Category Archives: retail chains

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.

 

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.

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.

An Ethnic Downtown With Many Retail and Fast Food Chains

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For many years downtown revitalization experts lamented that large, ethnic downtowns — those with lots of African American and Hispanic shoppers — were being avoided by major retail chains.

That is certainly no longer the case. Here, in New York City, one of the hottest retail locations is along 125th Street in Harlem. Many retail and fast food chains are also occupying important storefronts in the outer borough downtowns such as Jamaica Center in Queens, Downtown Brooklyn and Fordham Road in the Bronx. They are also opening in strong neighborhood shopping districts such as Jerome Avenue in the Bronx and and Corona Plaza in Queens.

Below is a list of the national and regional retail and fast food chains that I found on a visit yesterday to Jamaica Center.

I first went to this commercial district with my mother to buy shoes back in 1949, which was toward the end of its “Golden Age.” I continued to shop there occasionally for sports equipment and sneakers until I went away to college in 1958. It was not until the early 1980s that I returned to carry out consulting assignments for Regional Plan Association and the Greater Jamaica Development Corporation (GJDC). Though my involvement in the revitalization of this district ended in the early 1990s, I have continued to visit every few years to take photos and gauge its progress. It’s just two miles from my home office.

The revitalization of Jamaica Center has been a long process, starting back around 1968 with the creation of the GJDC. Over a billion dollars have since gone into the revitalization of this commercial center, paying for such things as the re-routing of a subway line (E train), tearing down an elevated line, building York College, the construction of a one million SF Social Security Building, new court buildings, building a terminus for a monorail link to JFK, etc.

By the early 19980s the quality of the retailers was ebbing and this trend culminated with the closing of two major department stores, Macy’s and Gertz. White shoppers from the northern and western parts of Jamaica Center’s trade area stopped visiting, choosing instead to drive east to the shopping malls in Nassau County.

Many of the other neighborhoods in the trade area had African American households with relatively high annual incomes for Queens. Cambria Heights, for example, recently had a median household income of $69,030, while the median income for Queens was $49,780. Many of the residents in these neighborhoods were civil service workers and teachers, often in dual income households. Though large numbers of these residents passed through Jamaica Center each weekday to use the subway on their trips to and from work, they, too, avoided shopping there because the retailing had come to focus on low income and teenage markets and the area had developed a reputation for street crime and drug use and sale. Nevertheless, the pedestrian traffic along Jamaica Avenue continued to be a “beehive of activity” and some of the merchants were doing $s/SF that rivaled those of retailers in some of Manhattan’s best locations.

I was greatly encouraged by my recent visit and feel that the end game, the “take off” phase of Jamaica Center’s revitalization is in sight. The primary reason for my optimism is the recent announcement of a major project that will bring over 300 market rate housing units into the downtown, with a number of similar projects on the drawing boards. Another reason is that the retailing’s strength now seems to be more than shops featuring “urban wear,” with chains having a strong middle class appeal opening, e.g., Home Depot, Marshall’s, Zale’s, Nine West, Old Navy. The teens will still shop in Jamaica, but now their parents might as well.

The changing nature of the district’s retailing is also, in my opinion, reflected in the new store facades that have been built in recent years. They are much more attractive, with smaller signage, a better sense of proportion and though the colors used might offend some with Main Street design sensibilities, they are often still very pleasing.

Another indicator of this district’s strength is that commercial rents along Jamaica Avenue recently have reached as high as $150/SF for choice locations.

In the list below I have noted some of the chains that were open in Jamaica Center and have since closed. It should be noted that all of these closures involved chains that were having overall problems.

At the end of the list I have provided a link to a web-based photo album that contains photos of Jamaica Center’s retail chains.

National and Regional Chains in Jamaica Center January 25, 2008

Payless (2 stores)
Gothic Furniture
Quiznos Sub
UPS Store
Java’s Brewin
Game Stop
Burger King
Taco Bell
Pizza Hut
Dunkin Donuts
Subway
McDonald’s (2)
Duane Reade
Walgreens
Sleepy’s
Footlocker Kids (converted to Kids)
Zale’s
Nine West
Radio Shack
Marshall’s
Conway (2)
Home Depot
Fabco Shoes (2)
Footco USA
Jimmy Jazz
Toys ‘R Us (closed, chain in trouble)
Kids ‘R Us (closed, chain in trouble)
Wertheimers (closed, chain in trouble)
Jennifer Convertibles
Rainbow
Ashley Stewart
Tick Tock
Dr Jay’s
Vim
Modells
Cookie’s Department Store
Porta Bella
Strawberry
Parade of Shoes (closed, chain in trouble)
Youngworld
Athlete’s Foot
Shoppers World
Old Navy
The Children’s Place
Gap (closed, chain in trouble)

Home Depots and Home and Hearth Niches

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Conventional Wisdom
Conventional wisdom holds that when “category killer” retailers, such as Home Depot , enter a market area, they decimate many independent retailers in nearby downtown and neighborhood commercial centers. Local hardware stores, lumber yards and paint shops are supposedly doomed, while shops featuring lighting, window treatments, flooring, home decorations, etc., are seen to be in increased danger. The urban Metropolitan Avenue shopping district in the Forest Hills neighborhood of New York City and the suburban Springfield Avenue commercial corridor in Maplewood, NJ, demonstrate that sometimes these small merchants can not only survive, but possibly even thrive, after a Home Depot opens nearby.

Forest Hills, NY
A Home Depot opened five years ago about 500 feet from a 0.70 mile section of Metropolitan Avenue, a two-lane, often congested street, that for decades was a backwater shopping district in this neighborhood. This district is 1.7 miles from the very powerful Queens Center Mall, and about 0.8 miles from the Austin Street shopping area that is tenanted by the likes of The Gap, Eddie Bauer, Benetton, Banana Republic, Sephora, Barnes & Noble, etc.

Five years ago Metropolitan Avenue was anchored by popular independent operations such as Eddie’s Sweet Shop, Continental Hardware, Alberto’s Restaurant, Weston Bros. Appliances and a movie theater. All had been around for over 30 years.

When Home Depot opened many retailers, including the owner of Continental Hardware, thought that a lot of local shops would be crushed. Today, this strip has experienced a surge of growth with better quality shops and restaurants opening that attract more affluent shoppers from nearby neighborhoods, including the famed Forest Hills Gardens enclave. Commercial rents and foot traffic have increased significantly. It now also has a flourishing 24 store “home and hearth” niche that includes: a 4,000 sf hardware store that stocks 60,000 items and has been around for over 80 years; a paint and wallpaper store featuring Benjamin Moore products; six antique shops; two appliance stores, with one specializing in air conditioners and fireplaces and the other in vacuums and sewing machines; two plumbing and plumbing supply stores; two furniture shops; one kitchen cabinet store; one shop specializing in window treatments and two reupholstery and drape shops.

Consumer expenditures provide room for both a Home Depot and a lot of nearby independent retailers: 157,459 households live within a seven-minute drive and they spend over $321 million annually on home furnishings and equipment.

The shops in this commercial area have long experienced heavy competition from Manhattan as well as nearby malls and shopping centers.

Double click photo to access photo album on this niche.

Maplewood, NJ
Springfield Avenue is a 2.5 mile-long suburban commercial corridor. It long has been a secondary shopping area within the community to Maplewood Village in terms of reputation, appearance , store quality, commercial rents and customer traffic. The core of the shopping district is about 3 miles away from the Short Hills Mall, which is famed for its array of high end retailers.

Over eight years ago a Home Depot opened about one mile west of the heart of the area. An Expo also opened near the Home Depot, but it soon closed. Today, Springfield Avenue is definitely improving. The Township has made significant street improvements. Recently, Dunkin Donuts and Pappa John’s Pizza opened as have some attractive restaurants, a toy store, an art gallery, a home decorating shop and a dance school. There also is a 25-store home and hearth niche that includes architects, plumbers, art dealers, upholsterers, paint and home décor shops. The strongest stores in this niche are Riccardi Bros. Decorating, Riccardi Paints (which have been around for 75 years) and Sherwin Williams Paints.

According to Walter Riccardi, his paint store’s revenues took a 5% hit the first year Home Depot opened, but they have since more than recovered. The Expo had a similar impact pattern on his decorating store. While his store’s prices are close, Riccardi states that his key to success is that “We serve our customers to death.” Households living within a 7-minute drive of the heart of the Springfield Avenue corridor spend $260,801,200 annually on household furniture and equipment.

Lessons Learned
There are several apparent reasons why these home and hearth niches have succeeded:

  • These niches represent nearby specialized shopping centers for consumers interested in making their homes more attractive or comfortable. They provide a lot of choice and convenience. Attractive restaurants, coffee houses and ice-cream parlors enhance this shopping experience.
  • Many of the niche shops that pre-date the Home Depots continue to be strong because of their quality products and especially their high levels of service. They never competed on price — and do not today. Many target time-pressed, affluent shoppers who definitely are not do-it-yourselfers and who place a high priority on such things as design, paint selection systems and installation being parts of the purchase package. Such services are definite keys to success.
  • They also had years of experience dealing with strong competitors before the Home Depot arrived. Similar shops in less urban settings may not have similar competitive experiences and are consequently less able to cope with the strong competitive pressures presented by a Home Depot.
  • Many niche shops — e,g., the antiques, art, furniture and decorating shops — do not compete head-on with Home Depot. Their goods and services complement Home Depot’s offerings. They help maintain customer traffic for the stores that do compete more directly with Home Depot
  • The opening of the Home Depot legitimated Metropolitan Avenue as a retail location, attracting better operators and more investment . It also increased consumer awareness of the strip.
  • Consumer expenditures within both market areas for home and hearth goods and services provide ample room for a Home Depot and a lot of independent retailers.