017 www.neimanmarcus.com

Sprouts Farmers Market San Bernardino, Calif. 12/31/2017

Smart & Final Stores Commerce, Calif. 12/31/2017 www.smartandfinal.com

Save Mart Supermarkets Modesto, Calif. 12/31/2017 www.savemart.com

Belk

Charlotte, N.C. 1/31/2018 www.belk.com

Stater Bros. Markets E

San Bernardino, Calif. 9/28/2017 www.staterbros.com

4,254,900

4,200,000

171

169

4,170,000

4,100,000

1,502

1,500

Petco Animal Supplies M

San Diego 1/31/2018, www.petco.com

Tiffany & Co.

New York City 1/31/2018 www.tiffany.com

4,169,800

4,001,800

370,100

446,100

315

313

4,002,700

3,794,977

53,874

54,189

199

201

3,800,000

3,500,000

135

137

3,795,549

3,609,865

204,163

212,449

1,047

1050

Ingles Markets

Black Mountain N.C. 9/30/2017 www.ingles-markets.com

Price Chopper/Golub Corp. E Schenectady, N.Y. 4/30/2017 www.pricechopper.com

American Eagle Outfitters

Pittsburgh 1/28/2017 www.ae.com

Source: Company reports unless otherwise noted E: Estimate, M: Media reports, R: Retail ops only, C: Results in Canadian dollars, NA: Not available CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

Three times as many Gen Z shoppers (ages 13-22) said they shop mostly in stores, compared to those shopping mostly online.

54%

of GenZers want control over what information they share, but

61%

also said they would feel comfortable sharing more information if they knew data is protected and securely stored. Source: National Retail Federation and IBM's Institute for Business Value

15A

TRENDS

Holiday Shopping Predictions By Marianne Wilson As retailers gear up for another holiday season, several forecasts provide some interesting insights as to what they should expect — online and off. Let’s start with brick and mortar. The busiest holiday shopping day of 2018 will fall on Black Friday, November 23, followed by Super Saturday, Dec. 22, and Saturday, Dec. 15, according to an annual survey by retail analytics firm ShopperTrak. This year marks the third consecutive year — and the last one before 2022 — when there will be four Saturdays in December leading up to Christmas Day, ShopperTrak pointed out, and an additional Saturday in December after the holiday. Similar to last year, the hours between 2 p.m. and 4 p.m. will be the busiest on the weekends, with 4 p.m. being the peak, with the same timing also holding true for Black Friday. Retailers should make sure that employee scheduling properly matches with the busiest days and these afternoon hours, ShopperTrak advised.

Here is ShopperTrak’s complete list of the 10 busiest shopping days, which it said will account for nearly 45% of all shopper traffic for the entire holiday season: 1) November 23–Black Friday 2) December 22–Super Saturday 3) December 15–Third Saturday in December 4) December 23–Sunday before Christmas 5) November 24–Saturday after Thanksgiving 6) December 08–Second Saturday in December 7) December 21–Friday before Christmas 8) December 26–Day after Christmas (aka “Boxing Day,” in some global regions)

9) December 01–First Saturday in December 10) December 29–Saturday after Christmas

What to expect..... Ryne Misso, director of marketing at market intelligence solutions provider Market Track, offers these holiday predictions: Stores will continue to reclaim their place under the tree. Expect to see retailers use their physical store locations as value differentiators during holiday 2018, with more in-store events (similar to Walmart’s holiday parties last year), more opportunities for shoppers to demo new products (like Best Buy’s VR demos in 2017), and other creative experiences that shoppers can only enjoy by visiting a store location. Voice commerce will become more than just a blip on the radar. Amazon’s Alexa technology has penetrated a huge number of American households — enough so that voice commerce may drive a relevant portion of sales during the upcoming holiday season. Look for Amazon to incentivize holiday shopping through Alexa-connected devices. 030

Online: The forecast for e-commerce holiday sales this year is mobile. Forty-six percent of all holiday orders will be placed on smartphones, edging out computers (44%), and tablets (9%), according to research from Salesforce. What other type of activity can retailers expect online? Salesforce’s “2018 Holiday Seasons Predictions and Insights” report also predicts that Cyber Week — the period beginning the Tuesday prior to Thanksgiving (Nov. 22) and running through Cyber Monday (November 26) — will account for 40% of all digital revenue for the shopping season globally. Black Friday will again be the top digital shopping day of the season, capturing 10% of the season’s revenue; Cyber Monday will contribute 8% of sales. In other findings: • Mobile traffic share will peak on Christmas Eve, when shoppers will turn to their phones to make 72% of all visits and 54% of orders. • Free shipping will be a mandate this season, as 72% of all orders will ship for free, up slightly over last year. • Instagram will emerge this holiday season as the fastest-growing (up 51% from last year) social channel for referring digital traffic to retail sites, while Facebook will see a 7% decline. • AI-based product recommendations will account for 35% of all retail revenues — up 25% over last season.

Walmart will enhance holiday shopping experience using stores and technology. Walmart’s strong 2018 is a testament to the continued development of their omnichannel offerings, and it is not slowing down heading into the holiday. In addition to the relaunch of the Jet.com site, expect to see Walmart push the envelope this holiday season by integrating its stores with its technology enhancements. Retailers will expand into new categories. During the past few holiday shopping seasons, retailers have been stocking categories outside their normal purview to drive holiday traffic. This trend is sure to continue this holiday season, but also expand to hot consumer categories, such as health and wellness. Look for retailers to jump on the health and wellness trend by not only expanding their assortment in the category, but also by partnering with such popular health and wellness experience brands as SoulCycle, CorePower, or Orangetheory Fitness on holiday-specific promotions that incentivize cross-shopping. SEPTEMBER/OCTOBER 2018

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1 Publication Title: Chain Store Age 2 Publication Number: 0054-4100 3 Filing Date: 9/30/2018 4 Issue Frequency: Bi-monthly 5 Number of Issues Published Annually: 6 6 Annual Subscription Price: $119 7 Complete Mailing Address of Known Office of Publication: 8550 W Bryn Mawr Suite 300, Chicago, IL. 60631 8 Complete Mailing Address of Headquarters or General Business Office of Publisher: See No. 7 9 Full Names and Complete Mailing Addresses of Publisher, Editor, and Managing Editor: (Publisher) Gary Esposito, Publisher, see No. 7; (Editor) Marianne Wilson, Editor in Chief, One Gateway Center 11-43, Rayomond Plaza West, 16th Floor, Newark, NJ 07102 10 Owner (Full Name and Complete Mailing Address): EnsembleIQ, see No. 7; 11 Known Bondholders, Mortgagees, and Other Security Holders Owning or Holding 1 Percent or More of Total Amount of Bonds, Mortgages, or Other

Securities: None 12 Tax Status (The Purpose, Function, and Nonprofit Status of this Organization and the Exempt Status for Federal Income Tax Purposes): Has Not Changed During Preceding 12 Months 13 Publication Name: Chain Store Age 14 Issue Date for Circulation Data Below: July/August 2018 15 See Chart Below 16 See Chart Below 17 Publication of Statement of Ownership for a Requester Publication is required and will be printed in the September/ October 2018 issue of this publication 18 Signature and Title of Editor, Publisher, Business Manager, or Owner: I certify that all information furnished on this form is true and complete. I understand that anyone who furnishes false or misleading information on this form or who omits material or information requested on the form may be subject to criminal sanctions (including fines and imprisonment) and/or civil sanctions (including civil penalties): Marianne Wilson, Editor. Sept. 30, 2018

Sections 15 and 16

Average No. No. Copies of Copies Each SIngle Issue Issue during Published Previous 12 Nearest to Months Filing Date

15 Extent and Nature of Circulation a Total Number of Copies (Net Press Run) b Legitimate Paid and/or Requested Distribution (1) Outside County Paid/Requested Mail Subscriptions (2) In-County Paid/Requested Mail Subscriptions (3) Sales Through Dealers and Carriers, Street Vendors, Counter Sales, and Other Paid or Requested Distribution Outside USPS (4) Requested Copies Distributed by Other Mail Classes Through the USPS (e.g., First-Class Mail) c Total Paid and/or Requested Circulation d Non-Requested Distribution (By Mail & Outside the Mail) (1) Outside County Non-Requested Copies (2) In-County Non-Requested Copies (3) Non-Requested Copies Distributed Through the USPS by Other Classes of Mail (4) Non-Requested Copies Distributed Outside the Mail e Total Non-Requested Distribution f Total Distribution g Copies Not Distributed h Total i Percent Paid and/or Requested Circulation

19,366

18,218

13,024

13,721

0 13,024

0 13,721

4,184 0

3,998 0

1,450 5,634 18,658 709 19,366 69.8%

50 4,048 17,769 449 18,218 77.22%

7,259

7,284

20,283

21,005

25,917

25,053

78.26%

83.84%

16 Electronic Copy Circulation a Requested and Paid Electronic Copies b Total Requested and Paid Print Copies (Line 15c) + Requested/Paid Electronic Copies (Line 16a) c Total Requested Copy Distribution (Line 15f) + Requested/Paid Electronic Copies (Line 16a) d Percent Paid and/or Requested Circulation (Both Print & Electronic Copies) (16b divided by 16c x 100)

I certify that 50% of all my distributed copies (electronic & print) are legitimate requests or paid copies.

TECHBYTES

Holiday Essentials The outlook for holiday 2018 is…digital. Experts predict that more consumers than ever before will begin their holiday shopping journeys this year on digital devices — and they will have little patience with sites that still make this a cumbersome task. While it’s too early in the game to predict how retailers will fare this holiday (although early outlooks are promising), one thing is certain: Companies that focus on speed, connectivity, and offer more fulfillment options will have a competitive advantage — during their busiest season and beyond. As retailers put the finishing touches on their holiday prep, here are five tips to help ensure digital ops are up to consumers’ expectations: • Improve network connections. One of the fastest ways for a brand to turn off customers is to offer digital channels that load too slowly or worse, crash at inopportune moments. By retiring legacy-based landlines, and future-proofing operations, companies can increase bandwidth and more importantly, secure information flowing through the network. • Mitigate downtime by stepping up storage. The last thing any retailer wants during the holiday season is for their servers to crumble as millions of shoppers flood digital channels simultaneously. Companies that move to a high-availability cluster of databases will provide business continuity. A primary database server receives updates, and secondary servers mirror the primary server. As a result, the configuration ensures that mission-critical applications are consistently available — all day, and every day — during the busy shopping season. CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

• Test systems — before an issue arises. The best way to stay on top of potential glitches is to test digital systems. In addition to helping administrators understand the flexibility and scale of systems, testing keeps users abreast of failover processes, as well as forecasting the time and effort needed to recover from potential crashes. • Centralize order management systems (OMS). Called the foundation of a unified commerce platform, an OMS manages all transaction and customer data coming in and going out of the system. Armed with this information, as well as customers’ order history and purchase behavior across channels, retailers can better engage customers. The technology also supports unified commerce order fulfillment scenarios, including buy online, pick up in-store (BOPIS) and buy online, ship from store. By using an OMS solution to manage data across all channels, retailers are also one step closer to true unified commerce. • Feature flexible fulfillment options. Customers want more options when they make a digital purchase, and the same holds true when it comes to receiving their merchandise. Retailers are in the hot seat to provide more options to deliver merchandise. To make this a reality, savvy companies are increasingly transitioning to a more tightly integrated, scalable e-commerce framework that is channel agnostic, flexible and delivers visibility into customer demand, as well as immediate access to inventory. Once this foundation is in place, retailers can step up click-and-collect and ship-from-store options that leverage individual locations as fulfillment facilities for digital orders. Smart retailers are also creating “ecommerce hubs” that can support curbside pickup or home delivery within local communities. When executed correctly, these initiatives can help retailers reduce shipping time, improve product availability and slash shipping costs.

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TECH Q & A

Supply Chain Optimization

To be successful in today’s omnichannel environment, retailers must be able to get merchandise into customers’ hands quickly — and in more ways than one, according to Chris Shaw, director of product marketing, Manhattan Associates. Chain Store Age spoke with Shaw, who discussed how retailers must leverage the latest fulfillment strategies, including buy-online-pickup-in-store (BOPIS) and shipfrom-store, to keep up with consumer demands. Q How has digital commerce’s rapid growth impacted retailers’ fulfillment requirements? Two areas tend to stand out. The first is within the warehouse, where rapid growth of the direct-to-consumer business is forcing retailers to integrate these shipments with traditional wholesale and store replenishment shipments. Simultaneously, processing multiple types of orders in the same facility requires advanced multi-channel optimization of workflows and order prioritization. The second area involves the emergence of new storefront fulfillment strategies, such as BOPIS, ship-from-store, curbside pickup or same-day home delivery, that require retailers to use in-store inventory fill online orders. This is a difficult task because it can create inventory imbalances between the stores and distribution centers. Q Where do retailers still tend to struggle? Every year, retailers are tempted by “shiny new objects,” like AI, virtual reality, and IoT, among other solutions. These technologies get a lot of hype, but the majority of retailers still struggle to fundamentally execute an effective omnichannel strategy because they haven’t solved the core issues around inventory planning and distribution optimization. With customers demanding “fast & free” fulfillment and better shopping experiences, retailers must be able to confidently promise merchandise and know they can pick, pack and ship these items in time to fulfill those promises. In their rush to offer an omnichannel approach however, retailers sometimes prioritize “let’s get something 034

in place” over “let’s protect our margins.” While they might have executed parts of an omnichannel strategy, these pieces are often not working well or working profitably. Q How can retailers better meet the consumers’ expectations of shorter fulfillment and delivery windows? Changes to the modern shopping experience are reverberating throughout the entire supply chain. Retailers must update and optimize their inventory planning and replenishment, distribution center fulfillment and transportation management to keep up with consumer expectations. For example, multi-echelon inventory planning has been an essential part of successful inventory replenishment for many years. However, these systems were designed with the expectation that in-store inventory would only be used to fill in-store orders, not digital orders. To be successful in today’s omnichannel environment, retailers must update their systems to leverage the latest fulfillment strategies, like BOPIS or ship-from-store. Q How are retailers automating their fulfillment models to meet consumers’ needs? In their rush to satisfy the consumers’ need for fast and free fulfillment, many retailers have put new demands onto old systems that were not designed for the way we shop today. This may allow them to fulfill the order, but not in a profitable manner. And profitability is the focus now for leading omnichannel retailers. As a result, we are seeing a lot of retailers turn to innovations that increase produc-

tivity and reduce costs in other areas. For example, introducing advanced robotics in the warehouse can significantly increase the productivity of the trained human workforce. We are also seeing technological advancements in the store, as IoT and new mobile applications that help store associates focus on creating great customer experiences. Q How is mobility changing the fulfillment operation? We have become a mobile-first culture, and this trend is also seen in today’s modern warehouses and stores. As the retail industry becomes faster and more complex, store and warehouse employees must have mobile access to real-time information, the tools to analyze this data, and the ability to make the adjustments needed to immediately improve or correct a situation. Mobile tools must be robust, but also designed to work the same way we use consumer devices, like our smartphones or tablets. This cuts down on training while increasing associate adoption of the tools. Q How can Manhattan Associates help retailers make the transition? Manhattan Associates’ solutions power the supply chains of 70% of the top 20 retailers in North America. Our digital supply chain solutions were specifically designed to address the challenges retailers are facing today. From order management, point-ofsale, warehouse and labor management to transportation and carrier management, Manhattan’s solutions and expertise help retailers thrive in today’s connected commerce world. SEPTEMBER/OCTOBER 2018

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TECH

Decoding Blockchain

Technology will impact retail in four key areas By Deena M. Amato-McCoy Blockchain technology is poised for widespread, mainstream adoption — and it’s likely to happen sooner rather than later. A 2018 report from Deloitte predicts that blockchain integrations across retail and consumer packaged goods could “revolutionize” the industries. According to the study, “New Tech on the Block,” blockchain will become a “standard operational technology across the financial, manufacturing and consumer industries.” Blockchain is a digital, decentralized, distributed ledger that provides a way for information to be recorded, shared and maintained by a community (private and public). While the technology is best known as the backbone of cryptocurrencies such as bitcoin, more broader-based applications are on the horizon — if not already here. Christian Kameir, managing partner and blockchain venture capitalist at Newport Beach, California-based private equity firm Sustany Capital, spoke to Chain Store Age about how the emerging technology can streamline operations and lower costs across retail organizations. Q How can retailers take advantage of blockchain? Blockchain technology can streamline operations and lower costs across systems (e.g., supply chains, transaction audits and middlemen fees), as well as improve customer retention programs. Utilizing the immutable record-keeping of blockchain, retailers can more efficiently manage vast amounts of information gathered about their products, services and customers to quickly see where inefficiencies lie and create the appropriate synergistic blockchain implementations.

036

Q How will blockchain impact retail? Blockchain’s biggest impacts can be seen in four areas: supply chain management, automating and auditing transactions, lowering credit card fees and customer retention. In supply chain management, blockchain technology can reliably track products from production to end user purchase or consumption. Blockchain’s immutable transaction records thwart attempts to counterfeit items. There are also fees associated with simply proving that a product has arrived at its destination. Blockchain technology is an excellent tool to automate and audit these transactions, and reduce costs associated with the transport of such items. Purchase trails often include the activity of several middlemen which adds to the cost for the end-consumer. Many functions of these intermediaries can be automated through blockchain-based applications. Immutable audit trails for supply chains enable all parties to monitor products without the need to access data silos guarded by third parties. Blockchain-based auditing systems can be integral to streamlining systems for physical products as well as virtual assets. Credit card fees can also be drastically lowered, especially when buying or selling products internationally. Traditional exchange of currencies is encumbered by fees, but blockchain will allow retailers to accept foreign currencies easily and make cross-border settlements painless while also lowering fees. Finally, blockchain impacts the customer retention programs (e.g., discounts, coupons, rewards, etc.) that retailers offer. Oftentimes, these can be hard to keep track of and manage, as customers forget to bring their coupons, rewards cards or forget they have ‘points’ accrued. Present systems require the consumer, point-of-sale (POS) systems and cashiers to keep track of these

programs, which are inefficient ways to manage programs. Tokenization of reward points can eliminate this by immutably and automatically calculating, monitoring and managing each customer’s points. Additionally, point-based systems can be converted into blockchain-based virtual currencies that are easily exchanged with compatible tokens, creating greater incentives for consumers to acquire these assets. Q What challenges does the technology present? The biggest challenges revolve around the compatibility of different blockchains, as well as legacy POS systems supported by credit card companies and banks. To be implemented, blockchain infrastructure must replace traditional POS systems. However, legacy technology providers and credit card companies make their money from fees — as much 3% per transaction — so it is not in their best interest to go away without a fight. Q What hurdles do retailers need to overcome to leverage blockchain? The biggest are POS systems and suppliers. POS systems and their associated credit card companies will not be quick to give up their dominance to be replaced by blockchain systems. The efficiencies of blockchain become moot if only some of the parties involved in the supply chain system are on board, so retailers must begin a discussion with all vendors in order to build a holistic system and maximize efficiency. Q What role will cryptocurrency play in blockchain’s adoption in retail? There is a general attitude of distrust in cryptocurrencies, and that must change. A lot of people think cryptocurrencies are either Ponzi schemes or only used by people who would like to purchase illicit goods when, in fact, the main objective of the first cryptocurrency, bitcoin, was peer-to-peer transactions. Cryptocurrencies and their technological underpinning, blockchain, are actually an instrument for decentralized peer-to-peer transactions that will streamline systems by cutting out middlemen. SEPTEMBER/OCTOBER 2018

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Construction Technology Three critical software needs for building stores By Russell Davidson Construction technology trends are always changing, as evidenced by our [Software Connect] 2018 Construction Technology Trends report. In our conversations with 158 construction industry professionals, we were able to determine the construction software needs most desired when shopping around for a new solution. They included: • Project tracking; • Job costing; and • Project estimating. All retail construction project managers want the same thing, which is to ensure the store opens on time and on budget. With that in mind, here is a look at how the three functions identified above specifically benefit retail construction. Project Tracking: In order to ensure that your retail business is opening on the advertised date, the project manager needs to maintain an accurate schedule. This requires accurate project tracking to make sure workers and subcontractors are completing their work on schedule. If not, hopefully, reasons can be figured out and changes can be made. Timing is everything in the retail construction business, and project managers are under stricter deadlines than other construction builds. Being on time for a construction project is always a goal, but the retail industry always has scheduled open dates being advertised to the public during development in order to build hype and aid with forecasting future sales. Many retail stores will want to go through soft-opens prior to their launch date as well. Indeed, the construction process needs to go smoothly in order for store owners to begin managing their store, which starts far before the place has been constructed. 038

Job Costing: Not every retail store is alike; however many chain stores will have a similar layout (or even identical) in order to give a sense of familiarity to the consumer. Job costing in a retail construction environment helps you better forecast your own company’s bottom line by tracking materials, labor, time, subcontractors, etc. Job costing is designed to detect inefficiencies in the execution of job work to allow for process improvements, with a goal of improved job profitability. It can also help improve price setting for future builds the corporate office may considering nearby, based on historical cost performance. If a retail company is opening up its fourth or fifth store in a large metro area, it can likely fall back on past performance to know what worked best and what ended up being a waste of time and money. Project Estimating: While similar to job costing, estimating holds its own unique place for retail project managers. Like it or not, estimating as well as the bidding process becomes much more involved in retail construction, as it starts in preconstruction. Typically, project estimating involves submitting price estimates to a contractor you may be looking to hire to build your newest retail location. Overall, this bid management process helps you select the proper contractors and subcontractors to assign the job to based on what they are charging or what you may be looking to pay them (based on your own job costing figures). Project management in the retail construction world can include a variety of unusual but important duties, as it needs to adhere to the brand consideration mentioned previously. An example would be finding the right contractor to take care of any graphics that

will be used on the storefront. Did the previous contractor that was used for the location across town work out well? You’ll need to look into what they charged, their production time, etc. Also needed may be market analyses of a number of areas to help make key decisions that will surely have a long-term impact on your store’s performance, such as determining which site is going to yield the best future results. Worrying about how well your business performs after the construction work is completed will be a top concern, and it’s part of what a retail project manager will pride themselves on. Building at one location may be less expensive, but market research could forecast fewer sales at the location over a three-year period. These are some of the big decisions these project managers may need to make. Summing Up: When a retail project manager looks to get a new location up and running for their chain, it’s important they can specialize in meeting the unique requirements a retail construction job has. Time is money, and postponing grand openings and delaying retail projects will only eat into any potential profits. The best way to avoid this is to ensure the ins and outs of retail construction are fully understood. — Russell Davidson is a digital marketing specialist at consulting firm Software Connect, which recommends software based on each client’s specific needs. SEPTEMBER/OCTOBER 2018

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SPECS 2019 Update Event focuses on planning/design, construction and facility maintenance By Katherine Boccaccio Physical retail will be in the spotlight at Chain Store Age’s 55th annual SPECS Show, which will be held March 3-5, at the Gaylord Texan in Grapevine (Dallas), Texas. The conference is designed for retail and foodservice executives involved in the planning, design, construction, and maintenance of stores and restaurants nationwide. SPECS is noted for its educational sessions and workshops, and the 2019 event will be no exception. Taking an active role in the program planning is the SPECS Advisory Board, which is made up of 44 industry executives from leading retail companies and key supplier organizations. The board members are charged with advising and directing the educational program for the 2019 conference, which will feature a packed slate of workshops, roundtables and panel presentations covering a wide range of emerging and evolving issues. As industry insiders, the SPECS board members are integral to the development of the program. Five veteran members are selected each year as Executive Advisory Board members. They are nominated by other board members and by CSA, and charged with team leadership and overall program direction. The SPECS 2019 executive leaders are: Lisa SmolaHollo, Ulta Beauty; Lori Koeppe, The Buckle; Craig Hale, HFA; Mike Gordon, Rent-A-Center; and Kristen Roodvoets, SmileDirectClub. (Titles are provided with board members listing.) The SPECS 2019 Advisory Board met in Chicago in June to start planning next year’s sessions. The group is currently putting the finishing touches on the program.

2019 Advisory Board Members Aaron Ancello VP, facilities manager lead, TD Bank Lisa Bien-Senz SVP marketing and HR, Inside Edge Commercial Interior Services Marilyn Brennan Director of business development and account management, Egan Sign Brandon Collier Director of architecture, design and store planning, RaceTrac Petroleum David DiCarlo Former Director of construction, Toms King Services/Burger King David Dillon Senior manager of development and standards, Walgreen Co. Tony DiSpirito Director of store preservation, Sephora Michael S. Ecke Strategic national accounts manager, Benjamin Moore & Co. Richard Elkins Director of construction services, Firehouse Subs

Mike Gordon Senior manager, facilities management, Rent-A-Center Bill Graber VP account management, USM Inc. Greg Green Divisional VP national accounts, Orion Energy Systems Scott Griffin Director of store design and construction, Stein Mart Craig Hale Associate Principal, HFA Roger Herman Director of national accounts, Springwise Facility Management Angie Huff VP/retail, NGS Films and Graphics Keith Johnson Director of store design, Dollar Tree & Family Dollar Stores Kevin Kilgore Director of construction, Jim ‘N Nick’s Bar-B-Q Christie King Senior architect, proto and new formats, Wal-Mart Stores

Brian Foster Senior VP, Paint Folks

Tiffany Ko Program manager, store development, lululemon athletica

Casey Fitzpatrick Construction estimator, Wegmans Food Markets

Continued on page 42

2019 Executive Advisory Board Members

Lisa Smola-Hollo 040

Lori Koeppe

Craig Hale

Mike Gordon

Kristen Roodvoets

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STORE SPACES Lori Koeppe Operations coordinator, The Buckle Bridget McCormick Lackey Senior manager of architecture and building design, JCPenney Robin Baskin Ladner VP sales, Global Facility Management & Construction Kevin Nolen Director of retail expansion and facilities, Z Gallerie John Noonan EVP business development & marketing, Atlas Sign Industries Doug Pellock VP construction and purchasing, Marcus Theatres Vaun Podlogar President, State Permits Inc. Terry Pratt Senior construction project manager, Academy Sports + Outdoors Rob Reiter Chief security consultant, Calpipe Kristen Roodvoets Retail operations - construction project manager, SmileDirectClub Eric Russell Director of construction, L Brands Lisa Smola-Hollo Project manager, growth and development, ULTA Beauty

Jennifer Sorrells Senior manager of national retail facilities management, T-Mobile BiBi Sukey Senior tenant coordinator, Brookfield Properties Retail Kevin Tierney VP strategic accounts retail, Tarkett Bennett Van Wert National sales manager, DWM Comprehensive Facility Solutions Rick Winkel President, Retail Contractors Association Joshua D. Witte Director of store operations, brand maintenance and repair, Ross Stores Inc. Bret Woodland Project manager, H.J. Martin & Son Inc. Jason Woods Senior manager construction, Tesla Tracy Scanlan Zaslow Senior director of design and construction, Luxury Brand Holdings, Ross + Simons, Sidney Thomas Jewelers Melissa Zimmerman Category manager, group procurement, Walgreen Co.

SPECS Highlights

The SPECS educational program will feature a diverse lineup of workshop sessions focused on the planning, design, construction and maintenance of brick-and-mortar stores. Here’s a sampling of just a few of the workshops: • Retail Through the Lens of the Disabled and Aging: An interactive session offers attendees the chance to experience firsthand the challenges that aging and disabled customers may encounter in physical stores; • FM Goes High Tech: A look at how technology is transforming facilities management; • Women in Retail: Top female executives in retail construction and facilities discuss the challenges faced and opportunities seized as they worked their way up;

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SPECS Ambassador Club The SPECS Ambassadors Club is comprised of retailer and vendor executives who have made significant contributions to the industry and to SPECS throughout the years. The members of the Ambassadors Club provide insights and guidance on overall programming for SPECS, and also serve on various committees involving mentoring initiatives, event attendance and conference educational programming. Here are the 2019 members: Dan Beeman President, Beeman Development Group Bruce Brock director of real estate, Hungry Howie’s Pizza & Subs Bill Chaff VP, real estate & facilities, Mongolian Concepts Sara Craven Senior manager, design & construction, Jamba Juice Dan Garneau Site development manager, Kum & Go Eric Johnson director of store planning, Brookshire Brothers Inc. Ken Kosinski president, PYE Consulting Sally Lee market segment manager-retail, Sylvania-LEDVANCE Alan Norton Senior manager, health and wellness innovations, design & formats, Wal-Mart Stores James Pagano EVP, Boston Barricade Co. Randy Pannell VP of construction, Saks Fifth Avenue Lisa Schwartz President, ProCoat Renee Tobin Strategic sourcing manager, Brookdale Senior Living

• Building and Preparing for Threats and Disasters: How to better build and better prepare stores for threats and disasters — man-made and weather-related; • Energy Code Roadmap: An update on energy codes and a preview of future changes.

WHAT ELSE IS ON TAP FOR SPECS 2019?

Attendees can expect dynamic keynote and Main Stage presentations, enhanced networking receptions, and the Breakout Retailers Awards, which puts the spotlight on growing brick-and-mortar retail and restaurant concepts. In addition, the 2019 show will feature SPECS’ first-ever Top 10 Women in Construction and Facilities Awards. SEPTEMBER/OCTOBER 2018

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STORE SPACES Q & A

Fire Protection Advice Up-to-code, properly installed — and maintained — fire protection systems are something that no retailer can afford to be without. Chain Store Age spoke with Michael Rose, CEO of Heritage Fire and Security, about this crucial element of store safety.

Q How has technology impacted the fire protection business? Extinguishing agents are becoming more adaptive to the hazards. The chemicals used are more effective. The end result is that if everything is used properly, fires really don’t stand a chance. Also, alarm systems are becoming smarter. The equipment now alerts users when the smoke heads require cleaning or if there is some problem that may result in the system not functioning properly. Q How important is maintenance of fire equipment? Maintenance of fire equipment is something that cannot be stressed enough. Fire alarm systems that are not properly maintained will give off false alarms and become less effective — that’s a guarantee. Without maintenance, fire alarm systems become more of a liability than an asset. The same is true for sprinkler systems. Inspections are very, very important. Fire extinguishers are at less risk of a catastrophic failure, but they are equally as important. One of the biggest mistakes a retailer can make is to try and cut costs by not keeping inspections up to date, which can result in the company receiving a violation. Even worse, without regular inspections, the equipment may not work when it is needed. Q How can retailers/restaurant operators make sure they are up to code? Hire a company that can handle the work and maintain the appropriate records. Also, make sure the company has the experience and personnel to adequately protect your business. Q Is fire protection equipment compliance costly? Compliance doesn’t have to be expensive if it is thought out. There are lots of ways 044

to cut costs that are easy to implement without sacrificing any level of service. For example, consolidated routing and bundling is something we provide that helps our clients save a considerable amount of money quickly. There are also ways to save money on electronic monitoring and on service calls, both of which we provide as a value add. Q What services does Heritage Fire and Security provide? We provide a wide range of national fire protection services, including fire alarms, sprinklers and extinguishers, range hood fire suppression systems, back flow prevention, special hazard systems, first aid kits and more. We supply, install and service our equipment in the United States, Canada and the UK. We also provide expert testimony as well as code compliance consulting. Q How does Heritage Fire differentiate itself from its competitors? There is no secret to our success: Our employees are our most valuable asset. We train our staff well, and develop a career path for those that want to advance. We also teach them how to be not only a team member, but a family member of the company so that they care about our future and our success. We communicate with them as well as our clients, and we do what we say we are going to do. Also, Heritage is not trying to squeeze every nickel out of a customer while we have the account. We are here for the long term. Our technicians do not work on commissions and they do not get paid more money if they oversell a client’s needs. In fact, they get penalized and if it continues, they get fired. Sub-contractors as well as employees are monitored constantly. We will not allow our clients to be taken advantage of. We

like to be the hero at the end of the day. We completed a job where we saved the client more than 75 % of their quoted work by one of our competitors. Sometimes our larger competitors just train people how to produce revenues. We aren’t owned by a private equity firm that needs to produce profits. We are a private company that provides a class A service to our clients and provide longevity for its family/team members. I want people that care about the clients and about each other. The Golden Rule is very relevant with our team: Treat people how you want to be treated. Q What are some of the latest trends in fire protection equipment? The newest trend is trying to stop the issues before they happen. For instance, our new RHGP-1 range-hood grease protection device protects the heat detection line, keeping it grease free so that the system works as intended. It guards against a failing fire suppression system. Q Is there any new equipment in the Heritage pipeline? New software is coming. I teamed up with an amazing development team and can’t wait to unveil our new software. It will blow away those bigger companies that are currently taking advantage of the lack of consolidated information. Our new software will keep track of times when costs were cut, grade our performance and help clients understand where we are at all times. Utilizing GPS technology, we will know where all of our employee-run trucks and our subcontractor trucks are located. This will allow us quicker response times and help keep clients’ costs lighter by selecting the tech who is located closer to the job. Less windshield time equals lower costs. SEPTEMBER/OCTOBER 2018

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McDonald’s Goes Green in Chicago Fast-food giant also embarks on major store remodeling program

By Marianne Wilson McDonald’s Corp.’s revamped Chicago flagship is like no other in the company’s portfolio. The 19,000-sq.-ft. restaurant, at Clark and Ontario Streets, has a modern, environmentally-friendly design and enhanced customer experience with self-order kiosks, table service, mobile order and payment, and delivery. It’s open seven days a week and 24 hours a day, serving drive-thru and dine-in customers. The steel-and-wood-timber constructed eatery is designed to highlight McDonald’s commitment to sustainability, and is complete with abundant green spaces and an array of energy-saving features. (The restaurant is applying to become LEED — Leadership in Energy and Environmental Design — certified.) The eco-friendly highlights include an onsite solar panel array for renewable energy collection to offset part of the restaurant’s non-renewable energy consumption. Other features include: • Interior and exterior LED lighting;

• Energy-efficient kitchen and HVAC equipment, including energy-saving freezer/coolers, low-oil fryers, energy-efficient fans and more; • Some 70 trees (at ground level), a vegetated roof space and a floating glass garden of ferns and white birch trees; and • Native and drought resilient plants used throughout the landscape along with permeable pavers for the parking lot surface to minimize irrigation and reduce storm water runoff; and • Expansive pedestrian-centric space featuring plazas with outdoor seating and a park area. Designed by Chicago-based Ross Barney Architects, the flagship has a streamlined modern interior. Furniture, graphics and

layout were designed by Sydney, Australiabased Landini Associates, which has collaborated on other McDonald’s projects. Remodeling Program: While the Chicago flagship is a one-of-kind location, some of its features are already in place in — or being rolled out to — other locations. McDonald’s is embarking on an ambitious and costly store remodeling program to transform the customer experience inside and outside at its locations nationwide. All told, the company and its franchisees plan to invest about $6 billion to modernize more than 14,000 restaurants by 2020. The makeover includes new furniture, globally and locally inspired décor, refreshed exterior designs and remodeled counters that allow for table service. McDonald’s also is installing self-order kiosks that allow customers to customize the menu, order and pay for their meals, along with digital menu boards in the restaurants and drive-thru lanes. In addition, restaurants will feature designated parking spots for mobile order curbside pick-up.

Starbucks Commits to 10,000 “Greener” Stores Starbucks is extending its commitment to sustainability with an ambitious initiative expected to reduce utilities expenses by $50 million during the next 10 years. The coffee giant’s new “Greener Stores” framework is meant to set a new standard for designing, building and operating Starbucks stores. During the next year, Starbucks will develop an accredited program to audit all existing company-operated stores in the U.S. and Canada against the framework criteria, which will result in the chain operating 10,000 “greener stores” globally by 2025, (encompassing existing locations, new builds and renovations.) The program includes a focus on using responsibly-sourced materials, energy efficiency, as well as lighting, air and noise CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

improvements. It will employ energy-efficient technologies that will reduce energy consumption by 25% compared to prior store designs. Starbucks expects the new standards will save an incremental $50 million in utility costs over the next 10 years, building on its 10-year legacy of utility savings generated from its existing eco-friendly practices. To date, those savings have equated to $30 million in annual operating costs. The new framework will be co-developed by leading experts including World Wildlife Fund (WWF) and will be audited and verified by SCS Global Services, a third-party verification organization that also oversees Starbucks Coffee and Farmer Equity (C.A.F.E.) Practices. It will be open-sourced to allow other retailers to benefit. 045

STORE SPACES

Reframing Retail Expansion Traditional rollouts giving way to new model By Robert Ausdenmoore As planned store closures make clear, the pendulum certainly seems to have swung away from the growth of store counts simply for growth’s sake. With traditional retail rollout models in their waning days, here are a few considerations to keep in mind: One Size Fits No One According to the International Council of Shopping Centers, the number of shopping malls grew by over 300% from 1970 to 2016. As mall counts grew, so too did store counts for their specialty retail and department store tenants.

Many retailers (and their design or architecture partners) were challenged with quickly creating and replicating a physical brand experience that would literally allow them access to new markets. Especially considering the availability of first-generation real estate during this time, speed to opening became the most important metric for success. Efficiency was often achieved through a modular, prototypical kit-of-parts that could be replicated in a copy-and-paste manner as new locations were planned. As some organizations are now reining in their store exposure, that definition of success has been forced to adapt as well. With e-commerce’s explosion, stores aren’t just points of transaction, but a potential touchpoint in a larger customer journey. The consolidation of a retailer’s presence

means individual stores have to do more heavy lifting than ever to deliver the desired brand experience. Where speed was once the primary goal for any rollout effort, the notion of nuanced, site-specific design sensitivity is becoming just as prevalent. For many, quality of experience has overtaken quantity of experience. As individual stores are now assessed more critically from their brand contributions (beyond just transactions), this can stretch the limits of even robustly tiered store prototype programs. Seize Localization Opportunities Early One of the major tactics some retailers are using to create the site-specific design sensitivity mentioned above is the localization of their store experience to the community it serves. Even if fixtures

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and overall aesthetic often need to remain mostly consistent, there are strong opportunities for adding some local “special sauce” to an individual store location. Emerging brands are perhaps especially at an advantage when it comes to localizing their store experiences. Brands in a growth mode can be more deliberate about the markets they want to target without the same sunk cost implications that large fleet retailers have to rationalize. They can also better earmark the elements of the store experience that they would like to align locally, versus those that need to remain uniformly the same. Graphic systems remain an ever-flexible route for adding nuance to individual store locations. These can even be sourced at a local level or in direct collaboration with local artists. During Mod Pizza’s considerable expansion in the last half-decade, the company has retained a signature “Wall of Fame” ele-

ment in most locations which displays photos and messages submitted by members of the community. Other interior design features and location-specific photography are (in most cases) drawn from local partnerships. Balance Exposure With Experience For mature retailers with a large base of existing stores, localizing every single location would likely be a cumbersome endeavor with harder-to-quantify ROI. The selective deployment of elevated “flagship light” experiences, however, can be used to signal a particularly strong commitment to higher-priority markets. T-Mobile, for example, has greatly increased its overall store footprint in recent years — oftentimes through expansion of independent, licensed store outlets. In parallel with some of this more traditional growth, though, they have also opened a half-dozen “signature stores” in high-profile destinations

that include New York City, Chicago, Santa Monica, Miami, San Francisco and Las Vegas. All of these stores offer an immersive T-Mobile brand experience, but each one has been uniquely designed to celebrate the respective cities that they serve. While the Times Square location takes advantage of large, exterior digital elements, for example, the smaller store in Miami Beach features an Art Deco façade to fit into local surroundings. Likewise, the Las Vegas store features a photo booth and concierge desk that feel right at home with amenities in resorts on the Strip. As a result, T-Mobile has not only achieved steady growth of its baseline store fleet and subscriber count, but created a few major splashes that have driven press, industry accolades and a more apparent commitment to their “un-carrier” brand proposition. Robert Ausdenmoore is an associate director in FRCH Design Worldwide’s specialty architecture studio.

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Trending stores: Starbucks Corp. has touched down in Italy, the birthplace of espresso and the coffee giant’s 77th country to date. The 25,000-sq.-ft. Starbucks Reserve Roastery in Milan is lavish and grand, the “crown jewel” of Starbucks’ global retail footprint. Located in a refurbished palazzo, the space is designed to pay homage to the city while celebrating the art and science of coffee. It features hand-chiseled flooring made of local marble, bar tops carved from Tuscan marble and equipped with radiant heating, and an in-store roaster. The mezzanine, reached by a sweeping staircase, is home to a 30-foot long marble bar offering specialty cocktails, and a Prince bakery and café. Starbucks debuted its upscale Reserve Roastery format in Seattle in 2014, and this is its third location, with upcoming ones planned for New York, Chicago and Tokyo. … American Eagle Outfitters is bullish on its fastgrowing intimate apparel brand, Aerie. The retailer ramped up Aerie’s store openings for next year with up to 50 to 80 locations, including a number of new markets. … Fabletics, the activewear brand co-founded online by celebrity Kate Hudson, is celebrating its five-year anniversary by setting a course for aggressive growth. With 24 U.S. locations, the brand plans to add more than 75 new doors. … Good Housekeeping opened its first-ever store, a holiday pop-up dubbed GH Lab, at Mall of America. The 2,800-sq.-ft. temporary outpost has a homelike design with different “rooms” that let shoppers visualize the products. Shoppers can interact with smart home tech live, try out kitchen appliances, sample the best of beauty and more. All products were tested in GH Institute’s famed labs. … Luxury outerwear brand Canada Goose brought a blast of cold air to its newest location, a 5,330-sq.-ft. flagship at Short Hills Mall, Short Hills, N.J. The store, the Canadian brand’s fourth in the U.S., is one of the company’s first to feature a “cold room.” The refrigerated space, the size of a large fitting room, offers an immersive experience where customers can try on jackets amid a range of different temperatures — including one as low as -13 degrees Fahrenheit. (Canada Goose plans to add the cold room to select future stores.) Designed to reflect the company’s roots and Arctic heritage, the Short Hills store is open and light, with a modern, minimalist look. Signature elements include a cash-wrap carved from a single piece of marble and sourced from a British Columbia quarry. The 3,800lb. desk has been left raw, with minimal polish to evoke the natural wear and polish of glaciers and icebergs. SEPTEMBER/OCTOBER 2018

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ON THE LEVEL

Philly is the real deal Bringing up kids in the Nineties, my wife and I left Manhattan for the Princeton area. During our decade there, we spent a lot of time in Philadelphia. When I took the short trip back there from New York for the Philly ICSC show, I realized how much I missed it. It was like seeing an old college buddy, getting that flood of memories and then thinking, man, you’ve never looked better. While Manhattan continues sprouting 80-story glass monoliths to house the world’s seemingly boundless supply of billionaires, Philly retains the gritty historical flavor unique to cities in the Northeast. Yes, it’s a sophisticated, cosmopolitan town, but it still looks like the place for tough, gruff, cheesesteak-eating Philadelphians. It still feels like the home of Rocky, the Iggles, and the Broad Street Bullies. Center City has its share of high-rise developments. The under-construction Comcast Technology Center will add 1.3 million sq. ft. of office space to downtown. But Philadelphia retains its old town feel. A short stroll greets visitors with sunlit open spaces and visual surprises: the statue of William Penn keeping watch from the tower of City Hall, Rittenhouse Square, the Ben Franklin “Ghost House,” Independence Hall. Speaking of halls…if designers of food halls in new town centers springing up across the land are not using the Reading Terminal Market as their model, they are missing a bet. The farmer’s market that opened in 1892 still features Amish folk selling jam in jars, but serves up everything from classic roast pork and broccoli rabe sandwiches to gumbo to moon pies to lobster. CHAINSTOREAGE.COM

SEPTEMBER/OCTOBER 2018

Real Estate

Now Philadelphia is becoming one of the main benefactors of the urbanization trend in American living. Educated, affluent millennials and empty nesters are flocking to Center City and retail is following, according to Michelle Shannon and Cassandra Dominguez of the Center City District, who were manning a booth at the ICSC show. “Since 2013, 66 new-to-market national retailers have moved into Center City,” Shannon said. “There are 175,000 people living here now, and that’s a 20% increase since 2011. A 10-year tax abatement offered by the city is also appealing to retailers.” Philadelphia was already rife with the commodity that malls and shopping centers all battle over — high-quality and unique food and drinking establishments. “Philadelphia has always had a great food scene. We have several James Beard Awardwinning chefs here, and they’re homegrown,” Dominguez said. According to Shannon and Dominguez, a combination of local and national developers are investing $9 billion to add 2 million sq. ft. of GLA to downtown Philly, more than a million of that being retail space. Leading the way is the under-construction Fashion District on Market Street, a joint project of Macerich and PREIT. When it opens in fall of 2019, Fashion District will represent the final piece of Center City’s developmental puzzle, according to PREIT CEO and Philly native Joe Coradino. “Philadelphia’s got everything except great retail,” he told us a few years ago at the outset of the project, “This project will change that.” So retailers, if, like me, you haven’t visited Philly in a while, put it on your itinerary. If your chain lacks a presence in the city, I have a feeling you might return from your trip with a mind toward rectifying that situation. The same goes for developers of live-workplay town centers. Get thee to the City of Brotherly Love for inspiration. Philly is genuine, and genuine is what builders of town centers must strive for.

Al Urbanski aurbanski@chainstoreage.com @AlUrbanski (Twitter)

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REAL ESTATE

By the Community and for the Community Mixed-use projects are about the locals not just the location By Al Urbanski As with all things real estate, location provides the foundation of a successful mixed-use project. The residential must be up to local standards, or luxury-class, if called for. Office space must be Class A. But it’s the retail that provides a project with its signature. It’s that unique mix of shops, bars, restaurants, and entertainment that makes residents want to live there and locals want to congregate there. If the mix is right, retailers will pay a premium to become part of it. A study conducted by Costar Group found that retailers would pay mixed-use center rents

Bridgeport

Levee at East Peoria Downtown

at a premium of 15-25%above the norm in a given area. Spread across 260 acres in Gainesville, with its own city street and traffic light, Butler Plaza has been the retail center of Gainesville, Fla., for decades. But in a growing community with a major university (U. of Florida), a thriving medical complex, and five million tourists a year, Butler Enterprises moved to augment its 150-tenant megacenter (now known as The Neighborhoods at Butler) with Butler Town Center. “Whatever you need, we either have it or we’re working on getting it,” said Deborah

Butler Town Center

Butler, president of the company founded by her father Clark. “With Butler Town Center, now leasing, we’ve focused on the more luxury-oriented place-making needs of the area. The tenant mix is critical.” Tenants signed to line the streets below The Residences and The Terraces — 202 luxury apartments at Butler Town Center — include P.F. Chang’s, Regal Cinemas, Lily Pulitzer’s Pink Narcissus, Hearth & Heart, and The Village Jeweler. When the Whole Foods opened at the site in May, more than 2,000 locals lined up to gain admittance. “Our priority is connection to the community. Whole Foods added a coffee café that depicts the history of our property as an air field that was the base of a famous female flying ace,” Butler said. “P.F. Chang’s features an alligator hand-painted in an Asian style that connects to our college town mascot, the Florida Gators. It’s an original design concept that will not be replicated in any other city.” The 40-acre Bridgeport project now going up in North Suffolk, Va., aims to bring the highestquality retail, dining, and entertainment options to its section of Hampton Roads, according to developer BECO. “The ability to seamlessly integrate cultural components that foster engagement and offer the community useable public space is critical for mixed-use developments in today’s market,” said Jeff Stone, commercial property continued on page 52

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executive for BECO. “Success depends on housing accommodations that meet the needs of the community, while at the same time offering a built-in lifestyle.” Bridgeport has letters of intent completed for a fine dining restaurant, a casual dining restaurant, a national boutique fitness concept, a child care center and an art studio. It’s still on the hunt for the right fresh-food-oriented supermarket. “There’s not a mixed-use development like Bridgeport in our area. North Suffolk has the second largest income per capita and the fastest growing household median income in the Tidewater region, and that will sustain our success for many years to come,” Stone said. At The Levee District in East Peoria, Ill., the community-connection quotient is high among the developers at Cullinan Properties. The 650,000-sq.-ft. project that combines a Holiday Inn & Suites with big box retail and myriad dining options is in Peoria-based Cullinan’s backyard. “Peoria blends fairly affluent residents with the middle class. It’s very stable with a huge medical population from the Order of St. Francis and Methodist Hospital systems. And, of course, it’s the headquarters of Caterpillar,” said Kathleen Cullinan Brill, VP and director of leasing for Cullinan. The Levee District caters to a wider demographic than so many of the luxury-leaning mixed-use centers being built. The 500,000 sq. ft. now open and operating presents Costco, Target, and Ross Dress for Less to a value-loving customer-base. And while Cullinan is in lease negotiations with fine-dining establishments, the restaurant menu now features Chipotle, Jersey Mike’s, Panda Express, and Red Robin. “We don’t have residential at the levee. We trend slightly more discount with our retail curation. I would say the mix here plays well to the population,” Brill said. The Levee caters to customers who range far beyond the Peoria area. The development is situated within driving distance of St. Louis and Chicago, whose residents are both also drawn to the Bass Pro Shop in East Peoria. Its location has made The Levee a popular site for hosting local and regional community events. “We did one of the nation’s last Target-Costco projects, and we get people from Bloomington who’ll come to shop there as well as at Bass Pro,” Brill said. “Our geographic positioning is unique and we’re a big hub for employment. Peoria doesn’t experience the economic peaks and valleys that so many other markets do.” Much the same environment exists in the Gainesville home of Butler Plaza, and Deborah Butler expresses the same sentiment as Kathleen Cullinan Brill. ‘If you ask me what’s the chief ingredient for a successful mixeduse project, the trendy answer would be, ‘Experience,’” said Butler. “The less sexy but more basic answer is that it’s still location and infrastructure. That will never change. The more accessible your location is to the highest concentration of people in that area, the higher the probability of success.”

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The Levee at East Peoria Downtown Location: East Peoria, Illinois Size: 650,000+ Developer/Owner: Cullinan Properties, Ltd. Key tenants: Target, Costco, Ulta, Ross Dress for Less, Lane Bryant, Carter’s, Chipotle, Jersey Mike’s, Potbelly Sandwich Shop, Red Robin, Shoe Dept.|Encore, Pizza Hut, Panda Express, Xfinity, McDonald’s, Noodles & Co., Sola Salon Studios and Aldi; in lease negotiations with a multi-location restaurant. Other uses/components of project: Hotel: Holiday Inn & Suites; Civic: East Peoria City Hall and Fondulac Library; Office: Clocktower Place Construction status: 500,000 sq.ft. now open, additional build-to-suit opportunities available. Last multi-tenant building completed in spring 2018.

The Levee District at East Peoria Downtown is a vibrant mixeduse center anchored by Target, Costco, Gordmans, Ross Dress for Less, Ulta and Carpet Weavers Furniture Gallery. When complete it will include over 650,000 SF of retail, restaurant, office and hotel space. The development is also home to a full service Holiday Inn & Suites, 54,000 SF office building, East Peoria City Hall and the state-of-the-art Fondulac Library. The Levee District has become the go-to development in the region for hosting local and regional community events that range from 5K’s to annual festivals. A strong, proven development, The Levee District is at the epicenter of tremendous retail growth that has occurred in this market over the years. East Peoria Bass Pro Shops, located within one-half mile of the center and Costco are the only locations between metro Chicago and St. Louis for both retailers.

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REAL ESTATE

Bridgeport

Butler Town Center at Stengel Field Location: Gainesville, Florida Size: 450,000 sq. ft. or retail, restaurants, and residential (mixed-use) Developer/Owner: Butler Enterprises Key tenants: Whole Foods Market; P.F. Chang’s; Irish 31; The Village Jeweler; Pink Narcissus—Lilly Pulitzer Store; MudPie; Grub Burger; newly renovated, recliner seating Regal Cinema. In lease negotiations with: tenants to fill 13,000 SF Stengel Field Food Hall and other newto-market retailers, boutiques and restaurants. Other uses/components of project: Stengel Field Food Hall, the first chef-curated food hall in the greater North Central Florida region; 202 luxury apartments located in The Residences, the top five floors of a six-story building, and The Terraces, situated above the retail and restaurants on the main street; major “gathering place” component complete with high tech misting “cloud” fountain and adjacent spray fountain and area for staging/entertainment and seating. Construction status: Phase One now open with Whole Foods and P.F. Chang’s anchors operating and other shops and restaurants opening throughout the fall. Phase two with larger anchors and residential currently in construction process.

Location: North Suffolk, Virginia Size: Planned square footage for phase one is anticipated to be 70,000 sq. ft. with 60,000 for retail and 10,000 for Class A office space. Outparcel is 2.5 acres and could house a 22,000-sq.-ft. building built-to-suit. Developer/Owner: Burt Cutright, and Eric Olson, co-owners and founders of BECO Key tenants: Actively targeting and prospecting retail, grocery, restaurant, and entertainment tenants with letters of intent completed for a fine dining restaurant, casual dining restaurant, national boutique fitness chain, child care center, and art studio. In lease negotiations with a winery, social club with boutique bowling, veterinary clinic, salon, barber shop, coffee shop, karate studio, dog groomer, and dry cleaner. Other uses/components of project: Retail and restaurants, Class A office space and luxury multi-family and 55+ apartment homes. Construction status: Bridgeport will be constructed in three phases. Preliminary site work on the development began in May 2018. The full project completion is slated for 2020.

A premier mixed-use destination in North Suffolk, Virginia, Bridgeport is centered around you! Designed to serve as a social hub for residents, guests and the greater Hampton Roads region, Bridgeport offers access to the area’s best retail, dining, and entertainment options in a walkable setting with beautiful water views. Plans include 60,000 sq. ft. of retail, 10,000 sq. ft. of Class A office space and 288 luxury apartments known as 3800 Acqua. Additional phases are in the planning stages and are projected to include a 55+ community known as Royal Sail, as well as another 280 lifestyle apartments. Full project completion is slated for 2020.

This Main Street-style retail and residential project will be the first of its kind in North Central Florida, creating a new community where people will live, shop, dine, and play near major universities and rapidly expanding major medical facilities. As the capstone development in The Neighborhoods of Butler, which include Butler Plaza (est. 1975) and Butler North (est. 2016) in one area, Butler Town Center will include boutiques and dining experiences not found anywhere else in the region; the first Whole Foods Market in the region; street level amenities including fountains and landmarks for gathering places, and the unique Stengel Field Food Hall, which will offer fine dining from national renowned, locally based Chef Bert Gill, and national, regional and local dining options , as well as pay homage architecturally to the property’s history as a WWII air field. Butler Town Center will serve as the emotional core of a 14-county market trade area.

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REAL ESTATE

Food Takes Center Stage at the Mall Restaurants and bars now rival Macy’s and Sears as traffic draws By Jennifer Setteducato Is it us or has everyone in America developed a discriminating palate? Just a few decades ago, everyone seemed content eating the same fast food you’d expect at the mall food court. In 2018, things are different, and exciting. More and more people expect a culinary experience on their plates — even when they’re grabbing a quick bite — and shopping centers are stepping up to the challenge in a big way. “Today you need the hotel, the office, the restaurants to draw daytime traffic. The restaurants get the people there,” said Kathleen Cullinan Brill, VP and director of leasing for Cullinan Properties, developer of mixed-use projects like The Streets of St. Charles in Missouri and The Levee District in Peoria, Ill. “The shopping center of yesterday — people went there to buy something. Our developments today need to be a place where people go to do something,” Cullinan observed.

Restaurants now play a leading role in the revitalization of malls as developers continue to diversify their tenant offerings and customers continue to seek out new experiences — particularly when it comes to dining. According to JLL’s “A New Mall Rises” study, food and beverage tenants now take up 8% to 9% of total gross leasable area in malls. That’s a five-point increase from a decade ago, and their space allotment could reach 20% by 2025. Four out of 10 malls are upgrading their restaurant options, JLL reports. “Shopping centers like ours, whether they’re open-air lifestyle centers or enclosed regional malls, usually had somewhere between 10% to 15% of space dedicated to food and beverage. Now we’re seeing that climb upwards of 25%” said Bryant Siragusa, VP of national restaurant and entertainment leasing at Starwood Retail. “An anchor may bring in $10,000 in volume, which is not a lot of foot traffic on a daily basis. If you tear it down and add five restaurants that collectively do $50 million in volume a year, that’s a lot of table turns, a lot of traffic, and a lot of reason to be there. It creates a repetitive business,” Siragusa said. Food courts being replaced by fast-casual and fine dining is infusing retail centers with new energy and it’s helping restaurant brands find leasing opportunities at centers located in mature markets that, for some, were once impenetrable. Developers now scout new food concepts like show biz impresarios hunting for new talent. Phillips Edison & Company, one of the largest Restaurant row at the Ridge Hill center in Yonkers, N.Y.

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owner-operators of grocery anchored centers has an “emerging trends” team that helps promising new eateries ramp up multiple locations in its centers. There is no cookie-cutter solution when it comes to finding the right mix of eateries at a given mall. Local demographics play a key role, as do locally based and locally sourced restaurateurs. Experts say that culinary curation is truly part art and part science. “It’s the landlord’s job to identify who the right co-tenants are to drive traffic for the retailers,” said David Orkin, executive VP, restaurant practice leader at CBRE. “You want to align the restaurant’s customer profile with your tenants, and with the area and market.” Orkin gave the example of a department store tenant being replaced by a movie theater. In such an instance, he said, a high-end steakhouse wouldn’t make sense as customers are not going to spend $100 on a steak and rush out to catch a movie. A casual dining experience would be a better option. By the same token, a fashion-driven center would not benefit from a sports bar. While there is no denying the appeal of restaurants in helping to lure traffic and repeat business, mall owners need to be wary of over-saturation. “Restaurant growth continues to accelerate at the same time retail growth is decelerating,” Orkin said. “At some point, though, there is going to be a tipping point where you have too many seats and then you have the same problem you had when you had too much retail.” “I see [the restaurant] trend happening for the next five years until we stabilize it,” Siragusa added. “You’re going to see a big evolution in how these centers change over time.” 055

REAL ESTATE

Courting Foodies The foodie culture continues to sweep the nation, and shopping center restaurants are responding with creative new options. Farm-to-table and celebrity chef brands are becoming commonplace in the former home of food courts. Revolution Hall, a two-story, 700-seat open-concept “culinary marketplace” will open this fall at JLL-managed Rosedale Center, in Roseville, Minn.. Located inside a former Borders store and owned by New York-based Craveable Hospitality Group, the 32,000-sq.-ft. space will take up two floors and will feature 13 of Craveable’s own curated brands, ranging from grab-and-go and artisanal specialties to fine-casual dining. Guests will be able to order from special kiosks

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throughout the mall, as well as online via an app. “The benefit of having our group curate and operate as the sole provider of the food hall is to gain leverage in the hospitality experience to the guest, creating an environment in which guests will have an effortless dining experience,” said Stephen Goglia, Craveable Hospitality Group owner, president & CEO. “It provides to them an elevated experience in quality and variety.” The Shops at Willow Bend in Plano, Texas, is also getting in on the action. The center, owned by Starwood Retail, is undergoing a $125 million redevelopment plan, will feature a “Restaurant District” where there once was a Saks 5th Avenue.

Four celebrity chef-branded restaurants are set to open in October, with more to open at a later date. One of the four creative food offerings the District at Willow Bend will offer is Knife, a steakhouse by celebrity chef John Tesar that will feature two patio areas, a retail butcher shop, and a walk-up window that faces into the mall where shoppers can order a quick burger. Eataly may very well be a food lover’s Graceland. With over 30 massive locations around the world, it truly is an amusement park for foodies. The 21st century Italian marketplace allows visitors to eat, shop, and experience live cooking demonstrations, culinary classes, and walking tours.

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Like the foodie movement, Eataly shows no signs of slowing down. Its first location opened in Torino, Italy, in 2007, and in the span of 11 years it has expanded worldwide with stores in Japan, Munich, Brazil, and Istanbul to name a few. There are currently five U.S. locations with a sixth — a 40,000-sq.-ft., Las Vegas store — set to open this fall. Eataly may not need shopping centers to expand. FICO Eataly World — described as “the largest agri food park in the world” — opened in Bologna last November. Sprawling across 20 acres, it features farms, fields, markets, and restaurants where cured meats, fresh pasta, and cheese are created. It also fills 10 classrooms with “artisanal workshops” to spread the foodie gospel even farther.

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Hot Markets

Chicago By Al Urbanski

Chicago is not so much a hot market getting hotter as it is a cool market getting warmer. And despite trending toward urbanization of the American population, it is the retail assets in suburbs north of the Loop that are raising the real estate temperature. Nearly a quarter of all retail transactions are happening there, according to Marcus & Millichap. Healthy net absorption is increasing rents in the suburbs, with the average rate pacing upward at about 4% to $15.60. In the Northwest City area, asking rents have risen around 6% to $22. Near O’Hare airport, rents are up 23% to $18. “Chicago is hardly a scorching hot market. Rents are only up 1.7% overall, but they’re accelerating in places like Arlington Heights, Northbrook, Deerfield, and even as far out as Naperville,” said Scott Holmes, national director of retail for Marcus & Millichap. Despite the fact that new constructions starts are on the decline in Chicagoland (1.9 million sq.-ft. this year versus 2.3 million sq. ft. in 2017), Holmes notes that the closest ring of suburbs surrounding Chicago proper are seeing increased action in mixed-use projects. The slowing pace of construction is the chief driver of vacancy rate decreases as retail shops and restaurant backfill large-footprint stores that have closed in shopping centers and strip malls. LA Fitness, Ulta Beauty, and Dollar Tree have 058

all signed multiple leases in Chicagoland this year. Demand for more retail space will continue for the coming year, predicts Marcus & Millichap, as net absorption more than doubles the number of completions and pushes vacancy to a 12-year low. Holmes said pickings will remain slim for national retail chains looking to expand into Chicago. “There’s not been much in the way of new construction since 2008, and most of the new projects have been built-to-suit, and that’s where most of the increase in net absorption has come from,” he said. Retailers should keep their eyes on a mega-project about to rise on the North Branch of the Chicago River, however. Sterling Bay is transforming an industrial backwater between Lincoln Park and Bucktown into Lincoln Yards. Originally planned as a 53-acre mixed-use project, the Chicago developer in August bought a closed scrap metal warehouse to add to the site and there’s speculation that the planned community could end up at closer to 100 acres. A 20,000-seat soccer stadium is planned to house United Soccer League team at the site; Live Nation has agreed to build up to five live event venues in Lincoln Yards; and a 70-story tower and 5,000 residential units are planned. Sterling Bay estimates Lincoln Yards will bring 23,000 jobs to the area.

chicago By The Numbers

1.9

million sq. ft. retail GLA to be completed in 2018

4.9

million sq. ft. net absorption

vacancy rate

$17.50

average asking rent

3,937

household retail sales per month

70,380

population increase from 2013-2017

Source: Marcus & Millichap SEPTEMBER/OCTOBER 2018

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