Observations & Conversations
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I'm always on the prowl for new blood, i.e., retailers that aren't at every street corner yet and have aspirations to become regional or national chains. |
We recently attended the ICSC show in Atlanta, and once again it was a great show. Lots of catching up with old friends, but I only came across a few new retailers and they were food tenants. As part of the hunt, we've undertaken a massive clean-up of our database of small store chains. Our core of 5,000 regional/national retailers is fairly easy to maintain, but we have several thousand more chains with 10 or fewer stores. It's really taxing to get the owners of small store chains to respond to our letters, calls, faxes and emails, since they open maybe a store a year and really don't want thousands of solicitations from brokers. We've implemented a major blitz to get these store owners to talk to us: We sent them a fax; then a week later they got a letter with a buck and a survey to fill out, and then a week later we called if we hadn't heard from them.
The results have been interesting. Certain uses are disappearing from the mom-and-pop landscape. For example, travel agencies are few and far between. Independent/downtown drug store chains have been gobbled up by the big boys and in a lot of cases the big boys have closed the downtown shop. Specialty toy, hobby and educational stores are shifting their business models to expanding sales via the Internet, rather than opening bricks-and-mortar shops. Auto-parts chains either have been acquired or have disappeared. Independent run-of-the mill book stores have been replaced by Barnes & Noble or Borders. Card and party-supply stores are virtually nonexistent. Small apparel and shoe chains catering to middle America are few, however shops catering to the more affluent crowd are growing. Some concepts seeing tremendous growth include home-furnishings chains, while their counterparts, the local hardware/home improvement and appliance stores are almost extinct. Supermarket chains are growing, but the small health-food store is feeling the pain. The use encountering the most growth is food/restaurants. The good news is that most of the small chains have been acquired by conglomerates that are actively looking to grow under mandate from Wall street.
In the end, the results are just a sign of the times. Look around: How many of you are booking travel on the Internet rather than sitting down at the travel agency in the local strip center to arrange a summer cruise? Is there a town without a CVS, Walgreens or Eckerds? Competition from the Net is brisk for toy, hobby and educational items. It's pretty commonplace at our office to get deliveries from Etoys. Another good example popped up when I was shopping for my niece's birthday present. Of course, I wanted something extravagant, so I visited a toy shop in downtown Princeton to find a $600 Schoenhut toy piano that I would have to ship. I decided to check it out on the Net and found it for $400 including shipping. Another person in our office purchased her childrens' school supplies on line at a substantial discount. Today, if you want a greeting card, you go to the supermarket or drug store, or use your computer. If you don't mind spending a few hundred bucks on a dress, you can find stores to take your money, but if you want everyday business attire, then it's TJ Maxx, Ross, Marshalls, Gap (or just log on to Gap.com) or a department store or, for the more budget-oriented, Dots, One-Price, Cato, Wal*Mart or Target. You can find organic and specialty foods at most national/regional supermarket chains, so making a special trip to the health food store isn't necessary. If you're not as hip and trendy as a Generation Xer, then buying shoes in a specialty shop is a disaster, but you can easily log on to Payless Shoes or Nordstrom. A backlash to huge home-improvement stores is apparent, as the huge stores are opening their own small-town versions. Music is under siege on the Internet, but one retailer that will probably survive with both real stores and online is TransWorld with its recent purchase of Spin.com, an online venture that buys and sells used CDs. You buy the new stuff at TrasnWorld, sell it back to Spin.com and someone else buys it from Spin.com, and the circle just goes on and on.
So what's the point of this rambling? Yes the Internet and acquisitions have made an impact on retail real estate, but there is still an abundance of small shops and chains that are growing. You just have to woo them harder than the big chains that have no choice of how many stores to open, because they either meet projections or their stock takes a tumble. If you've got space of 20,000+ sq.ft. in a "B" or better location, finding a tenant isn't that tough, but if you've got 5,000 sq.ft. or less and you want uses other than a Chinese buffet or a nail salon, you're going to have to beat the pavement and leave dozens of messages before that small shop owner ponies up to the table to sign a lease, whether your site is a mall, or a strip, power or specialty center.
In this issue, Mark Borsuk offers his opinion on how the Internet is affecting mall developers. I like Mark and respect his viewpoint, but I don't necessarily agree with him on every point. Mall developers have to change with the times too, and putting your tenants on a mall-hosted Web site isn't the answer. Developers should do what they do well, which is lease space to stores that meet the community's needs. I'm certain that shoppers don't visit one mall over another because of its Internet presence, but I can assure you that the high-volume shopping centers are just that because of their tenant mix. Until next month,