Author Archives: DANTH

More On Retailing To Teenagers

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There was an interesting article by Eric Wilson in yesterday’s New York Times about retailers who target teenage shoppers. The full citation can be found at the end of this post.

Wilson notes that a recent study by the investment bank Piper Jaffray reported a 14% decline in spending by teenagers that was a “direct reflection of the economy.” Cost has become a much more important factor in teenager purchasing decisions.

Most importantly, Wilson notes that “as teenagers’ priorities rapidly shift away from brands they now perceive as too expensive, the pecking order of mall stores has changed.” Abercrombie & Fitch, for example, has held its prices during the current recession and consequently has had a significant decline in sales.

But, price is not everything., Hot Topic has increased its sales steadily during the recession largely because it sells licensed products tied to the “Twilight” vampire series. According to Betsy McLaughlin, the chain’s CEO: “There’s just so much retail out there. I think the people who will win are the ones who provide something different. It’s not just a price war.”

See: Eric Wilson, “Losing Its Cool at the Mall,” The New York Times, April 23, 2009, sec. Fashion & Style, Article.

 

Is Our Great Recession Saving Downtown Movie Theaters?

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About a year ago, I wrote that downtown movie theaters were increasingly in jeopardy because people were more and more watching movies at home. Lately, I have been asked if I still believed downtown cinemas were in trouble, since recent media reports indicated that:

  • Nationwide, movie attendance was up 21% in the first seven weeks of 2009
  • The National Association of Theatre Owners claims box office numbers climbed in five of the seven economic downturns that occurred over the past 40 years.
  • It is well-known that movie attendance rose sharply at the height of the Great Depression
  • The stocks of the movie theater chains lately have risen substantially.
First, it should be noted that a seven week attendance pattern ought to be treated with caution, especially when it is contrary to a longer term trend.

Total U.S. & Canada Admissions
Year Admissions
2008 1.363
2007 1.400
2006 1.395
2005 1.376
2004 1.484
2003 1.521
2002 1.599
2001 1.438
2000 1.383
1999 1.440
1998 1.438
1997 1.354

Source: National Association of Theatre Owners

Total admissions in the USA and Canada for the full year of 2008 – when we where already in recession – was the lowest since 1997.

But, the primary reason that I still think downtown cinemas are in trouble is the behavior of highly regarded Hollywood moguls such as James Cameron and Jeffrey Katzenberg and the movie theatre chains. Cameron and Katzenberg both believe that the future of the movie theater business rests on 3-D movies because “going to the movies” has to once again become a special occasion, quite different from watching a flick at home. The movie chains have been investing a lot of money in more IMAC screens and now they are trying to raise between $700 million to $1 billion to convert enough screens—at $100,000 a shot –- to 3-D.

Some smaller, but savvy movie theater operators are doing such things as running “dinner cinemas,” where you get both a good film and a quality meal. Others are opening restaurants or brewpubs next door.

The downtown movie theaters that are really endangered – regardless of how they are drawing now – are those that cannot turn watching a movie into a special occasion. That is the key for the future. Dirty sticky floors, uncomfortable seating, inadequate restrooms, uncivil patrons, run of the mill films, etc., are not characteristics of a special occasion that will draw film viewers from their homes, but far too many downtown cinemas have them. Improving these theaters will not be cheap. Nor will it be cheap to provide them with 3-D equipment.

I do not know whether 3-D is the silver bullet. Here in Kew Gardens, we have a six screen cinemaplex that has absolutely no off-street parking, but it has been packed every weekend for many years. It is located in a densely populated neighborhood and features current “indy” films to an audience that rarely has a teenager in it – I’d say most patrons are over 40. Larry Houstoun reports similarly successful small cinemas near him in downtown Philadelphia. Indy flicks for seniors or IMAC or 3-D or whatever that makes going to the movies a special occasion is what counts!

If downtown organizations want their independent cinemas to survive they will have to help the operators again provide a venue where going to the movies is a special occasion.

Recession Evils: Rumors and Facile Solutions

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In a recent newsletter of Red Bank’s RiverCenter, Nancy Adams properly admonished the rumor-mongers who, faster than the recession, can bring down a good business operation. I congratulate Nancy for her spunk. And in contrast to Lou Grant, a lot of us like spunk! I am so glad she told those idiots to shut up!

Let me take up a cudgel against an equal danger – the town leader, manager or guru who thinks they are on to an easy answer for coping with our Great Recession. For instance, since November I have been hearing on and off about how good the student market is for retailers. This flies directly against what I have leaned about student shoppers since I started to study them for a project in Elizabeth, NJ back in the late 1990s. Before the dot,com bubble burst, the teen/tween market was an important growth engine for many downtowns – especially in urban wear. But with the dot.com bust, these youths lost their biggest income – what mom and dad gave them. And a lot of shops that targeted this market were badly hurt. Also, this market is notoriously fickle – a shop or chain that is red hot today can be in the crapper tomorrow. Finally, the potential size of this market is limited – the amount that teens and tweens can spend simply pales in comparison to how much retail spending their mothers control!

Then, if you look closely at what is happening today, you have to wonder some more. You can bet your bottom dollar that as this recession deepens, these kids are going to get less and less from their parents. And do you really think these kids are now getting part-time jobs to cover their retail buying habits? Moreover, if you look at some recent data, the story is a mixed one; some retail chains that target the teen/tween market are doing really well, but others, many that were hugely popular with these young shoppers, are not.

Below are some same store sales comparisons for retail chains that like teen/tween customers. The data are from Barbara Farfan at About.com:

Same Store Sales –Dec 2008

+13.5% The Buckle, Inc.
+ 12% Aeropostale
+ 10% GameStop
+ 4.3% Hot Topic Inc.

– 1% Urban Outfitters
– 10% Pacific Sunwear
– 12.3% Zumiez
– 12.5% Wet Seal
– 17% American Eagle Outfitters
– 24% Abercrombie & Fitch

Same Store Sales –Jan 2009

+ 14.7% The Buckle Inc.
+ 11.0% Aeropostale
+ 6.0% Hot Topic
+ 2.0% American Apparel

– 11.0% Pacific Sunwear of California
– 14.8% Zumiez
– 20.0% Abercrombie & Fitch
– 22.0% American Eagle Outfitters

Same Store Sales –Feb 2009

+ 21.0% Buckle, Inc.
+ 11.0% Aeropostale
+ 10.8% Hot Topic
+ 4.8% Torrid (Hot Topic)
+ 3.0% Urban Outfitters

– 6.6% Wet Seal
– 9.0% American Apparel
– 13.0% Zumiez
– 23.9% Arden B (Wet Seal)
– 30.0% Abercrombie & Fitch

The Buckle, Hot Topic and Aeropostale are indeed doing well and it would be great to discern a winning formula they share. Hot Topic is hot because it sells the clothing that the vampires or zombies wear in some book series that tween and teen girls now adore. Gamestop is hot because it resells computer games to the avid gamesters. But, Ambercrombie’s, Amercian Eagle, Zumiez, Wet Seal and Pacific Sunwear are not flourishing. And Amercian Apparel and Urban Outfitters – some retail analysts thought they were immune to this recession – are up and down. This market segment still does not sound to me like a rock downtowns now can build their retail upon.

“You never want a serious crisis to go to waste”

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Rahm Emanuel’s statement about not wasting a serious crisis was music to my ears and anyone committed to real change in their downtowns should keep it always in mind during this very trying recession.

Two of the socio-economic theorists I most admire, the American economist Mancur Olson and the French sociologist MIchel Crozier, forcefully argued that real change in most social, economic and political systems can only occur during a crisis. During the non-crisis periods they’ve become ossified, paralyzed, stalemated and bureaucratized by powerful interest groups. For change to occur the existing system must be severely shaken — and that is exactly what a crisis does. A crisis greases a paralyzed system and enables real, meaningful — not just incremental — change.

Now is the time for downtown leaders to think BIG, to come up with innovative programs, perhaps in areas their organizations have not ventured before. These programs certainly will be of value during the recession, but have even more utility when the economy turns around. For example, I think that the vast majority of downtown organizations now need to get much more involved in helping small businesses find financing. I also think that BID/SID advertising and promotional programs based on the “old media” need to be overhauled. BID expansion is another possibility. I am certain you can come up with your own list of possibilities. Now is the time to undertake such ventures!

Long ago, I was told that in the Chinese language the character that means crisis also means opportunity.

The Apparel Niche and the Home & Hearth Niche: The Growing Importance of Independent Operators

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Introduction

The apparel niche and the home & hearth niche may seem unrelated, but they share several commonalities:

  • They are both particularly important to downtowns
  • They are both facing challenges, and
  • They will both be relying on the success of independent operators for their future well-being and growth.

Apparel

First, let’s consider apparel. This niche is important to downtowns because women are our most prominent and powerful shoppers (making 80% of the purchases for the home and family). And clothing, shoes and accessories purchases for themselves and their children are an important part of women’s purchases. As we’ve reported in previous blasts, time-pressured mothers are willing to accept higher prices from downtown vendors if they can shop quickly and easily close to home. In addition, a successful apparel niche adds diversity to the downtown mix and stimulates interest in strolling and window shopping.

But apparel has been an at-risk niche for the past two decades. While the industry has grown, it has grown at a pace much slower than other retail sectors. Additionally, major retailers like Ann Taylor, the Gap and Chico’s – the kind of trophy apparel shop that many downtowns have targeted as their dream tenants – are not opening new stores as they suffer reduced sales in a difficult economic climate.

What to do? We all know of downtowns where there is more than sufficient unmet demand for apparel within a ten-minute drive shed to support a new store with $300,000 to $400,000 in annual sales. Such revenue may be too low for a national chain, but very adequate for an independent operator.

These new merchants will need a great deal of support from the downtown organization in finding affordable space, negotiating leases and perhaps even “sourcing” their merchandise. To succeed it will help that these merchants:

  • Be a local resident – for instance, a local mother – with a network of friends and colleagues in the community
  • Represent and market to a specific and strongly populated ethnic group in the community
  • Be opening a very high-end shop that provides an exceptional level of pampering and customer service
  • Be able to solve the problem of sourcing attractive merchandise

In many instances, an independent operation apparel niche is not going to be recognized or realized without the proactive intervention of a downtown organization. Your organization can help foster such a niche by:

  • Having market research performed to identify opportunities
  • Indentifying and cultivating possible entrepreneurs
  • Helping the entrepreneurs form a viable business plan, find appropriate affordable space, find loans or investors, etc.

Home & Hearth

For decades, revitalization advocates have searched for a type of retailing that can thrive in downtown locations despite the presence of nearby malls and big box discount retailers. DANTH has found that home and hearth niches are very often the answer.

Home and hearth niches are groups of shops that feature goods and services that enable shoppers to make their homes more comfortable, more entertaining and more beautiful. They include retail establishments selling furniture, carpets, antiques, table top goods, window treatments, hardware, electronics, art works, picture frames, tiles, appliances, kitchen and bathroom equipment, plumbing supplies, telephones, and gardening equipment. This niche can also include architects, plumbers, carpenters, contractors and service firms that deal with lawns and septic tanks.

Usually, the firms in this niche are overwhelmingly independent operators or small regional chains. They usually don’t need vanilla box spaces.

The home and hearth niche is very dependent on the housing market and the niche’s current economic woes have traced the decline in home values. But DANTH believes that demand for this niche’s products and services soon will begin to grow as consumers start to put more money and attention into fixing up their current homes instead of buying new ones. Home Depot and Lowe’s have already pivoted their marketing in this direction. Economic conditions have also sent Americans into more “cocooning” in their homes which is leading to strong sales of flat screen TVs and other home theater accoutrements.

Plus, the long-term trend for this niche is very good, showing that businesses in the home and hearth sector have grown at a pace greater than GAFO in eight of the last ten years for which data are available. DANTH expects that as the current housing crisis is resolved and household formation again rises, sales in home and hearth stores will follow suit. Now, as the market is bottoming out, is a good time for downtown organizations to strengthen or build their home and hearth niches.

Another positive for this sector is that downtown organizations will need to do less work in attracting and building this niche than with an apparel niche – since less home and hearth business owners are “newbie’s” to the industry. The downtown organization can take on a more traditional business recruitment effort without having to provide the large amount of business development assistance that independent apparel operators will require.

This posting was condensed from my longer report by Mary Mann. To read the full report on Apparel and Home & Hearth Niches, visit www.ndavidmilder.com.