Thursday, February 6, 2014

How Malls "Strategically Position" themselves – and what you can learn from it

I often use the term “strategic positioning” when I want to describe a shopping district by lifestyle, price point and tenant mix. This concept is not new to the shopping center industry – and it undergirds how shopping mall operators execute tenant mix in their shopping centers. I recently read an article that really drove this point home (“FIGat7th Bring Big Retailers to Downtown Los Angeles”, 2/5/2014).

Take FIGat7th shopping center, which happens to be located in Downtown Los Angeles at the intersection of Figueroa and 7th Streets. The 28-year old, 330,000 sf property is getting a makeover by new owners Brookfield Office Properties, who purchased the site in 2011. When Brookfield looked at the demographics here is what they found -  a population of 530,000 living within a three-mile radius. Most are affluent and young, with an average age of 37 and average household income of $80,000. Additionally, 35,000 students live in the surrounding area, which is also close to public transit. And there are 10,000 downtown professionals who work within a four-block radius.

What Price Point and Lifestyle?
This is a hypothetical, but I’m sure the owners looked at that data and asked themselves "what retailers are the right fit for the shopper profiles we identified?" Was their target shopper going to patronize upscale shopping options? Or mid-market shopping options? The answer, according to the article was “chic but affordable”. With that strategic positioning in mind, the retailers they chose to pursue reads like a who’s who of affordable and contemporary offerings, including Zara, H&M, California Pizza Kitchen, Sports Chalet and City Target, along with “mall staples” Victoria’s Secret, L’Occitane and Bath and Body Works. Additionally, strategic positioning refers to tenant mix and in the case of FIGat7th, Brookfield ultimately decided to emphasize apparel and comparison shopping. 

The outcome? Simone Tatro, the store team leader for City Target was quoted saying, "We have exceeded the company’s expectations on sales since opening”. I’m sure the other retailers in the center would share similar sentiments.

So, how can you use strategic positioning to inform your efforts to manage tenant mix?
First, you need to ask yourself whether your businesses are reflective of the lifestyle and price point of your target customer. We recently worked in a community that had seen some significant demographic shifts over the past 10 years towards a younger, more trendy population of young professionals. But the retail mix still read like a page from an early 1990’s mall, including Gap, Express , Conway, Claire’s Boutique, NY&Co., Benetton Outlet and Bakers. Not bad, but not great. To add insult to injury, the stores had not been updated in that long either, so the street read as tired, old, and in need of a major face lift. Not the kind of place that young, trendy professionals go when given options. Moreover, nearby shopping malls were creating more and more competition for these shoppers. When we talked to businesses, what we found was not surprising, store sales were slipping and the street was not attracting the same number of shoppers, despite the improving demographics. Yet property owners were still living in the hey-day of the street, demanding rents that exceeded what current sales could support.

So what were the major take-aways?  Keeping in mind the limited staff resources available for the retail attraction effort, we focused on four key strategic tasks as follows:
  • Focus significant effort on attracting a brand-name retailer that is both affordable and contemporary/trendy. Think H&M or Zara. We developed a hit-list of about 23 handpicked prospects that fit squarely within their strategic positioning statement - they were contemporary/trendy in their offerings, their price point was mid-level or value-oriented, and they square footage they were looking reflected the kinds of spaces that were available on the street. We then developed an outreach plan to begin identifying vacant properties that might be a good fit for those tenants. The next step involved sit downs with property owners to enlist them in the recruitment effort. This also included educating them on the kinds of rents that major credit tenants would pay - and what they wouldn't - for spaces on the street. 
  • Communicate the retail strategy, again and again. Enlisting property owners and brokers is critical for successful retail attraction efforts. While the “prospect hit list” we prepared for our client is a basic tool that the BID can use in initial outreach efforts, property owners and brokers will have their own hit lists. The goal is to get them to buy into the strategic position as a "theme" to follow. So while we may have suggested H&M as a potential tenant, there might be other similarly positioned retailers with an interest in the street. In cases like this, brokers can be your best friend. They have deep knowledge of the local market and may come up with other retailers that are just as appropriate as the ones you want. Either way, it’s a win-win for the street.
  • Façade Improvement for Regional Independents and Mom & Pops. Fortunately the street looked really good owing to the excellent job the BID had done in landscaping and street maintenance over the years. But the dated facades were a real problem, so we recommended a façade improvement program to help existing businesses refresh their facades and signage.
  • Develop a campaign to get Nationals to clean up their act. Given the predominance of national chains on the street, we recommended developing a targeted campaign to get national retailers to refresh their stores through outreach to corporate headquarters (and letter writing campaigns if necessary). Update: since our study, Express and Gap have both upgraded their stores.
The update? The effort is still in its early stages, but tenant mix on the street continues to improve. Within the past year, a Blink Fitness opened (this is a younger, trendier version of Equinox), two new organic food stores have opened, the Express store got a facelift and expansion, and the Gap store got an interior store redesign. Not bad - and all moving in the direction of the district's new strategic position. 


BEFORE: Express is in need of a facelift. Sun faded awnings covered in
pigeon poop are not quite the right image for the street.  

AFTER: New awnings, clean facade AND an expansion.
Seems that Express knows that this street is a good investment after all. 

Author Larisa Ortiz is Principal at Larisa Ortiz Associates. 


2 comments:

  1. very interesting, what is their positioning statement?

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  2. Thanks for the comment. This district has a great mix of retail and is well known locally as a comparison shopping district. Our effort aimed to develop a stronger set of offerings around apparel, with an emphasis on contemporary retail offerings in the affordable to discount price-range.

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