How are retailers doing in the wake of the ongoing economic downturn? According to a panel of national large-format retailers convened during ULI’s 2011 Fall Meeting in Los Angeles, they’re doing better than some might expect—with smaller and more efficient footprints, growing use of social media to reach their clientele, sophisticated branding, and a focus on customer service.
Brad Hutensky of Hutensky Capital Partners moderated a session titled “Retailers Sound Off” that included James Lampassi of PETCO, Bernie Schachter of Staples, Kenard E. Smith of JCPenney, and Donald Wright of Safeway.
One question was how retailers are coping with the challenge posed by internet shopping. While national retailers fume about the fact that they have to charge customers state sales tax, while internet-based outlets such as Amazon do not have to in most states, panelists agreed that online shopping is a threat they can manage and defuse. At PETCO, for example, customers don’t want to pay the shipping costs for 40-pound (18-kg) sacks of dog food, and they like chatting with store staff about their pets. Safeway’s Wright reported that online food shopping has never really taken off.
Other retailers encourage their customers to search for their own lines of branded products online, either at home or in store-based kiosks. Staples, for instance, has developed a mobile application that allows customers to research products, find local stores, check store inventory, and shop online. JCPenney views its online offerings as an extension of its bricks-and-mortar stores; its “find more” in-store computer kiosks let customers search for its products and have them delivered to their homes or to a nearby store. JCPenney has gone even further with online social media, with 1.6 million Facebook friends.
Regardless of where customers shop, branding is essential to retailers’ survival, panelists agreed. To keep customers buying its brand, JCPenney offers a variety of exclusive private labels—an idea that has been adopted by Staples with its Martha Stewart line of home office products. And Safeway has hired a chief medical officer to help redefine that retailer’s brand as a health and wellness organization, rather than just a purveyor of food.
Another key to survival, they agreed, is efficiency. Staples and other stores are right-sizing their footprints and trade areas—which is perhaps not the best news for retail space owners. Nearly all are experimenting with smaller stores in urban areas. For example, PETCO’s Unleashed stores for urban settings measure just 4,000 square feet (372 sq m). Staples is looking at infill, adaptive use, and opportunistic settings. And Safeway, determined to keep its larger footprint, builds on podiums with underground parking in urban neighborhoods. Some of the nation’s larger stores are even subleasing space to smaller tenants.
Ending on a note of optimism, the retailers agreed that time is on their side. The U.S. population is expected to grow by another 130 million people by 2050—and they will all need to buy food and other products.