Your Stores Might Need an Overhaul

store-space 730x280.jpgIt’s no secret things have been tough out there for brick-and-mortar retailers of late. But lost in all the juicy coverage of closings, shut-downs, and “going out of business” sales is the fact that plenty of traditional brick-and-mortar retailers are doing just fine.

In the past few weeks alone, Fort Worth, Texas’s Star Telegram profiled At Home Group, the big-box home furnishing chain that added 23 stores in the past year and has posted 11 consecutive quarters of net sales growth greater than 20 percent. The Atlantic ran a feature examining the sustained success of REI when its competitors, like Sports Authority, have gone bankrupt. And CNBC published a report on the retailers that “are bucking the store closure trend,” which included big names like Target, Costco, and Dick’s Sporting Goods.

To be clear, we’re not saying the current climate is necessarily peachy for brick-and-mortar retailers. But rather maybe—just maybe—articles like “As Online Sales Boom, Is Brick-and-Mortar on the Way Out?” in US Today are just a tad hyperbolic. After all, The Wall Street Journal did declare as recently as February that not “all big box stores are dead” and that plenty of retailers “can still find ways to entice shoppers to their physical stores, despite a continuing consumer shift toward online buying.”

So, maybe it’s time to start stop with all the doom and gloom and start thinking about expanding your brick-and-mortar footprint. According to Bloomberg, the time’s never been better. At least if you’re considering a Manhattan location, anyways.

Unprecedented Perks

According to Bloomberg, Manhattan landlords are pulling out all the stops to entice brick-and mortar retailers to rent storefronts. Offers most commonly include such incentives as interior design overhauls, moving expense reimbursement, and new lighting and displays, and are most common in high-profile areas like Madison Avenue and Fifth Avenue. 

Perhaps most interesting, though, is that building owners are attempting to woo potential retailers by helping them get out from under their current leases and move to so-called stores of the future.  According to the article, property owners have “kicked in” for elaborate in-store features, such as the in-store basketball court Nike uses to entice consumers to test out shoes before buying. In addition, to further sweeten the deal, property owners have agreed to take over new clients existing leases in less desirable areas of the city. When Nike agreed to move to 650 Fifth Ave., the landlords agreed to take over the company’s lease obligation at an existing store about five blocks away at 6 E. 57th Street.

“We’re seeing tenant-improvement and concession packages that retail landlords never, ever contemplated before,” said Steve Soutendijk, an executive director at brokerage Cushman & Wakefield Inc. 

Effects in other cities

So far, land lords in other “higher end” retail destinations like Chicago’s Michigan Avenue and Rodeo Drive in Beverly Hills haven’t yet begun offering the same perks as their New York counterparts, but that may just be a matter of time. As retailers begin to rethink their brick-and-mortar strategies, the space needed for traditional retail can—and will—shrink; which can give way to more “stores of the future.” And as we know, as far as retail is concerned, as New York goes, so too does the rest of the country.

Implications

As retailers consider more space or alternate space - it's important to have finger on the pulse of your foot traffic. Stuffing your new space with more options, product choices, or styles isn't always the solution. Know your localized demand and make sure your store assortment reflects that.

Really, there’s two main takeaways here. One, if you’re one of the lucky retailers that has continued to thrive in an otherwise difficult climate, there may be no better time to expand your physical real estate. Two, for the retail industry as a whole, declining real estate prices and “store of the future” incentives from land lords could be the push retailers need to open up more experimental brick-and-mortar locations. It’s not unreasonable to see an explosion of concept stores in the coming months and years.

 

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Topics: assortment optimization, in-store assortment, concept stores

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