Reviving Retail

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Reviving Retail

Reviving Retail

The 2009 Downtown Institute

Maureen Atkinson

Urban Marketing Collaborative

Urban Marketing Collaborative


Reviving Retail

Agenda

• Introduction and Expectations

• Starting Your Programs

• The Big City Experience

• The Small City Experience

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Reviving Retail

Your Retail Knowledge Base

Retailers – what you need to know

Retail Real Estate

• Downtown Retail Planning

Retail Retention

Retail Recruiting

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Characteristics of Retailing

• Touches the ever-evolving consumer

• Always changing: form and position

• Simple principles: have more of what people want

and less of what they don’t want, when and where

• Need to find and differentiate regarding special

needs and wants

• Difficult to do exceptionally

• The retail lifecycle

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The Retail Lifecycle

Sales & Profit Growth

Personalization/

Customization

Home

Delivery

Automated

Shopping

Supercenters

Digital

Download

E‐commerce

Home

Improvement

Teen Specialty Retailers

Lifestyle

Retailers

Hard Discount

Quick

Casual Rest.

Office

Superstores

Drug

Stores

Hypermarkets

Wholesale

Clubs

C‐stores

Fast

Food

Dollar

Stores

Supermarkets

Discount

Stores

Furniture

Gen. Stores

Merch. Department

Music Stores

Retailers

Toy

Superstores

Variety

Stores

Emerging Growth Maturity Decline

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New Compressed Lifecycle

Emerging Growth Maturity Decline

0–2 2–10 10–15 15+

Years

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U.S. Retail Consolidation

Top Three Retailers Market Share

Category 1986 1996 2006

Department Stores 39% 60% 97%

Discount Stores 61% 77% 94%

Building Materials 11% 31% 37%

Consumer Electronics 15% 34% 46%

Drug Stores 18% 33% 59%

Supermarkets 18% 14% 28%

Source: McMillan|Doolittle

(Results reported for 10 year increments)

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Internet to Influence Nearly One‐half of

Total U.S. Retail Sales in 2010

Online and Online‐influenced

Retail Sales

(in billions)

$2,250

$2,000

$1,750

$1,500

$1,250

$1,000

$750

$500

$250

$0

23%

For $1 spent online, $6 of offline

sales are influenced by the Web

27%

30%

33%

37%

41%

45%

$833 $955

$388 $629

$725

$464 $543

$67 $81 $95 $108 $121 $133 $144

2004 2005 2006 2007 2008 2009 2010

Online retail sales

Online‐influenced retail sales

Percentage of total retail sales

100%

80%

60%

40%

20%

0%

Percentage of Total Retail Sales

Source: Jupiter Research

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Demographics

Changing Population

Changing Households

Demographics

Ethnic Diversity

Income Polarization

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Percent of Population Over 50

35%

32.4%

30%

29.8%

27.6%

25%

24.4%

25.6%

26.0% 25.8% 25.5%

26.0%

20%

1970 1975 1980 1985 1990 1995 2000 2005 2010

Source: U.S. Census Bureau

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Population is Shifting to Older Age Cohorts

US Population by Age Group

(% of Total)

100%

80%

60%

2001 2005 2015 CAGR ’01–’15

Baby boomers

55 & Older 12.8%

35–54 Yrs ‐1.0%

40%

20%

0%

Gen Y

25–34 Yrs +3.6%

20–24 Yrs +4.5%

5–19 Yrs +0.8%

Under 5 Yrs +3.8%

Source: S&P Retailing Report 11/01

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Net Changes in the U.S. Population

2001–2011, Spending Implications

13,000,000

11,000,000

9,000,000

Career

Spending

Early

Retirees

12,271,000

Older

Retirees

7,000,000

5,000,000

3,000,000

1,000,000

1,444,000

Teen

Wear

995,000

4,846,000

Replacement

Spending

5,294,000

‐1,000,000

‐354,000

0 to 9 10 to 19 20 to 34 35 to 54 55 to 64 65+

Source: U.S. Census, Claritas

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Changing Population

Demographics:

Boomers Redefining Aging:

• 30% of the 78 million boomers in the U.S. are or about to be empty

nesters this year

– More than 1/3 of this population experiences a + $10,000 increase in

discretionary income

• Every minute, from now to 2014, seven boomers will turn 50

• This is the wealthiest generation in the history of the world and will be

for the next 30 years

• Gen X and Y will likely be the first generations to not surpass the one

before

• These boomers have ever increasing expectations about service and

brands

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Chico’s

Standard Bearer For The Aging Boomer

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The Changing Diversity of the U.S. Population

It will drive increased complexity and new targeting efforts for retailers

7,467

30,517

22,379

248,791

U.S. Population in Millions

10,990

33,616

33,876

281,422

14,436

37,483

43,688

299,862

1990–

2000

2000–

2010

Total U.S. +13.1% +6.6%

Asian +57.1% +31.4%

Hispanic +51.4% +29.0%

188,315 197,249 201,956

African

American +15.6% +10.6%

Caucasian +4.7% +2.4%

1990 2000 2010E

Retailers will seek to target the higher growth demographic groups, which may result in multiple language versions in

advertising, promotions, and packaging

• Demographers believe that as diversity increases, purchase behavior will be needs-based versus along strict ethnic lines

Source: U.S. Census Bureau 7/2001, AdAge.com

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HEB Hispanic

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Asian Influence on California Convenience

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Haves & Have Nots Mean Household Income

(adjusted dollars)

$180,000

$160,000

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0

Top Fifth

Fourth Fifth

Third Fifth

Second Fifth

Lowest Fifth

1970

1975

1980

1985

1990

1995

2000

2005

2006

2007

Source: U.S. Census, Income, Poverty and Health

Insurance Coverage in the United States, 2007

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Success Has Been In Catering To the Extremes…

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Trading Up and Trading Down

Trading Up

Trading Down

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Shopper Dynamics

Trade‐Up and Trade‐Down, “Where I Care”

Magellan Roadmate

300 Portable GPS System

$50 Mail‐in Rebate and Bonus Case

$509.99

vs.

vs.

Map

• “Average” middle-class consumer

and purchase is disappearing

– Luxury items more affordable and shoppers

will “trade-up” on those items they care

about quality / prestige…

– Which requires them to “trade-down” in

other areas

Kobe Beef

New York Steaks,

10oz Steak, $48.95/lb

Big Mac

vs.

Source: costco.com, petsmart.com, mcdonalds.com

pawprintzeboutique.com, kobe-beef.com

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Attitudes About Shopping

Dual Earners Traditional

Shop on weekends 71% 39%

Less time to shop 86% 42%

Want to shop less 58% 35%

Adds stress to life 50% 36%

Big stores waste time 36% 24%

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Shifting Priorities

Customer Behavior:

Consumers are adding more criteria to

their shopping requirements beyond the

initial selection of a product or service

Goods

Services

Over eight in 10 women prefer to “do

something for themselves” rather than

“buy something for themselves,” it is no

surprise that luxury services are often in

strong demand and that, according to

American Demographics, 72% of women

said that their last luxury purchase was

because they wanted to “treat themselves

to something special”

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Shifting Priorities

Customer Behavior:

Consumers are adding more criteria to their shopping

requirements beyond the selection of an product or service

Products

Experiences

Consumption has evolved from focusing on the pure thrill of

being able to acquire so much—from DVDs to SUVs—to

focusing on creating and accumulating experiences—from eating

sushi to bungee jumping

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Walmart Bridal Experience

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Shifting Priorities

Customer Behavior:

Item

Solution

Consumers can research and find products easily enough. The retailer

that provides solutions differentiates itself in the customers’ eyes

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Shifting Priorities

Customer Behavior:

Mass

Individualization

Consumers have begun to demand and expect a higher degree of individualization and

customization in the goods and services they buy. Even companies that operate

primarily in the mass market are finding that the introduction of product lines serving a

niche market can help build the bottom line, provide a testing ground for turning fad

products into mainstream ones, and capture consumers that they might otherwise be

missing

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Shopper Expectations

Importance of Price

Strategic

Imperative

Challenge:

Managing the

shift upwards

Low

Entertainment/

Experience

Value Add / Information


High

Commodity / Transaction

Source: R. Blattberg,

Kellogg School of

Management

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Trends That Affect Downtown Retail

Positive

• Ageing population

• Downtown living

• European retailers

• Scaled down store size

• Demand for services

Negative

• Massive scale

• Fewer shopping trips

• Low cost occupancy

• Parking requirements

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What is Happening Now

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U.S. Retail Sales

7%

Total retail

Total retail (excl. automotive)

6%

Retail Sales Growth

5%

4%

3%

2%

1%

0%

‐1%

'00/'99 '01/'00 '02/'01 '03/'02 '04/'03 '05/'04 '06/'05 '07/'06 '08/'07

*Automotive = Motor vehicles, parts dealers and gasoline stations)

**00/99 reflects estimated data

Sources: National Retail Bulletin, JCWG

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U.S. Consumer Confidence

Consumer Confidence

120

100

80

60

40

20

0

Dec‐03

Mar‐04

Jun‐04

Sep‐04

Dec‐04

Mar‐05

Jun‐05

Sep‐05

Dec‐05

Mar‐06

Jun‐06

Sep‐06

Dec‐06

Mar‐07

Jun‐07

Sep‐07

Dec‐07

Mar‐08

Jun‐08

Sep‐08

Dec‐08

Sources: National Retail Bulletin, JCWG

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Retail Winners and Loser Today

Winners

• Food stores

• Drug stores

• Walmart

• McDonalds

• Think budget stretching

e.g., TJ Max, DSW, etc.

• Costco

Losers

• Circuit City

• Linens ‘N’ Things

• Luxury retailers

• Apparel in general

• Home related

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Who Is Expanding

Now

• Almost no one

(financing issues)

• Drug stores

• Smaller grocery

• Fast fashion stores

• Low priced fast food

Short Term

• Luxury, especially

beauty

• Stronger retailers, e.g.,

Best Buy, IKEA

• Value oriented

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What You Should Know About

How Retailers Operate

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Profit Model: Traditional Retailers

Dept. Store/

Specialty

Chain

Promotional

Dept. Store

Mass

Merchandiser/

Chain Discounter

Specialty

Book Store

Sales 100% 100% 100% 100%

Gross Margin ±40% 35% 28% 39%

Operating

Expenses

Operating

Profit

±37% 32% 26% 35%

3% 3% 2% 4%

Turnover 3–4 4 3–4 2–3

Sales per sq. ft. $200/300 $200/300 $300 $250

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Profit Model: New Wave Retailers

EDLP*

Discounter

Super Center

Category Killer

Club

Warehouse

Sales 100% 100% 100% 100%

Gross Margin 25% 23% 15%–22% 11%–12%

Operating

Expenses

Operating

Profit

19% 18% 13%–18% 10%

6% 5% 4% 2%

Turnover 6–8 12 7 12+

Sales per sq. ft. $300 $500 +$700 $1,000

What is the Difference?

*Everyday Low Price

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What Retailers Consider When

Opening a Store

• Location

• Planning

• Inventory

• Operations

• In-store activities

• Visual presentation

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Location, Location, Location

• Key is being close to a lot of target market

consumers

• Need to balance location choice with:

– High (pedestrian) traffic

– Amount of competition

– The right occupancy costs

– Propensity to buy

• GIS mapping for location decisions

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Retail Retention

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Working with Retailers

Retail Retention

• The benefits include:

– Avoiding costly losses of tenants

– Keeping local independents and small chains

healthy

– A downtown that is more vital and competitive

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Working with Retailers

• Deciding who to work with

• Role of downtown management

• Motivating change

• Talking retail

• Checklist for establishing effective

communications

• Using outside experts

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Types of Programs

• Series of educational sessions (e.g., Getting Ready for

Christmas)

• Focused educational and coaching sessions for

pre-selected stores with specific topics (e.g., Shopperstopper

Windows and Entrance Areas, or The Seven Steps

of Selling)

• A coaching and improvement action program with

structured follow-up for individual retailers

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Breadth and Range of Services

• The suitable range and depth of services will

depend on downtown’s:

– Target market segment(s)

– Type and mix of stores

– Strategic market positioning

– Tenants

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Retail Recruitment

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Retail Recruitment

• Before developing a program, decide:

– What role your organization will play

– Who will be involved

– What your strategy will be

– Resources to be allocated

– Outside resources required

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Retail Recruitment

• What role your organization will play

– Provide information

• Demand – consumers, residents, workers

• Supply – retail base, vacancies, lease rates, etc.

– Use marketing to attract consumers

• Overall events

Retail focused promotions

– Promote leasing indirectly

– Promote leasing directly

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Retail Recruitment

• Who will be involved

– Committee

– Staff

– Outside resources

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Retail Recruitment

• What your strategy will be:

– Prioritize by:

• Location – think nodes/districts

• Type of retail – what anchors exist now?

• Landlords – who understands/wants to make it

happen?

– Based on:

• Target markets

Retail trends

• Competition

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Retail Recruitment Program Checklist

Person assigned

Marketing materials

Agreed strategy

Incentives available

Flexible information access

Landlords on side

Contact program – events, one-on-one

meetings

Patience, Patience, Patience

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Retail Recruitment Tools

• Incentives

– Financial – range by state and city

• Historic

• TIF based

• Other tax based e.g., income tax

• Operational

– Non-financial

• Promotions

• Mailings

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Thank you

Maureen Atkinson

Urban Marketing Collaborative

17 Dundonald Street

Toronto, ON M4Y 1K3

Tel: 416-929-7690

Fax: 416-921-4184

matkinson@jcwg.com

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Consumer Behavior

Five Big Trends Impacting the Market

Market Polarization

Time Compressed

Customer Control

Shifting Priorities

Wellness

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