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.
I'm back in the U.S. in July, partly for meetings and partly to film retail documentaries in New York, Washington, D.C., south Florida, Phoenix and southern California. I'll be visiting more than 30 retail locations.
If you think you might like to join me for any part of this trip and learn about the industry and where it is going, do let me know.
Non-food retailers in mature markets have recently pinned their hopes for future growth on three things: factory outlet locations, e-commerce and expansion into emerging markets. The trade press has been fueled for the past couple of years by reports of high-profile retailers expanding abroad. While the common assumption has been that the retailer tide will flow in one direction - from the US and Europe outward - a key trend on the radar is the exact reverse of this. Retailers are going to be heading in the opposite direction and will exert a material influence on fashion and shopping in mature markets.
Shanghai Tang was one of the notable early movers but others are looking to get a foothold in the West as well. Examples are China's Li-Ning sports apparel brand, which has just kicked off its US e-commerce site, and India's Malabar Gold & Diamonds that is targeting a major international rollout from its current regional store base of 64 units.
This is just the tip of the iceberg. Watch for a steady stream of fashion, health & beauty brands influenced by Eastern philosophies, fabrics and ingredients to come knocking on the door in mature markets over the next few years.
Are there positive implications for shopping centers and other retail distribution channels in places like North America and Australia? The answer is a qualified "yes." There will be a pool of new tenants for shopping centers and fresh brands for department stores and other wholesale channels. However, with regard to the benefits to shopping centers, much depends on whether incoming brands take the flagship/e-commerce road or decide to establish full-blown store networks.
Either way, after the mess that some Western architects, developers and retailers have made in emerging markets they came to conquer, it's refreshing to see imperialism in the retail industry is now set to work both ways.
Last year I published an article in which I presented a list of what I thought were the five most innovative shopping centers I've seen. Having been in the industry for 15 years and travelled perennially as a consultant and tourist, I can claim to have seen a few.
The list evoked a lot of reaction, which I had expected, and so I'm reproducing it here for anyone who hasn't seen it already. Remember though that the list is not meant to represent the best-performing, or the biggest centers, or even personal favorites (although a couple of them are). It's about centers that were influential well beyond their own trade area and their own time by pushing the shopping center concept in a new direction. See what you think.
1. Southdale Center, Minneapolis, Minnesota (opened 1956). Created by Victor Gruen, Southdale was the world’s first climate-controlled mall, made possible by engineering breakthroughs in air conditioning technology. Southdale was also revolutionary because it brought two competing department stores into the same property. These “anchor stores” were separated by the entire length of the mall, which consisted of an enclosed pedestrian walkway lined by specialty stores. The modern regional centre was born.
2. Potomac Mills, Woodbridge, Virginia (opened 1985). With over 1.5 million square feet of gross leasable area and 20 anchor stores, Potomac Mills was a pioneering “value megamall." By combining large entertainment anchors with numerous big box stores and value- and full-priced specialty retailers, Potomac Mills merged and expanded the regional mall, factory outlet and entertainment centre concepts at a single stroke . Not resting on its laurels, the centre has led another trend in recent years by hosting the off-price units of several large department store chains, including Nordstrom, Saks Fifth Avenue and Bloomingdales which have all set up outlet shops there.
3. Easton Town Center, Columbus, Ohio (opened 1999). Not the first town centre development in the shopping centre era but industry analysts, including this one, believe it brought the concept to a peak that has probably not been bettered anywhere. Developed by Steiner + Associates, Easton has a retail GLA of about 1.5 million square feet that includes more than 150 specialty stores and restaurants, one upscale department store (Nordstrom) and one moderate department store (Macy’s). The centre does an immaculate job of combining alfresco dining, shopping, open-air community space and architectural design features to achieve an authentic sense of place and an outstanding shopping experience. Among other things Easton also boasts a 30-screen cinema, three on-site hotels with 559 rooms and 800+ units ranging from studio apartments to three-bedroom townhouses.
4. The Lab/The Camp, Costa Mesa, California (opened 1993 and 2002 respectively.) The twin inspirations of clothing designer Shaheen Sadeghi, these two centres face each other across the same suburban street that hosts the much better known Goliath of shopping, South Coast Plaza. The Lab “anti-mall” has 50,000 square feet of floorspace and The Camp “eco-retail campus” has 60,000. Both centres have only about a dozen tenants each, which are focused on apparel suited to the lifestyle of the immediate neighbourhood and restaurants with fanatical local devotees, such as The Camp’s vegan “Native Foods.” Both centres have unique layouts and design features, stores that occupy eccentric shapes, and a vibe that speaks directly to an unconventional segment of the local market.
5. K11, Tsim Sha Tsui (Kowloon), Hong Kong (opened 2009). K11 is the brainchild of Adrian Chang. K11 departs from the humdrum in so many ways it's impossible to catalog them all. For example, while plonking an art gallery into a shopping centre has become a bit of a fad lately, only K11 has seamlessly interwoven two- and three-dimensional art into the very fabric of the mall so that it is part and parcel of the shopping and recreation experience. K11 has also walked the walk when it comes to community involvement, leasing to an unusually high percentage of independent retailers and operating several design stores of its own in the mall that source exclusively from local producers, designers and artists.
If my list were to be extended to 10, then other centres that could make the cut are some of Steve Tanger's early outlet centers, Country Club Plaza in Kansas City (opened in 1923) and Ayala Malls' Greenbelt center in Manila, which is important for demonstrating how a well-executed open-air center can work brilliantly in a tropical climate.
In America there is a saying that the most chilling words you can ever hear are "I'm from the government and I'm here to help you." After spending much of the past four months trawling shopping centers, traditional markets and other retailing venues in six booming Asian countries, I returned to Australia earlier this week to find that it is still in the depths of a retail recession. And the government - or at least a government - is trying to help out.
In this instance it's the Victorian government, which is now incrementally fooling with the rules governing so-called "bulky goods" centers. The rules are being relaxed to enable a slightly expanded dribble of retail categories to operate out of these centers. The minimum store size threshold is also being lowered.
Since I'm pro-consumer and pro-market, I like the idea of competition, so it beats me why there are bulky goods zones and bulky goods centers in the first place. Why not just zone for retail and allow all retailers and shopping center types to compete on an equal footing everywhere? This works fine in the US where supercenters, powers centers, regional centers and everything else compete head to head without any special rights, protections or restrictions on what you can sell and who can sell it.
Interestingly, of the six Asian countries I've worked in recently, the one with the retail sector that is serving its consumers worst is India. As in Australia, part of the reason is government interference that restricts competition by limiting the types of retail that can operate.
India uses foreign direct investment (FDI) laws to prevent certain kinds of retailers - specifically, foreign ones - from setting up there. Multi-brand foreign retailers are not allowed at all. Single-brand retailers can operate but may only have 51% equity unless they source 30% of their merchandise from local SME suppliers.
The FDI rules have survived because of strong support by the politically powerful small shopkeepers, of which there are approximately 20 million in India.
While recognizing the concerns of the domestic shopkeepers, increased competition in the Indian market engendered by FDI reform would have a number of positive impacts, including:
India's shopping centers are generally of poor quality, partly as a result of its FDI laws. Analogously, Australia's shopping centers are not as good as they could be as a result of its planning regs. But maybe it will take a much bigger retail recession than the one Australia has now to get a more rational planning environment.