One of the biggest retail stories going the rounds recenlty is Target's demise in Canada. For people unaware of this dismal story, Target has decided to cease operations in Canada less than two years after opening in 130 or so locations vacated by Zeller's. Target reportedly blew about $2 billion in the process of trying to establish a beach-head in Canada.
A number of reasons have been put forward for Target's failure, including supply chain problems, misunderstanding Canadian customers and poor execution. Each of these issues is certainly relevant. However, one stands out to me above all - it's that Target was opportunistic rather than strategic about real estate. Buying up a whole bunch of leases from another chain is inviting trouble, particularly if those leases are in inferior locations (many of the Zeller's locations were) and if the new retailer uses pretty much the same boxes as the ones occupied by the previous retailer (Target did).
In Australia, retailers coming into the market in recent years have typically moved into purpose-built stores in very selective locations. This applies to Costco and to many of the international fashion retailers entering the country and rolling out store fleets. The practice of operating only out of purpose-built stores at premier locations is a sound one and should be continued.
There are exceptions to the rule, as always. For example, a retailer like Aldi might work out okay in a variety of inferior locations and configurations provided it can keep its pricing model intact. Generally, though, each retailer has an ideal set of format and location characteristics that need to be observed, although of course these are often tinkered with a bit to customise them to the industry culture in a new country. As someone in the US location research business, speaking about retailers, told me a long time ago: "No one wants anyone else's boxes." There's a good reason for that, and Target has now learned the hard way.
Shopping center operators have been trying for a while to figure out how to grab hold of that elusive 'community space' quality that will make their centers an irresistible place to hang out as well as a great place to shop. Technology is one answer, good dining experiences another, green space yet another. But at the end of the day these are still all 'features'. What makes a place the soul of the neighborhood?
This is the question that Publika, in Kuala Lumpur, Malaysia, has a red hot-shot at.
Like The Lab/The Camp in Los Angeles and K11 in Hong Kong when it first opened, Publika may not be quite conventional enough to get a guernsey on most standard-fare retail tours, so if you're going to see it then you will likely have to hoof it there by yourself. It is worth the short taxi drive out of central KL because it contributes some ideas about what the shopping center of the future might feel like. It's not the perfect, polished item but it's different, it works as a community hub and at the same time has a super-regional draw, nurtured partly by the aggressive use of social media channels like Facebook and Instagram.
Publika is a shopping center, art space, and staging area for all kinds of community activities that are initiated from the community itself. I put this phrase in the bold italics because it is a key point that the community members are pushing events into the center. These events include concerts, art exhibitions, dance, theater, fashion shows, flower shows, outdoor movie screenings, corporate functions, educational programs for children and wellness programs for all ages.
In all, Publika hosts more than 550 events annually, of which about 300, or 60%, are community-initiated. The other 40% are staged by center management. These events behave in an economic sense much like an anchor store, driving business to the food service establishments and mall shops. (There are a load of Youtube videos showing both indoor and outdoor events at Publika, although there is a bias toward live performances so it isn't exactly a representative sample. You can see them here.)
KL has a dearth of public space available for community events and Publika has emerged as an attractive alternative. There is some risk involved, since neighborhood-driven events loosen the control of shopping center management over what might happen. But it's a risk that Publika's creators were prepared to take in order to make it an authentic community beacon and to distinguish it from conventional fare, such as the more illustrious Suria KLCC and Pavilion KL downtown.
Some of Publika''s ideas have become local institutions. For example every Sunday is a "Wheelie Sunday" - between 7am and 10am the streets around the property are closed to traffic, bicycles are loaned out gratis and people descend on the area to bike, walk and jog.
From a configuration standpoint, Publika is a fusion of different components each with its own physical characteristics and point of view. There is an open-air space called The Square where many of the events occur, ringed by alfresco restaurants and office buildings.
The Square adjoins a three-level enclosed mall called The Boulevard that was constructed out of . two facing rows of traditional shophouses. This is where many of the retail stores are.
Parallel to The Boulevard is a pedestrian-friendly street with ground-level retail and multi-level residential above.
The project has a supermarket anchor but generally speaking the retail mix at Publika is focused on independent retailers and designers operating with two or three-year lease terms. Space is also set aside for pop-up shop tenants in their early days who are not yet able to stump up market rents and lease terms. The owners - Sunrise Bhd - are committed to nurturing local businesses and keeping the tenant mix differentiated from the malls in the city with the big retail names.
It would be getting ahead of oneself to suggest that Publika has all the answers for shopping center operators looking to sing deeper roots in the community. But it is certainly carrying out an interesting experiment that is sure to have valuable takeaways once the center - opened in August 2011 - is a little more mature.
Hanging out in a few Asian stewpots over the past week gave me the opportunity to start thinking about some long neglected projects, like getting this retail blog up and running again.
I spent the week in Hong Kong and Macau with a quick stop on the way back in Bangkok.
Hong Kong is my favorite place in the world so anything I say about it - including its retail - will be hopelessly biased and most likely not worth reading. While HK fuses East with West seamlessly, Macau also has a formidable knack for connecting things that you might think are unconnectable, like freewheeling Las Vegan glitz and Marxist-Leninist service culture. The mainland Chinese high-rollers have an insatiable appetite for luxury brands and only in the old city of Macau do the stores become more accessible (see slideshow below).
If you are going to be in Bangkok, I strongly recommend you see the following two centers:
Platinum Fashion Mall, which is similar in concept but superior in execution to Kenanga Wholesale City in Kuala Lumpur. This is a huge building with seven floors carved up into hundreds of tiny boutiques about 15 sq.m each, selling to both retailers and end-consumers. (See the slideshow.) I picked up about two dozen items for roughly 50% of the price you pay for similar merchandise in Forever 21, H&M or one of the other disposable fashion stores.
The brand new Central Embassy luxury project, which is open but still not finished on the inside. Central Embassy now just needs a few people to shop there because all of the rich tourists have been scared off by the coup. The external shop facades are great (see the slideshow). There were few soldiers around that I could see but every tourism-dependent business in Bangkok is suffering because the planes are coming in empty.
Trawling Asia's trophy malls underscored for me again how much technology will improve the shopping experience going forward and reverse or stabilise the shift to online shopping.
A case in point: I was shopping for trousers in one of Asia's best malls, which has an H&M, Pull & Bear, Zara, Mango H.E, Uniqlo and Marks & Spencer all clustered in the now familiar manner at multiple levels around a centre court. I went from one store to another and in every case experienced problems finding my size, which is a rather Asian 79-centimetre waist. With a shopping bag in one hand and a small backpack on my back I found myself repeatedly bent over stacks of jeans, rifling through them with my free hand and making a mess everywhere while also trying to keep my sunglasses from falling off my face.
This is where the 'Hointer' model just totally makes sense. You should all be aware by now of Hointer, a US-based chain that only displays a single pair of trousers in each style. Instead of having to destroy a pile of jeans in search of the size you want, you download an app onto your smartphone, enter your size and any other pertinent details and when you scan the QR code on the pants you want, robots set to work in the backroom picking them out in your size and preferred colour. By the time you reach the dressing room your jeans are already there to be tried on and have been added to a virtual shopping cart on your phone. Don't want a pair of pants after trying them on? No problem, toss them down a chute in the change-room and they will automatically come out of your shopping cart.
Brilliant fusion of real-world shopping and futuristic technology.
Of course, we've tried hard in the shopping centre business to use low-tech to improve the shopping experience. One way of doing this is through creative signage but it can be embarrassing if you screw it up, as in the slideshow photo snapped in a big Asian mall - check out the sign right above the woman in the striped shirt.
Have a great week!
In an extraordinary piece of triumphalism by the standards of British investor research, Citi analyst David McCarthy wrote a research note in October 2007 on Tesco's launch in the US that pretty much told the American supermarket industry to run up the white flag.
McCarthy's 20-odd page tribute to the superiority of British food retailing concluded with: "As we have said, the US is potentially a $100bn opportunity for Tesco. An opportunity that the incumbents have largely missed. US supermarket retailers should be concerned. Very concerned."
McCarthy was not alone. Tesco execs gushed with confidence from the outset.
Last week, after five years, 200+ store openings, weak productivity and mounting losses, Tesco's CEO announced that in all likelihood the company would sell or close the entire chain.
I visited a number of Tesco's "Fresh and Easy" stores in California and Arizona over the five-year period and quite liked them. They are larger than the standard convenience store and much smaller than a full-line supermarket. Their selection of prepared foods and private-label merchandise is fairly good. Trouble is, most US consumers, unlike me, didn't go for it. They remained loyal to their own. Fresh and Easy was caught in a Bermuda triangle consisting of high-service models like Trader Joe's, traditional supermarkets and large-format supercenters and warehouse clubs.
Tesco's was a stunning failure in the US and a reminder to all international retailers that overwhelming success in one's domestic market coupled with intensive market research prior to entry into a new market do not guarantee success in the latter.
The US is a tough market, sure, but it also highly segmentable. Minor niches can be huge in absolute volume terms. Tesco should have done better. Either their research was very faulty or they did a lot less research than they made out.
Everyone raves about the Apple service model but maintaining this kind of excellence uniformly across a store fleet becomes more difficult as that store fleet expands. And when it comes to countries like Australia that are notorious for a lack of service culture, the difficulty is elevated.
Here's an example. A little while ago I bought my wife an iPhone at an Apple store in Sydney. She subsequently made an appointment to bring the phone into the store to meet an Apple associate, go over basic functions of the phone and get her specific questions answered. (She's a university lecturer but certainly not a technophile.) Sadly, the rep assigned to her for this meeting was not just unable to answer her key questions about how the phone worked but compounded the problem by pretending that he could. After about 20 minutes of pure frustration she walked out of the place and eventually found the answers the hard way - and is now happy with the product.
I doubt this is an isolated case. The moral of the story should be obvious. In a country where retail service is, for want of a better word, rotten, even retailers like Apple will risk impairing their standards. And the risk will rise the further they expand.
If anyone else has any interesting service stories about Apple that depart from the routine admiration, please let me know.