Shopping Centers Today International

NOV 2015

Shopping Centers Today is the news magazine of the International Council of Shopping Centers (ICSC)

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Joe Nashif. "We just opened our fifth store here," he said. "We see [brick-and- mortar] retail as an important way to ex- tend our reach." Other formerly online-only concepts — including Athleta, BaubleBar, Birch- box, Boden, Bonobos, ModCloth and Warby Parker — continue to explore their real estate options as well. Gap's Athleta, which started out online and in catalogs, has become a mall mainstay, with a rollout of 102 stores since 2011. Fashion retailer Bonobos has launched 20 so-called Guideshops (a shop at which a staff "guide" walks the customer through the selection and purchas- ing process) in 16 cities thus far, with roughly half of these opening in the past year. Eyewear chain Warby Parker now operates 12 stores as well as four store- within-a-store showrooms. And more deals are on the horizon: ModCloth is reportedly gearing up for its own mul- tistore rollout, while British fashion e- tailer Boden aims to open stores on both sides of the Atlantic. How can landlords bolster their chances of doing deals with these ex- panding retail concepts? The key is to recognize how these companies' pri- orities and goals with regard to markets, branding, target customers, product delivery and the overall shopping expe- rience differ from those of conventional tenants, experts say. As established busi- nesses, some of these boast strong bal- ance sheets, thousands of loyal custom- ers, and years of experience in online retailing. Warby Parker is valued at $1.2 billion, according to published reports, and ModCloth reportedly took in up- wards of $150 million in 2014. By definition, however, these op- erators tend to be real estate newbies. As Barocas sees it, landlords seeking to woo e-tailers should work closely with them on site selection in particular. "At General Growth, we think it is part of our responsibility to bring new and dif- ferent retail uses to our malls, so that we don't get stale," he said. "All of these e-commerce startups represent an op- portunity to do that, so we spend a lot of time and effort with them trying to understand who their customer is. We want to match the demographic and psychographic profile to specific malls in our portfolio." Traditional retail chains come to the table with reams of market research and a precise understanding of their ideal co-tenants. As online retailers scout potential brick-and-mortar sites for the first time, how- ever, they are likely to benefit from candid discussions with the leasing team about mar- kets, malls and co-tenants, Barocas says. He also suggests investing in these new tenants — up to and including offer- ing them lower rents for their first units — as a way to reap bigger dividends down the line. "Fabletics is only doing five stores with us right now, but we want these first stores out of the chute to be tremendously suc- cessful," Barocas said. "That way we can talk to them about 10 more stores next year or maybe 20 the year after that." Brand-building also tends to be a key consideration for these companies, which helps explain why so many of them are flocking to high-profile malls and streets in important markets such as Chicago, Dallas, Los Angeles, New York City and London. Personal-shopping website Trunk Club, which launched in 2009, is testing its brick-and-mortar con- cept at two locations in Chicago's Hyde Park neighborhood. Likewise, when jeweler BaubleBar opened its first store this past June, it chose Roosevelt Field mall, near New York City. "These are not full-fledged rollouts where they're doing 30 or 50 units a year and going into every single market in the country," said Douglas J. Green, a prin- cipal at Philadelphia-based MSC Retail. "For the most part, [e-tailers] are sticking with the top 10 to 12 major markets." Opening brick-and-mortar stores in high-traffic locations helps these compa- nies cut through the white noise of the Internet and its endless array of e-com- merce-enabled sites, Green says. "It gives retailers a way to educate consumers 40 S C T / N o v e m b e r 2 0 1 5 F a b l e t i c s s t a r t e d o u t o n l i n e b e F o r e l a u n c h i n g i t s F i r s t s t o r e s t h i s y e a r

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