Center owners are facing increased vacancy rates and turning to specialty leasing as a category to help fill space and drive revenue until the economy rebounds. To get a better understanding of what is happening in the specialty retailing business, we spoke to Patricia Norins, Publisher of Specialty Retail Report and Joan Woods, Director of Specialty Leasing at Madison Marquette.
Q: How has the industry changed in light of the recent economic challenges?
PN: As specialty retail rents rose over the past few years, many local/regional merchants felt priced out of the market. Today, more and more entrepreneurs are turning to shopping centers to launch new products and services because the cost to entry is substantially lower.
JW: Many of the specialty retail concepts that were once shunned by developers are now in high demand. For example, many centers would never consider hosting a carnival or circus in the parking lot, but are now open to them because of the traffic and income they generate.
Q: Why is specialty retail so important right now?
PN: The first and most obvious reason is because of the income it generates. The typical specialty retail program can generate several hundred thousand dollars to the bottom line with larger programs bringing in well over $1 million. Cart programs can also be an important point of differentiation and offer a competitive advantage to the “sea of sameness” that exists in retailing today.
JW: As national retailers consolidate their portfolio’s locations and close stores, specialty retail offers landlords an opportunity to keep the lights on and generate income from their vacant spaces. In addition, specialty retail brings “life” and excitement to what might be an otherwise lackluster common area through interactive retail merchandising unit programs.
Q: What tips can you offer for finding quality specialty retail merchants?
PN: CANVAS, CANVAS, CANVAS! You can’t expect prospective retailers to come to you. You need to hit the pavement and find them. Don’t limit your searches to other shopping centers — some of the best merchants are in street-front locations in up-and-coming neighborhoods. Hosting Business Opportunity Days are also a great way to introduce prospective merchants to your cart/kiosk programs. And last but not least, consider non-traditional media outlets like Craigslist.
JW: At trade shows like Spree and Fusion, I often meet with suppliers who have interesting new products, but don’t have operators in my region. I use my Business Opportunity Days to partner great products with local entrepreneurs who want to start a new business.
Q: What are some categories/products to watch in the coming months?
PN: Affordable Luxuries…Consumers may have cut back on extravagant luxuries like the latest designer handbag or expensive dinner out…but they are still buying the seasons newest shade of lipstick, making a statement with accessories (scarves and jewelry) and gourmet foods and chocolates.
I’m also seeing developers and merchants thinking creatively about how to fill a void in the marketplace — an interesting concept I recently came across is Furnishments in Seattle. The owner, Kristina Puetz, capitalized on the recent home staging trend to open a store that offers high quality furniture and accessories on a short term rental or purchase basis. She brings furniture in on consignment so she has very low start up costs and has become a popular resource for the home staging community.
JW: As taxes on tobacco products continue to rise, E-Cigarettes created a disposable electronic cigarette that delivers the experience of smoking a cigarette — including the nicotine — without the tobacco. It’s a less expensive alternative to real cigarettes and they are flying off the shelves.
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