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Opening a new store is essential, whether a brand is opening their first or their hundredth. A new store builds excitement, embodies the relationship between the brand and their customer, and showcases what’s new.  Those brands that choose design-driven concepts have the advantage to ensure a unique experience that also performs in the marketplace. So imagine the frustration and expense, both in capital and sales, that occurs when store openings become stalled at every turn. 

The World Has Changed.  

The variables that drive retail design have changed dramatically. And it’s not just labor shortages and supply chain issues; every step, from location decisions, lease negotiation, early concept design, through to how one structures the build team can now be a challenge and needs to be considered more thoughtfully as a whole than ever before. 

explains Ed Hofmann, Partner of Design and Strategy at ASG-Chute Gerdeman. “We find ourselves navigating decisions that spread across multiple layers and choices – literally as an extension of the Brand’s in-house group.  For instance, the ability to move with real ‘speed’ is now contingent on the ability to navigate thru 10 – 12 decisions at once, supported by only partial information.  You don’t know everything you need to know, so we are more and more relying on instinct, strong back up plans, and our relationships to move at pace.

Vendors are wanting more up front, work is taking longer, so we are value-adding where we can, for instance, helping clients on the tenant negotiation side to suspend leases or postpone payments due to uncontrollable delays. We place a lot more emphasis on streamlining the work leading up to the construction so that the build can go as efficiently as possible, such as separating the interior and exterior builds if we must – it creates 2 permitting tracks, but it allows work to continuously move forward, rather than being totally stalled.”  

Clients Crave Control

Clients know what they want for their store designs, but they are frustrated, simply by the lack of control. Delays are increasing due to factors out of the control of both the agency and the client. These delays don’t just add to frustration but increase spending on construction and payroll. Delays in opening lead to lost revenues. 

Neither clients nor agencies can defeat the supply chain, but the situation is causing clients to lose confidence not only in the agencies with whom they work but with their own internal teams and their vendors as well. And vendors, who are either protecting themselves or simply unable to move quickly enough due to the supply chain, are driving up wait times and increasing costs.

“It used to be you got to choose 2: good, fast, or cheap….but now it includes a 4th variable: just getting it done, and you’re allowed only one mistake,” says Hofmann.

Layered Construction in Design

On the execution side, layered construction is becoming more common to help overcome the challenges of supply chain and labor issues. But these challenges aren’t just happening with the storefront. A retailer may not be able to get the correct fixtures or all of the fixtures they need, so a layered approach is being used to help keep the client moving toward opening. 

Clients may be able to have some of the fixtures installed and use alternates for the rest while they wait for the remaining fixtures. They’re making do with what they can get – literally buying things off the shelf, at second-hand stores, or recycled from other locations as placeholders until the real elements arrive. 

For example, if the space has been designed with certain color-themed rugs that you can’t get right away, they find something that works, place it in the store, open the store, and then replace it when the actual items arrive. And it’s not just rugs – it’s light fixtures, window glass, paint colors, display tables, shelving – it could be anything. Now imagine the scale of that when it is multiple locations or multiple elements. Just to get the store open, the design team might have had to get fixtures at West Elm, Arhaus® Outlet, Wal-Mart, or even Amazon, as the first layer and then later, come back and add in the desired elements. 

Managing the Customer’s Experience 

This obviously isn’t the optimal approach, because the design is part of the experience for customers walking into a newly-opened location. In order to manage this “layered” experience will require finesse and transparency. So how the retailer positions the design choices they make will influence how it is received by consumers. 

The key to a successful layered construction approach comes down to closely following the brand intent, that powerful story, with thoughtful, perhaps temporary substitutions, back up plans and complete transparency with the client and often the end consumer.  The relationship between Brand and the people that love them is paramount – it’s our job to protect that and find a way to go above and beyond, delivering unique and powerful connections, sales, and memorable experiences. 

It’s tough to be a retailer trying to open new stores right now. Everyone is experiencing high costs, lack of materials, logistical issues, and labor issues. One of the hot topics at the ICSC convention this year was the idea of layered construction. Layered construction allows the retailer to open sooner, albeit not in the ideal state. Layered construction is the outcome of more than two years of pandemic-related supply chain and labor shortage issues that show no real signs of letting up any time soon, which have only been exacerbated by the war in Ukraine.

What Is Layered Construction?

Layered construction is an approach to launching a new location in the midst of all the construction industry challenges currently besetting the industry. It can take much too long for a brand to realize the ideal design for a new location due to shortages or wait times for materials, labor, and partner resources, so they sacrifice or alter the design to help facilitate progress towards opening. This can look like many things, but basically, it means implementing a new prototype in layers. For example, a store has a new, beautiful storefront design, but the design requires certain materials which are not accessible for 22 weeks, despite sourcing locally or looking for custom-made solutions. Waiting 22 weeks for the materials isn’t feasible when the store needs to be open for customers now, so the design is built in layers. Often, this means creating an alternative to the prototype that can be built immediately, then returning later to update with the correct materials when they’re finally available.

Processed Have Changed

Processes have changed dramatically, and because most of these things are completely outside the control of the agency and the client, it becomes a matter of adjusting to the changes, communicating them effectively, and adjusting internal processes to accommodate the changes. For example, permit times have doubled in the last year.

explains Liz Seitz, ASG’s Store Planning and Construction Leader. “What used to be a 6-8-week timeline, is now 20 weeks in some scenarios.” What agencies must do to help assuage the frustration for clients is to perform due diligence and organize everything prior to construction to make the process quicker and more efficient to execute.

Agencies must be vigilant, keeping their eye on the swiftly changing environment. “As soon as one lever opens up, another one, down the road we never expected, shuts,” says Seitz. Sometimes, Liz explains, it’s important pump the brakes earlier- talk to vendors and ensure construction schedule will align for everything to come along as scheduled.

“Companies will do anything to get into their space,” says Seitz. “They will literally rig their HVAC to make it into their space quicker.”

Supply Chain Woes

As with so many other industries, the construction industry has been plagued with supply chain issues. These issues are now compounded by a backlog of projects, a new infrastructure bill, and pent up demand for projects that were put on hold during the pandemic. These supply chain issues are impacting every phase of construction, and lead times are growing, exacerbated by the labor shortage in the trucking industry that moves the materials.

Alternative Buildout Matters

One of the wonderful specters we see in retail over and over again is a willingness to be flexible, to switch gears, and to change directions in order to keep moving forward. It’s one of the most invigorating reasons to be in this industry. There are many creative and innovative options rising to the forefront to make it easier to complete construction as expected.

“Just as we’ve seen new store formats or logistics solutions in response to the pandemic, businesses are becoming more adaptable and flexible overall in response to a new normal. Those that are prepared to make the most of this will benefit in the long run if any other supply chain issues arise.” said Tom McGee, president and CEO of ICSC, in an interview with Costar.

Some of the alternatives being considered include:

The data every retailer relied on to connect with consumers before the pandemic must be reevaluated. Today’s consumer – the post-pandemic consumer who was isolated at home for several months, learned to rely on others to choose their groceries and deliver them, and refurbished their homes while shopping online – are not the same consumer they were before the pandemic. And more than ever, demographics are no longer an accurate predictor of consumer behavior on their own. Consumer behavior crosses gender and generational lines in ways retailers have never seen before. As we think about analytics and strategy, fully understanding a consumer requires demographic, psychographic, and social analytics. In fact, social segmentation has become an influential piece of the puzzle.

According to Synchrony, “In a world where consumer behaviors have been turned upside down, businesses have to rethink what loyalty looks like — and create new paths for building and maintaining customer loyalty for the long term. Smart brands are on it: finding ways to adapt technology, social media and other tools for the current environment while still leaning into the human elements of incentives, rewards and personal connections that sustain loyalty over time.”

Social as Part of the Shopper Journey

Rachel Lloyd of Green Room discussed the social retail trend in Retail TouchPoints:

“…despite the fact that most customer journeys start on social media through product discovery, there will always be a huge desire for people to experience brands in real life. Humans have an inherent desire to come together and connect in social settings. Yes, the rules of retail are changing, but the human needs and desires that retail fulfils are not.

But in order to survive, the store’s connection to the brand’s wider digital ecosystem is now absolutely vital to ensure that a dialogue is maintained long before a customer goes in-store and continued long after they leave.”

So as retailers find new ways to “adapt technology … while still leaning into the human elements…” social media rises to the forefront of the new way to not only connect with customers but learn about them. Consumers are turning to social media more than ever to explore and connect with brands. The search for and discover of products online fulfills a sense of adventure for consumers – it’s like being on a quest. And consumers are eager to share their discoveries and take pride in being the first to know about an unknown brand.

So while most consumers still want that in-store experience, for brands to get consumers to walk through the doors, they need to be accessible on social and paying attention to what their customers want. In other words, even as retail continues to change, the need for human connection and in-store shopping isn’t going away. Social retail is the connection brands need – and the way forward for more intelligent marketing.

The Need to Move from Demographics to Social Segmentation

Retailers currently have an enormous opportunity to connect more authentically and more effectively with their customers. In combination with actual physical shopping behavior and historical data, brands have an opportunity to leverage social sentiment to guide how they move forward. In fact, a social view is critical now to form a complete picture and guide retail strategy. By incorporating social listening and social segmentation, it’s possible to gain a more holistic picture of today’s consumer and how they’re interacting with your brand.

Moving Beyond Demographics

Retailers have historically lumped customers into targeting groups based on demographics. Messaging and advertising, maybe even product mix, became based on age and generational characteristics. People of a certain age were in specific stages of life. 20-somethings were starting families and buying homes. 30-somethings were making home improvements and raising families. 40-somethings were thinking about things like investing and insurance. 50-somethings were becoming empty nesters, focusing on travel and retirement planning. It was concrete, and everyone was following along with their age group in terms of life stages. Now, we have 80-year-olds graduating from college and 40-year-olds having their first child. Millennials aren’t even thinking about buying a home until they’re in their late 30s – if at all – and consumers across all demographics are spending their dollars with brands and companies whose beliefs and behaviors align with their own.

Benefits of Social Segmentation

In building the case for social segmentation as a strategy for better consumer engagement, consider these statistics:

• 77% of consumers say they are more likely to buy from a brand they follow on social media over one they do not (Social Media Today)
• In 2020, over 3.6 billion people were using social media worldwide, a number projected to increase to almost 4.41 billion in 2025. (Statista)
• 71% of consumers say it’s important for brands to raise awareness and take a stand on social issues. (Sprout Social)
• Half of worldwide marketers have turned to social listening to understand consumers’ changing preferences during the pandemic. (eMarketer)

In the past few years, retailers have learned to be quick to pivot because of how rapidly consumer sentiment can change. Using social signals gives retailers a deeper understanding of what consumers want – and how they want to buy. Instead of relying on what has happened in the past, a social view provides context around what is influencing buyer behaviors in real-time. Benefits include:

• Increase Customer Lifetime Value
• Improved customer engagement
• More cost-effective customer acquisition
• Improved omnichannel/integrated experience
• Significant improvement in anticipating customer needs, wants, and behaviors

How Can Retailers Use Social Segmentation?

Customers are more than their demographics. Social listening allows brands to identify not only consumer sentiment – toward brands and toward social issues they care about – but also can help brands measure what consumers say online against their actual behavior as consumers. And it allows brands to customize and personalize their messaging. For example, if consumers are talking about sustainability, a brand can tailor messaging with social segmentation around sustainability efforts. If they’re concerned with diversity and inclusion, the brand could then create content around the efforts they’re making in DEI. Knowing what is important to customers is crucial to building and maintaining loyalty for every brand.

Brands Doing It Right: Leveraging a Social View to Create Better Experiences

Understanding customers in real-time through social listening and targeting customers based on social segmentation rather than demographics can help brands connect more authentically with their consumers.

Target

Target is so good at attracting customers to their stores that they have their own entry in Urban Dictionary. They incorporate a variety of marketing strategies, an in-store shopping experience that makes people want to be in their stores, and partnerships with brands people love but in limited quantities that create FOMO – the “fear of missing out.” Their social media effectively connects them to their customers and explain that they try to post what their customers want, not what they think they should post. They incorporate user-generated content in their social media and website, from sharing shopping experiences posted by customers to reviews to answers about products on their website provided by users.

Sephora

Sephora uses a variety of social listening tools and social segmentation to reach their customers. They’ve recently been highlighted by Wall Street Journal for how they are using social media to share their purpose. In the interview, Suzanne Kounkel, CMO of Deloitte US says, “Organizations are seeking to demonstrate to all stakeholders—from customers and employees to partners and investors—why their companies exist and how they make an impact beyond profit.”

Gymshark

Gymshark, which we recently named a DTC brand to watch, is in part having success because of their approach to social retail. Not only are they leveraging influencer marketing to turn their brand into a household name, but they are using social listening to more accurately target their customers. Giraffe explains, “Gymshark is a key player in knowing your audience and using social media channels in a hyper-targeted way. For instance, Gymshark owns 3 different Instagram accounts (@gymshark, @gymsharkwomen and @gymsharktrain) all with different goals and purposes.” Maybe conducted an in-depth analysis of how Gymshark used social media to listen and connect with consumers here.

Social Retail Connects You with Your Customers

Social listening provides more accurate and up-to-date information than typical historical data and forecasting. And by using social signals, retailers can more quickly adapt to changing sentiments. Most importantly, however, social signals provide a cross-section of data that moves beyond generational demographics and allows a brand to align with consumers and use social segmentation to deliver more impactful experiences. With the great wealth transfer well underway, there are invaluable opportunities for companies to listen and learn from their customers in new ways.

A Decline in Institutional Knowledge is Leading to an Increase in Lease Management Outsourcing

Before the pandemic, there were 10,000 boomers retiring every day, taking an enormous amount of institutional knowledge with them. While this has been most noticeable in the healthcare and insurance industries, over the next decade, we’re going to feel it in every industry.

In an article written in 2013 by Dr. Andrew M. Pena, SHRM, he sounded an alarm about the loss of institutional knowledge and its impact on businesses.

“Today, as Baby Boomers prepare for retirement, some Gen. X’ers and many Millennials are not remaining employed in one organization long enough to learn from their older colleagues. As a result, the institutional knowledge, history, and business continuity possessed by the veterans and Boomers might vanish with little or no knowledge being retained by the Gen. X’ers and Millennials. The failure to retain and transfer institutional knowledge could result in a steady increase in employee turnover and further loss of institutional knowledge, translating into higher costs and lower institutional efficiency.”

Fast forward eight years, factor in a pandemic, a significant labor shortage, and more than a year of “The Great Resignation,” and the threat of institutional knowledge losses have increased substantially.

The Generational Divide

Because Boomers have worked longer and are retiring later, Gen X and Millennial employees, in many cases, have not had the opportunity to rise through the ranks as quickly. As Boomers now begin to disappear at an alarming rate, they are leaving behind very inexperienced replacements who have had much less time and opportunity to enter leadership positions. Consequently, these replacements have limited high-level work experience, creating a giant skills gap. The choice to delay having children quickly enough to create future replacements, combined with the shift in attitude about staying with the same company longer than a few years, and the gap and skills shortage will continue to widen.

What Does This Have to Do with Retail?

Retailers often benefit from younger generations working in their stores. Digitally native brands inherently understand what traditional brick -and-mortar brands often fail to realize: The brand is the brand, regardless of how or where the shopper engages with the brand. While operations and other aspects are feeling the pinch on the front end of the talent pool – on the corporate side of retail –a painful loss of institutional knowledge on a regular basis in lease administration – and it is a costly and painful deficit.

Lease Management Is a Negotiation Game that Requires Expertise and Finesse

As experienced lease administrators retire and take with them their considerable understanding of leases, settlement negotiations, and relationship building, their younger replacements simply are not armed with the information and knowledge needed to properly defend contracts and protect their companies. In one instance with a national retail brand, the lease administrator retired. When the new administrator started, he immediately invested in a new system that included a lot of promised bells and whistles. They spent a ton of money on it – and promptly missed a kickout, costing them over $300,000. When we audited the system after taking over, 82% of their expiration dates were wrong.

Why Outsource Lease Management

Outsourcing lease management offers several benefits, including more efficient administration and expertise that saves you money. Outsourcing retail lease management has a measurable ROI. By placing lease administration in the hands of dedicated experts, there is a team proactively seeking opportunities, ensuring you’re not overcharged, and helping maintain compliance.

Lease management is often overlooked as a contributor to a company’s bottom line. But the benefit derived from expert lease management in terms of cost avoidance, negotiations, and credits that can be offset against monthly expenses is often immeasurable.

Outsourcing lease management ensures that you have the best experts handling the second-largest expense item for many retailers. Relying on experts can help transform a game-changing expense item into a hidden profit center.

Increased Efficiency

For many companies, internal lease management is just one of many responsibilities that an employee shoulders, and they often don’t have the time to fully analyze and manage leases. Outsourcing to a company that specializes in lease management can free your employees to focus on the primary duties of their jobs – often allowing the company to realize measurable savings in labor and efficiency.

Expertise

Outsourcing provides your company with depth and breadth of experience that can improve your negotiations and ensure that you do not miss cost savings. Because outsourced lease administrators manage leases across multiple industries and niches, they are familiar with retailers of all sizes, ages, and types. And, they have a finger on the pulse of the industry, staying abreast of and ahead of changes that might impact your costs.

What to Look for in an Outsourced Lease Management Service

When seeking an outsourced provider for lease administration, seek a partner who has:

• Provided this service for portfolios of all sizes, for retailers that are at the height of success, and for those experiencing their last days
• Read thousands of lease clauses and has learned to detect the nuance of how they are written.
• Experience disputing billing errors and demonstrated success in getting revisions for most disputes
• An in-depth understanding of co-tenancy failures retroactive to previous years
• The ability to play a key role in obtaining the best possible lease terms for you
• A demonstrated track record processing billions of dollars in lease-related payments.
• State-of-the-art technology

What You Should Expect with Outsourced Lease Management

Meticulous Auditing

One of the most essential functions of an outsourced retail lease administrator is auditing. The lease manager should ensure that all your lease documents, dates, and detailed information about your leases for each property as accessible. They should meticulously audit your invoices and conduct regular reviews to ensure you are not overpaying and that all your negotiated concessions are being met.

CAM Reviews

Building operation expenses (CAM charges) are a significant expense and one of the biggest areas in which there can be errors. When you work with a retail lease management partner, they can often save your organization more than what you pay for the service provided.

Preservation of Institutional Knowledge

If you rely on one or two internal lease managers, and one or both leave or retire, it is almost impossible to replace that industry knowledge. By outsourcing to a firm with a specialty in lease management, you get depth of experience without the risk of the loss of institutional knowledge.