Shopping Centers Today International

FEB 2016

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

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Thinking small Ramping up convenience via smaller stores and showrooms In response to the fiscal crisis of 2008, many retailers focused on slashing prices in their existing stores or even launching off-price spinoffs. But another strategy — shrinking store formats and mer- chandise offerings in a bid to make shopping more convenient — is gaining ground around the globe, experts say. "When both Macy's and Lord & Taylor have value concepts, you know value is saturated," said Rachel Elias Wein, founder of WeinPlus, a consultant firm specializing in competitive strategies for real es- tate owners and retailers. "People have been trained to continu- ously get 50 or 40 percent off. The alternative is convenience." The trend is perhaps most visible in food retailing. Accord- ing to an April 2015 Nielsen report titled The Future of Grocery: E-commerce, Digital Technology and Changing Shopping Preferences Around the World, consumers are shifting toward smaller, easier- to-shop grocery formats. The 33-page report uses data from surveys of 30,000 consumers across 60 countries and other Nielsen market research. "Across the globe, we're seeing the rise of proximity retailing," said Patrick Dodd, Nielsen's presi- dent of global retail, in the report. "In the eyes of global shop- pers, small and simple is beautiful right now. While there is some growth for large stores, the real winners are mini mar- kets, small supermarkets and convenience stores." According to Nielsen, the growth of smaller-format stores tends to be strongest in developed economies. Nonetheless, the authors write, "convenience and drug stores demonstrate strong growth potential in both developed and developing markets, which underscores consumers' desire to use brick-and-mortar stores for quick trips and special (often urgent) purchases." Whole Foods Market's 365 by Whole Foods Market spinoff typifies this trend, according to consultant Paco Underhill, CEO and founder of Envirosell, a consumer-behavior research firm. The roughly 30,000-square-foot 365 by Whole Foods Mar- ket stores offer what Whole Foods says is a "curated" — meaning streamlined — product selection dominated by the chain's 365 private-label brand. According to a press release, the company has signed eight leases for the smaller-format concept thus far, with the first stores opening this year and up to 10 additional ones set for next year. "In the United States, as in Europe, the fastest-growing chains are Aldi and Lidl," Underhill said. "The idea is to have a smaller, curated store with your own branded products in it. Today people do not see house brands as a com- promise. Part of what is driving the convenience factor is the recognition that we have reached the apogee of the big box." Cavernous stores filled with thousands of products can ac- tually be inconvenient for some shoppers by requiring longer drives and overwhelming them with too many choices, says Jeff Green, who heads an eponymous retail consulting firm in Phoenix. By contrast, he says, smaller-format stores such as Trader Joe's and Sprouts are all about a quicker and easier experience. Within the grocery industry, in fact, some even speculate about a future in which smaller stores supplant tra- ditional supermarkets, according to Jeffrey S. Edison, a princi- pal and the CEO of Phillips Edison & Co., which specializes in boosting the value of underperforming, grocery-anchored centers. "We're not big believers in the model, but the idea is that the center of today's supermarket will basically go away," Edison said. "You'll buy your Cheerios, Campbell's Soup and other commodity items online, and then go to smaller-format stores to buy your perishables, prepared foods and meats." Fashion, electronics and other nonfood chains are also using so-called curated merchandise selections to make shopping more convenient, observers say. Wein cites British fashion retailer Ted Baker, which operates some 350 stores and concessions across 24 countries. "Ted Baker is my new

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