Monday, April 4, 2011

The "Small Box" Trend Requires Some Rethinking

It's exciting to see more and more news covering what I call the "Big Box to Small Box" trend. ["Big-Box Giants Downsize to Drive Productivity with Smaller, Urban Stores"; Retail Traffic, 3/30]. Clearly retailers are getting over what they once considered major obstacles to investing in urban markets. A 2004 survey by the International Council of Shopping Centers and the Business for Social Responsibility found that 88% of retailers cite 'insufficient concentration of your target customer' as a factor influencing the failure to establish stores in underserved markets. Seven years later, the growing interest in urban markets suggests that many retailers are rethinking this long-standing misperception. We can now add Old Navy, going from 25,000 sf to approximately 10,000 sf, and Sports Authority, going to a 12,000 - 15,000 sf model called S.A. Elite, to our growing list of retailers exploring urban formats.

Yet commercial district managers know that challenges remain. Big box retailers exploring "small box" opportunities in urban markets must overcome concerns that still keep them out of urban markets. As one Walgreen's executive shared with me a few weeks ago, their concern is less about product disappearing through the front door with customers, than about product disappearing through the back door, i.e. with employees at checkout or during shipping. Proper surveillance and inventory control can help to address these issues.

Retailers also have to get used to lack of parking. The ICSC survey found that 83% of retailers are concerned about 'inadequate parking'. Yet, the best locations in dense urban markets are not typically known for easy automobile access or ease of parking. Consider Bed-Stuy in Brooklyn -- the subway stop at the intersection of Nostrand Avenue and Fulton Street sees 12,800 boardings a day in a community whose retail leakage is estimated at $785 million a year. Yet amazingly, there is no national drugstore at this busy intersection.

And we all know that crime still scares away some retailers. 93% of retailers cite crime or the perception of crime as a reason for their decision to steer away from urban markets. This suggests that our jobs as commercial district managers will continue to play a significant role in improving the reality and perception of crime within our districts. Bed-Stuy Gateway Business Improvement District is tackling this challenge directly by establishing a Public Safety and Environmental Control program that identifies hotspots of criminal activity and works closely with law enforcement to develop strategic interventions, as Colvin Grannum, President and CEO of the Bedford-Stuyvesant Restoration Corporation notes in his regular Bed-Stuy Patch column.

As the retailing industry considers urban markets, they have got to realize that many issues related to the shopping environment are completely outside of their control, and that commercial district managers can play a role in maintaining the standards that many of these retailers have come to expect in more controlled shopping environments. Whether this includes managing public safety concerns, maintaining clean streets, or addressing the district vacancy rate, the role of commercial district managers will become increasingly critical to ensuring that the shopping experience inside the store is matched by the shopping experience outside of the store. Some industry experts posit that 30% of a shopper's desire to return to a store is based on what happens outside the store. If this is true, then retailers can ill afford to be lax about addressing the needs and participating in the efforts of their local commercial district management entity.

1 comment:

  1. "Some industry experts posit that 30% of a shopper's desire to return to a store is based on what happens outside the store." Larisa, I can't find a study or article with this statistic. Do you have one you can share? Thanks!