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[11 comments]

Independents Deemed Mall-Worthy

December 3, 2012

While most malls largely support national stores, an upscale mall in Phoenix area is creating some room for a few local independents.

Biltmore Fashion Park in early November opened a new retail section called Union dedicated to 18 retailers, almost all Valley-based. Each individual store in the 7,200-square-foot strip located on the east side of the open-air center ranges from 200 to 500 square feet.

To set it apart from the rest of the mall, Union has an urban and rustic feel with a mix of concrete and reclaimed barn wood, as well as unfinished ceilings that expose lighting and ducts. The upscale mix of independents features Whoopie Baking Co., Queen Creek Olive Mill, Smeeks candy store, the Willows Home and Garden, and a restaurant and wine bar.

The independents get a break with only a one-year term as opposed to the typical three for national retailers, but they particularly benefit from the foot traffic with many locals primarily shopping at malls.

"It's very difficult for an independent merchant to find a little niche in a side street like you would see in San Francisco or New York here in Phoenix," Lew Gallo, owner of Union home accessory shop For The People who helped assemble the mix of retailers, told arizona.newszap.com. "We've kind of created that little side street with Union at The Biltmore, and it's allowing small stores to survive and thrive there."

For its part, Biltmore Fashion Park gains a differential from other malls and also taps into the growing preference for locally produced goods and Arizona-based retailers. The Union is also hoping to attract a younger, hipper crowd while still appealing to loyal older shoppers.

"This is exactly the opposite of what big players who managed malls were doing 20 to 25 years ago, when they just wanted big retailers," Bob Kammrath of Kammrath & Associates, a commercial-real-estate research company, told The Arizona Republic. "And that didn't work out. ... Everybody is scratching their heads asking, 'What can we try next that might work?'"

Discussion Questions:

Can local independents be a draw for upscale or even regional malls? What type of support structure may malls have to create to increase the likelihood of success for independents in malls?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much does a mall environment increase or decrease the likelihood of success for independent retailers?

Comments:

I think this is a great idea. It will help support small businesses while creating a niche for the mall.

There should be some dedicated marketing efforts for the independents, specifically targeted to the local audience.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

I'm not clear why the mall had to segregate these stores and give them an area that looked different. To me, that's a hindrance to their success, basically telling customers they are different or second tier.

All chains start out as a single store. So as long as they can afford to be in a mall, it seems like it's fast forwarding the possibility of a local store testing the waters to see if it has the "stuff" to attract investment and franchise or add company owned locations.

Short of making things financially feasible and helping with promotional efforts, I don't believe malls can do much other than screen local businesses very carefully before giving them space (if that's legal).

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

At the risk of taking Marshall McLuhan's "the medium is the message" too far off its original context, I think it applies here. I don't think people go to the mall to see independents. The medium, in this case the mall, suggests a certain message, in this case national brands. You don't go to a Gap store, you go to "The Gap." You go to the mall expecting and wanting to see stores with a national presence and a consistent message.

I personally can't see this development being all that successful for the mall or the independents. If you are an independent with a unique product, showcase it in a unique way...not at the mall.

Fabien Tiburce, CEO, Compliantia, Retail Audit & Task Management Software

There is mutual opportunity for both the independents and the mall operators. Malls have become mirror images of each other, with the same stores anchoring and pretty much the same stores in the body of the mall—all national chains with a [minor] nod to the local environment. In other words, they're pretty boring.

Bringing in local independents will certainly generate foot traffic for the independents and will likely create long-term benefits and street cred for the mall itself. Having said that, this will only work if mall operators make it financially attractive for independents. I know from Miami that the rents on Lincoln Road have forced most independents to leave—it now looks like almost any other mall—except it's outdoors.

In other words—it's all about the Benjamins. If the rent is attractive, everyone will win.

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Paula Rosenblum, Managing Partner, RSR Research

This appears to be a win from several standpoints. First, it provides foot traffic to independents which is critical to their success. Secondly, it provides malls with a differentiator from the same bland collection of national chains. Finally, it helps fill malls in a desperately over-built environment. The challenge is whether the independents can reach the hurdle rates required to afford the rents and CAM charges.

Bill Emerson, President, Emerson Advisors

It seems to me that success for mall operators hinges on destination appeal. Individual stores need to have a common theme thread. It also seems like many themes work, as long as the stores fit the theme. Those that don't will likely fail, so the one year lease is a smart idea. A little churn in this kind of setting might be an enhancement.

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Dan Raftery, President, Raftery Resource Network Inc.

I'm loving this concept! If I'm going to shop local, why not have my favorite national brands and some fun niche shops in the same place? This could really help in the branding of the mall itself as so many malls are making efforts to redefine themselves. I also agree with Paula (as almost always :)), that it must be financially affordable to the indies in order to work.

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

"Separate but equal" in retail? Ken seems to have the same thoughts I did; to be fair, though, what really sets the stores in this effort apart from the others is the small size and shorter lease terms (whether the latter is really of benefit to a successful retailer I'm not sure).

In answer to the general question, I would think a celebrated local retailer could be more than successful—they could in fact be a point of differentiation—but they would have to have a reason to (re)locate to the mall in the first place...and if they're already doing well, they may not see one.

'notcom'

Easton Town Center in Columbus, Ohio has been doing this for years, especially on the restaurant side. I think it's a fantastic idea, as long as you watch the blend and location (i.e: don't make a local 'wing').

This takes a good 'eye' on the part of the developer though, which is not common. Lot's of cash does not a good tenant always make. It's a little like a 'brand' decision in a product assortment; sometimes a combo of pieces work better than an all best sellers selection. Steiner & Associates (Easton) has a great knack for that skill.

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Lee Peterson, EVP Creative Services, WD Partners

Why would this not be a great idea? It creates the traffic and therefore awareness of the independent brands. The challenge may be the local shops affording the rental space, compared to their stores outside these malls.

The independents should perform a feasibility study of sorts to determine if these sites would produce good ROI. Site selection is key, as we all know.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

This seems to be a really good idea. Small business owners with a store front in a strip mall where other stores are not like them are not likely to get the foot traffic they need. If the mall can make it more affordable by having open air ducts and taking some short cuts on construction, that helps the independents.

In addition, the mall is reducing the risk by providing a 1 year lease. Often small businesses are afraid of 3-6 year leases because your house is on the line. Lastly, it gives malls a uniqueness that will set them apart.

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Janet Dorenkott, VP & Co-owner, Relational Solutions, Inc.

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