Strolling the Agora: To Reach New Customers, Discount, Outlet And Off-Price Retailers May Soon Be Expanding Their Criteria To Make Deals

Strolling the Agora column for the October 25th 2010 edition of SHOPPING CENTER DIGEST

By Murray Shor

Just two months ago we highlighted the trend of more luxury retailers
seeking cost-conscious shoppers by looking for stores in areas and
locations they once avoided, the outlet shopping centers, and secondary
and tertiary markets.

And we stressed that this relatively minor niche of less than 220
projects, by some estimates, is dwarfed by the number of over 100,000
mainstream malls and centers that encompass the shopping center/retail
chain world of the US and Canada. To make an impact in this market,
retailers must deal with the two main landlords responsible for the bulk
of these centers: Simon Property Group with its Chelsea division and
Tanger Factory Outlets.

Yet a new approach being taken by one of the poshiest of merchandisers,
Neiman Marcus, has the potential to bring this type of retailer into
almost every local market available. It could expand opportunities even
to every deal-hungry broker in the field.

First, what Neiman Marcus is doing. It is starting a new spinoff of
outlet stores to be called Last Call Studio with lower-priced
merchandise that never was being sold in its Last Call outlet stores.
This outlet merchandise may still be too expensive for many customers.
So, the Studio stores will carry clearance goods from its mainstream
stores, namebrand apparel, and lower-end merchandise ordered from
vendors specifically for these units.

The first protoype store about half the size of a more traditional
unit– opened recently in Dallas, with others in Rockville, MD, and
Paramus, NJ.

Possible Locations

Targeted as possible locations for this division will be suburban areas
and strip centers, storefronts, possibly even vacant downtown locations
that could never attract luxury retailers because the numbers never
added up. However, with high-end shoppers heading for the outlets and
discounters which may still carry too high a ticket for many moderate
households and the reduced clearance merchandise and inventory available
from many liquidators and vendors who have cut back on manufacturing,
there is pressure to find customers willing to spend limited income for
quality merchandise with a high-end label.

As one highly-regarded consultant stressed: “From a modest out-of-sight,
out-of-mind liquidation tool, it has now really morphed into a
strategic and financial necessity for these companies.”

Another maven pointed to the recession and the insistence by shoppers for even more value-oriented merchandise.

Other luxury retailers, such as Nordstrom, Saks 5th Ave, Lord &
Taylor, Bloomingdale’s, and the like, have been operating outlet stores
for years, or have recently entered this market.

Great Potential

Looking at the decision by Neiman Marcus to follow the consumer to
where she lives rather than wait for her to drive an hour or so and make
a day of outlet shopping, one leading broker pointed out, opens up a
great potential for dealmaking. Many brokers have specialized in finding
tenants for Moms and Pops, for local operators within a limited market
to fill vacancies in very local strip centers. They may never have made a
call on a luxury retailer.

“Now, suddenly”, he continued, “it’s a whole new ballgame. If other
leading retailers decide to give it a try, the potential number of
tenants that can be approached increases exponentially.”

No question, the number of vacancies have been increasing across the
board due to the closings of many stores by stressed retailers, and the
cutback on expansion by many others as a reaction to the high
unemployment and pessimism of consumers. Though it may not be a deluge
by healthy apparel chains seeking locations, there is the potential.

“And isn’t this,” said one senior real estate officer, “what drives many dealmakers? The potential.”

Other Interesting Activity

Joe’s Jeans, based in Commerce, CA, says it wants to expand its
outlets division, now with 14 stores, in addition to its full-price
stores. Contact CEO Marc Crossman.
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General Growth Properties has appointed hedge fund manager
William Ackman to become its chairman when it emerges from bankruptcy
next month. It is being split into two units; GGP will retain about 185
malls, the Howard Hughes Corp will consist of the master-planned communities and other non-income-producing properties.
__________________________________

Walmart says it plans to grow its total square footage by between
3 and 4% during the fiscal year, adding up to about 35 million sq. ft.
of new stores. It expects its sales growth in 2012 to grow 4-6%.


Strolling the Agora was a twice-monthly column discussing trends, issues of importance, and commentary on the leasing/development aspects of the shopping center/retail chain industry in the US and Canada. Called Strolling the Agora, it was a part of Shopping Center Digest, a newsletter founded in 1973 published until September 2010. The column provided expert insight into various retail focused topics. It was primarily authored by Murray Shor, Editor & Publisher as well as industry and veteran retail experts.  A smattering of archived columns are presented here for your reading “pleasure”. It's an interesting “look back” at what were current hot topics at the time with regard to shopping center/retail industry focus, development and leasing expansions and processes, retail mix, opinions and more.
About Murray Shor:
Reporting and writing on the shopping center/retail industry since the late ’60s. Began as editor at Chain Store Age, founded Shopping Center World (now Retail Traffic), Shopping Center Digest “The Locations Newsletter” in 1973, and the Directory of Major Malls in 1979. Each issue of Shopping Center Digest contained a column called Strolling the Agora which provides commentary on trends, activity, issues of concern to development and leasing in the shopping center/retail industry.
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