New Concepts Look for Big Growth
Store closings were a fact of the retailing biz long before
the Great Recession ever hit, but there’s no doubt that weak operators have
been going by the wayside in larger numbers in recent years. Despite this,
new concepts are popping up that could reduce the number of vacant spaces currently
sitting on the market, according to a Retail Traffic report.
Doug Healey,
senior vice president of leasing for the East Coast with the Macerich Co.,
a regional mall REIT based in California, told Retail Traffic that
many of the stores opened in past years focused on necessities. Today, a large
number of the new formats are looking to capture more of consumers’ discretionary
spending dollars.
Melvita, a sister company to L’Occitane en Provence,
sells natural and organic beauty care products. It operates stores in 20 countries
outside the U.S. and is the top selling certified organic beauty brand in France.
The company currently has three stores on the West Coast and plans to open
a location in New York City sometime before the end of next year.
"The U.S. is the perfect market for Melvita because there is such a
need for clarity in the marketplace about whether personal care products are
actually organic and to what extent they are organic," Deanna Elstrom,
vice president of Melvita U.S.A., told Retail Traffic.
Among other new
concepts mentioned for expansion potential included Freshii, which bills itself
as "the new generation of quick service dining." The
chain, which plans to open 60 stores this year and has stores in Canada, the
U.S., Austria and Dubai, offers a customizable menu made up of fresh, preservative-free
foods in biodegradable packaging.
Matthew Corrin, the founder of Freshii, told Retail
Traffic, "If
Subway has 30,000 [stores], I believe we can achieve 10 percent of that number
(in North America)."
Discussion Question: What new or fast growth retail concepts have impressed
you recently? Do you see any commonalities among the successful new chains?
Regional shopping malls and strip malls are blighted even in the most desirable neighborhoods all over the U.S., thanks to all the store closings right before and during the recession. Too many empty locations with huge lease signs on the windows of former Circuit City stores, Linens ‘n Things, and many others.
Fast growth retail concepts are much needed these days. Fortunately, we are seeing the growth of companies such as eateries like Five Guys, retailers such as Ulta cosmetics, and lots of natural consumer goods stores. We are also seeing Nordstrom Rack, and other specialty retailers come more into play.
There will always be retail growth stories as the needs and wants of the consumer change. Even in the midst of the toughest retail environment in my 35+ years of experience, there are huge success stories–Amazon’s Kindle, the iPad, Zappos, Zara, and so on.
That said, the challenges of opening a new format are huge–low demand as unemployment stays historically high and consumers rediscover savings, low access to credit as banks sit on cash waiting to see what new regulations come next, and a fierce competitive environment as desperate retailers give things away.
Succeeding means offering something truly new and/or unique as well as having the capital to grow. Not impossible, just very challenging.
My neighborhood has enjoyed a number of seasonal pop-up stores that attract happy customers, including a Halloween store and an Italian ice stand. They invigorate the area and bring new revenue. Long live capitalism!
As long as companies engage, listen to, and market to their customers using the data and insight within their grasps, it should be easier to grow customer-centric programs and retailers.
When thinking about new concepts ripe for growth and expansion in today’s economic marketplace, I am hard pressed to come up with a solid idea. Then I recall how not so many years ago Howard Schultz, CEO of Starbucks, went to a banker and said he wanted to build a nationwide network of upscale coffee shops selling coffee for $4.00-plus a cup. I can’t imagine either the foresight of the banker or the drug he must have been taking when he agreed. And the rest is history still unfolding.
So there is someone out there today with a fantastic idea whose time has come, speaking to a group of investors who either think he is the brightest person they have met or he is crazy. The future will tell us the answer.
The Veggie Grill concept that is rolling out in California is super impressive to me. Delicious and hearty vegan food that is kid and adult-friendly and served in a cheerful fast/sit-down hybrid format. Prices are fair–not in burger war territory by any means; however, even during the height of the recession, lines regularly formed out the door every time I came by on business trips. Store management has personally greeted me on every visit (often cheerfully passing out food samples to those in line) and someone always checks in to ask about the experience, the food, etc, before you leave.
The only request they haven’t been able to honor so far is hanging a shingle here!
I am in the DC market and we are seeing the small chain, specialty/gourmet restaurants popping up everywhere since the recession. Georgetown Cupcake, Sweetgreen, Le pain quotiden (European, but now hitting CA and the northeast), Grilled Cheese & Co. The list is endless actually. All having great success off of the consumer’s desire to spoil themselves with food since cutting back in other areas of their lives.
Should we reflect on whether fast-growth concepts helped lead to some of the larger economic challenges we face today in our industry? Give them what they want when they want it–yes. But many great companies have achieved successful long-term growth by letting demand stay slightly ahead of supply i.e. a scarcity model.
Yes, I frequent the great chains/mass retailers of the world. But if In-N-Out went public, where would it be 5 years later? The BEST (or most heavily-financed) concepts don’t necessarily deserve the FASTEST growth model. Each business has its own set of unique scaling challenges. The last thing we need are for great concepts/companies to sell out to fast growth junkies, so thinning out the quality so quickly that by the time there’s an In-N-Out in your neighborhood, it tastes/feels/looks like every other fast food joint.
I agree with Mr. Emerson that the retail climate today is super-challenging for new formats or any real growth in retailing. The perception of real value added to any of these new concepts have to be clear with consumers. The super-specialized concepts need to appeal to a real void in the marketplace, and some of these don’t.