Emerging Market Trends in Retailhttps://consultasg.com/wp-content/uploads/2023/06/emerging-markets.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
“Location, location, location” may be a cliché, but “what is the ideal location for my brand?” is the burning question behind every retail strategy. The “right” location is not always where you think it is. Opening a retail location in the right spot can increase foot traffic, boost sales, and give the brand the exposure it needs. Conversely, a poor location can slow sales and even result in bankruptcy.
Where is retail happening right now and why? What markets are thriving? In this emerging market report, we’ll look at how some retailers are making a big splash outside the typical retail hot spots and why it might be beneficial to consider opening a retail location in these areas.
“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive,” says Carrie Barclay, president and CEO of ASG.
Data, Data, and More Data
Data analytics is crucial to understanding retail location strategy. The most critical factor in choosing a retail location is understanding your target consumer. Insight into consumer behavior is essential. And that’s the rub, because consumers have dramatically changed their behavior post-pandemic. Anything retailers knew about their shopper from before the pandemic no longer is relevant.
Finding the right location in this shifting landscape requires access and understanding, says Doug Tilson, head of tenant representation for ASG. “It’s critical to understand how markets develop and how they’re changing. That can only happen when you have access to up-to-date, comprehensive data,” he says. “Using accurate data to drive decision-making and working with a trusted tenant rep partner can help you determine what’s possible in a retail real estate landscape that is constantly evolving.”
The Big Location Shift
Consumers are shopping closer to home, and they are seeking unique and memorable experiences when shopping in person. These factors are shifting location strategies for retailers, leading to store openings outside of the typical launch areas.
“While virtual and digital experiences still matter, the in-store experience is returning to prominence, and 94% of retailers are focused on enhancing it for their business overall.” –SquareUp
New location opportunities can lead to different format opportunities. Because consumers are sticking closer to home to shop, retailers—both big brands and a resurgence of mom-and-pop retailers—are opening smaller stores that allow them to fit more locations into neighborhoods and suburbs. Some retailers are even opening strategic locations on college campuses.
“Consumers want and crave variety, diversity, and choice. You can maintain a national footprint and effectively leverage regional and localized design. Bringing these strategies to scale can be a differentiator for retailers who want to thrive, not just survive,” says Carrie Barclay, president and CEO of ASG.
Meeting customers where they are and where they want to be is part of a smart retail strategy. And that means an opportunity for retailers—both big brands and mom-and-pop retailers—who can’t afford big-city lease prices and large-format shopping environments.
“Retailers can tailor these small-format stores to target a specific demographic, create a personalized shopping experience, or experiment with a new brand direction. Small-format stores can also serve as fulfillment centers for click-and-pay shopping and as a location for returns, all while fostering brand awareness and customer engagement. And thanks to their smaller size, these stores can help companies expand their reach in urban centers and other highly-priced real estate markets while lowering overhead costs.”– Placer.ai
Using data to determine where and how retailers can best position themselves to attract consumers is essential to future success in today’s retail industry.
“Right-sizing helps in the long run: less labor, less inventory (“showroom” stores), less build-out costs, less energy spend, better online fulfillment and return options, as well as the big one since 2020—better accessibility.” – RetailWire
“For the first time in a long time, retail growth is outside of the top 20 cities. You’re looking at tier two or tier three cities, which suggests that the redistribution post-Covid is shifting. We know that it will shift again as people move past the Covid experience.”
-Carrie Barclay, CEO ASG
According to PWC, almost all of this year’s survey of top-ranked real estate markets are in faster-growing southern and western regions and away from the coasts.
• Nashville was once again the top-rated metro area
• The Dallas/Fort Worth area jumped five spots from a year ago to become the number two-ranked market
• The Atlanta metro area scored higher in this year’s survey, jumping to the number three-ranked spot from number eight last year
In addition to Nashville, Dallas-Fort Worth, and Atlanta, ASG is seeing opportunity in Seattle,
Austin, Charlotte, and Louisville.
3 Reasons to Consider Retail Development in Nashville
1. Nashville has been focused on economic development coming out of the pandemic and offers a variety of opportunities in mixed-use spaces that are reasonably priced compared to larger cities.
2. Nashville is an international tourist destination, bringing in people from around the world every year.
3. The city is investing in infrastructure, including public transportation, to support the growth.
For more, see these seven reasons why retailers should consider Nashville.
Nashville shops offer something for everyone: records by local musicians, rare musical instruments, vintage items, artisanal sweets and drinks, and items crafted by local makers and fashion designers. Music City is home to several shopping districts including 12South, East Nashville, Hillsboro Village, Green Hills, and Downtown.
The Nashville region is defined by a diverse economy, a low cost of living and doing business, a creative culture, and a well-educated population. Nashville’s growth is spurring a wide variety of new businesses, making it attractive for retailers. Nashville is a strategic location for retailers, but as more brands discover the opportunity, prices will rise. Retailers whose consumers will respond to a Nashville location should be planning now.
3 Reasons to Consider Retail Development in Dallas-Fort Worth
1. Dallas/Fort Worth is experiencing significant population, attracting people to the area with promising job opportunities and affordable housing in comparison to other areas of the country.
2. DFW and Texas in general have business-friendly tax policies, including dedicated support for small business owners, incentives to locate or launch businesses in the area, and has a 0% local tax rate as well as low property tax rates.
3. The region has made substantial investments in infrastructure development, including transportation, commercial real estate, and retail spaces.
According to the Q1 2023 Dallas-Fort Worth Retail Report, the Dallas-Fort Worth retail market continues to exhibit robust growth “characterized by robust leasing activity, sustained tenant demand, and redevelopment initiatives.” These conditions make the DFW area favorable for retail growth. Areas to watch in Dallas-Fort Worth include Lakeside and development near the Deep Ellum Rail Station at Swiss Avenue and Good-Latimer Expressway.
3 Reasons to Consider Retail Development in Atlanta
1. Like DFW, Atlanta is experiencing a rapid population growth, offering retailers a large consumer base supported by a strong economy with multiple industries including finance, tech, and logistics.
2. Atlanta is the home base of several Fortune 500s and is also a cultural and entertainment hub, providing a rich and diverse local and visiting customer base for retailers to attract.
3. Atlanta has invested in significant real estate development, including the construction of new shopping centers, mixed-use developments, and revitalized neighborhoods, including Centennial Yards and Medley.
“With the growth of jobs in the city, Atlanta and its 21-county surrounding region has seen a population boom, with more growth on the way. As of April 2023, the surrounding metro has an estimated population of 6.1 million people, and the Atlanta Regional Commission expects this number to grow to 8.6 million by 2050. The current annual household income growth is also outpacing the U.S. average, as well. This extra income growth is to the benefit of retailers.” –REBusiness Online
3 Reasons to Consider Retail Development in Seattle
1. Seattle is consistently rated among the top 10 cities to live in the United States. It boasts an above average median income for its residents with companies like Amazon.com, Boeing Commercial Airplanes, Microsoft Corporation, Starbucks Coffee Company, Costco, Weyerhaeuser, Nordstrom, REI, Alaska Airlines, and The Bill & Melinda Gates Foundation. In the 2022 America’s Best Cities report, Seattle ranked #12, and household income was found to be the sixth highest nationally.
2. Seattle’s transportation infrastructure is impressive. The city has two airports, bus, light rail, and ferries providing extensive public transportation offerings.
3. Seattle start-ups accumulated over $3.2 billion in venture capital in 2020 and have a roster of 25 start-up accelerators and incubators.
While Seattle has seen a slight downturn from the tech industry decline, the city still offers an enormous opportunity for retail, especially for retailers seeking to add small stores in some of the exceptional neighborhood’s Seattle features. In 2022, Nike opened an 8,800-square-foot space in Seattle’s eastside Bellevue neighborhood. Bloomingdale’s is making its entry into Seattle retail with their new small format stores in 2023.
3 Reasons to Consider Retail Development in Austin
1. Austin is one of the fastest-growing regions in the country, attracting high-end talent to the area that makes it ideal for growing retail brands.
2. The Opportunity Austin initiative has helped to create 637,400 jobs that contribute to a diverse economy where talent is abundant.
3. Austin was named the No. 2 best-performing city by the Milken Institute in economic growth and access to opportunities, crediting its strength to its high-tech sector driving rapid job and wage growth.
Retail opportunities abound in Austin. In 2023, the seven-building East Riverside Gateway complex mixed-use development was announced and will provide two million sf of office, retail, and residential space that will emphasize the pedestrian experience. The Domain complex, opened in 2023, includes 20 full-service and fast-casual dining options, 100+ retail stores and around 5,000 residential units in the area.
3 Reasons to Consider Retail Development in Charlotte
1. One of the biggest advantages for retailers in Charlotte is the low taxes. It was named a “Top 10 State for Best Business Tax Climate” by U.S. News and World Report in 2020.
2. Charlotte was named one of the best places to live in the U.S. in 2023-2024 by U.S News & World Report.
3. North Carolina is ranked No. 1 in America’s top states for business with the nation’s strongest economy.
Charlotte has many development and retail opportunities. In 2023, developers announced plans to turn the Mallard Pointe Shopping Center on North Tryon Street into a student gathering place with businesses tailored to the University of North Carolina Charlotte. Food and fitness retail are the fastest growth areas, and while vacancies are nearing record lows, new mixed-use development opportunities continue to evolve.
3 Reasons to Consider Retail Development in Louisville
1. Louisville has worked to increase infrastructure, including adding direct flights to LA and Boston as well as 35 other cities.
2. Louisville attracts talent in a variety of industries, including healthcare, high-tech, and manufacturing, building a population of higher-than-average income workers who are ready to shop.
3. Louisville was named a Top 5 U.S. Metro for economic development by Site Selection Magazine.
The opportunities in Louisville are limitless, with both downtown and the suburbs seeing a huge spurt of new development. Oxmoor Center has become a tourist attraction with retailers vying for the location. Nike recently opened a store there. Shelby Park is also seeing a rise in development, and Wawa recently announced plans to open in the east end.
Location as Retail Strategy
Meeting customers where they are and where they want to be is smart retail strategy. And that means opportunity for retailers—both big brands and mom and pop retailers—who can’t afford big-city lease prices and large-format shopping environments. These emerging markets represent some of the hottest areas in the country for retailers, whether a brand is launching a flagship store or wants to engage customers close to home with a small footprint neighborhood shop.
The Importance of Lease Management for Business Continuityhttps://consultasg.com/wp-content/uploads/2023/05/lease-management-header.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
Lease management is critical for your retail business. Effective lease management can ensure that your retail business can withstand the volatility of economic downturns, supply chain disruptions, and unexpected challenges to your operations. Many retailers are unaware of the profound financial impact the right lease management team can have on your business, but a smart business continuity plan should include working with a tenant representation professional and outsourcing lease management to experts.
What Is Lease Management?
Lease management is the practice of ensuring that the terms of the lease are properly met. When a retailer receives an invoice from the landlord, the goal is not to balance to the landlord’s invoice but to ensure that the invoice matches the terms of the agreement, doesn’t overcharge, and doesn’t include costs that should not be included. While often a thankless and behind-the-scenes area of our work, ASG saved $12.6 million for clients last year through our effective lease management.
How Does Lease Management Impact Business Continuity?
Lease management, or lease administration, is crucial in ensuring business continuity by protecting the retailer. A well-constructed lease will guarantee that the retailer continues to have access to essential assets. The lease also reduces operational risk, helping the retailer avoid unexpected and unwarranted expenses. Effective lease management involves several key factors, including regular monitoring and tracking of lease agreements, timely renewal of leases, negotiation of favorable lease terms, and proper documentation and record-keeping. Outsourcing lease management can be beneficial because the lease management team are experts in the industry and have the ability to quickly recognize risk areas, negotiate better terms, and help preserve the tenant-landlord relationship.
Best Practices for Successful Retail Lease Management
Effective lease management is crucial for any organization to maintain healthy relationships with its stakeholders. Contracts serve as the backbone of these relationships, and it is essential to manage them efficiently. A robust lease management system can ensure business continuity during unforeseen disruptions or when physical access to the office is not possible. By streamlining the contract management process, organizations can minimize risks and maximize opportunities for growth and success.
Understanding Lease Terms
The first step in retail lease management is to thoroughly understand the terms of your lease agreement. This includes the length of the lease, rent payments, maintenance responsibilities, and any clauses related to business continuity or termination.Regular monitoring and review of lease agreements
Regular Monitoring and Review of Lease Agreements
Retail leaders without experience in lease negotiations and management may find themselves overpaying, which can add risk to business continuity. It’s critical to monitor the lease, review the agreement, and be proactive about addressing issues that may arise, whether the retailer is being overcharged or not received agreed-upon accommodations.
Proactive Negotiation of Lease Terms
Whether the retailer has an existing lease that is being renewed or they are securing a new location, the lease agreement is an opportunity for mitigating risk to the business based on unexpected events, unanticipated costs, or changes to the space, location, or other tenants. It’s important to negotiate a renewal that aligns with your business goals and objectives including rent payments, lease terms, or other provisions that can help ensure business continuity.
Effective Communication with Landlords
The lease may serve as the backbone to the contract between landlord and tenant, but communication is what allows the relationship to flourish to the benefit of both parties. Maintaining open communication between tenant and landlord is key to ensuring business continuity.
Professional Tenant Representation
A tenant representative is an essential partner in assessing location needs, negotiating lease terms, and facilitating the communication and relationship between tenant and landlord. They are also the people who fight for the retailers they represent when terms are not honored or costs are not being controlled as contracted.
Plan for the Unexpected
It’s essential to have a plan in place for unexpected events that could disrupt your business, such as natural disasters, economic downturns, or changes in consumer behavior. This plan should include contingencies for rent payments, staffing, and inventory management.
Options That Protect the Retailer
Business continuity planning is often a game of what if. And building those what ifs into the lease agreement is essential for retail business continuity. Options for subleasing, sharing space, adjusting the size of the space, and delaying rent payments for certain circumstances are all examples of how the retail lease is essential for comprehensive retail business continuity.
Retail Business Continuity Planning Is Not Complete without Lease Considerations
Retailers and their lease management and tenant rep partners must have a clear understanding of the retail space and resource needs, any cyclical nature of the business, and have clear insight into the risks and liabilities contained within the lease. A lease management system like ASGEdge can be instrumental in not only ensuring retailers implement a strong strategy for choosing locations but for managing every location’s lease in a streamlined and efficient manner.
7 Common Myths in Tenant Representationhttps://consultasg.com/wp-content/uploads/2023/04/myths-tenant-rep-header.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
Tenant representation or tenant rep can be complex, but the misconceptions some retailers have about it can prevent them from taking advantage of the opportunities it offers.
What is Tenant Representation?
Tenant representation is a service that brings experts with decades of experience to the table to help locate the best locations and negotiate the best possible outcomes on lease agreements. Tenant representation is essential – tenants need someone capable of understanding the market, using unparalleled market intelligence and geo-analytical tools to help retailers find the right locations, and employing that expertise to help ensure navigating, negotiating, and changing lease terms and fostering a tenant-landlord relationship into a partnership that benefits everyone in the industry.
Here we address the top seven misconceptions about tenant representation and why retailers choose the service.
Tenant representation is only for big businesses.
While larger retailers may have more complex needs, more locations to manage, and bigger budgets, tenant representation can benefit retailers of all sizes. In fact, smaller retailers may benefit even more from tenant representation as they may not have the internal resources or expertise to navigate the commercial real estate market on their own. Tenant representation can help retailers of all sizes find the perfect space for their needs and negotiate favorable lease terms.
Tenant representation is too expensive.
While there are costs associated with hiring a tenant rep, the benefits far outweigh the expenses. Tenant representatives help retailers save money by negotiating favorable lease terms, advocating for tenants, and steering tenants away from costly terms. Last year, ASG negotiated $13.5M in savings across 135 locations.
Landlords won’t work with tenant representatives.
Most landlords are willing to work with tenant reps and many prefer it because they know they’re working with someone who has deep understanding of the market and can effectively negotiate on behalf of their client. Additionally, tenant representatives can help landlords fill vacancies quickly and efficiently, which can be beneficial for both parties.
Tenant representatives only focus on finding the cheapest rent.
While finding affordable rent is important, tenant representatives also focus on finding the best overall deal for their clients. This includes negotiating lease terms, securing tenant improvements, and ensuring that the space meets the client’s needs. Tenant representatives work to balance cost with other important factors, such as location, amenities, and accessibility.
We don’t need a tenant rep because we already have a lease.
Having a lease in place does not preclude retailers from being able to renegotiate terms based on changes in situation, ensure covenants are being met, and ensure flexibility. Even when a retailer has an existing lease, a tenant rep can provide insight into ways the lease can be enforced to save money.
Tenant reps work for landlords.
Retail tenant reps work for the retailer they represent. Their goal is solely to ensure that you get the best possible lease. While many tenant reps have established relationships with landlords, this serves as a credibility factor, not a conflict of interest.
We’re renegotiating an existing lease, so it’s not the right time.
Renegotiation may be one of the best times to enlist a tenant representative. The depth of expertise a tenant rep brings to the table can ensure that the terms of the lease are as beneficial as possible to the retailer, that there are no surprises included in the lease, and that there are adequate pathways for changing or ending the lease should there be significant changes in the situation.
Benefits of Tenant Representation
Retailers aren’t just seeking the lowest expense; it’s a combination of location, terms, and total occupancy cost that matters. A retailer might think they are negotiating a great deal on lease cost only to discover that the lease cost is lower than expected because the landlord takes a hefty percentage of sales or the retailer has no flexibility with regard to the space. Tenant representation helps the retailer in the negotiations. Here are some more benefits of tenant representation:
Tenant Reps Work for the Retailer
A tenant rep is there solely to represent the retailer in securing locations and negotiating the best possible deal for the retailer. There is no conflict of interest.
Tenant Reps Are Experts at Lease Negotiation
From quoted rents to exit strategies, tenant reps ensure that the retailer has protections in place that give them leverage if things change.
Tenant Reps Save Retailers Time and Money
Tenant reps excel at saving money on things like attaining lower rent costs, higher improvement dollars, and other quantitative measures, but they also negotiate for the things that retailers may not consider, like better renewal options, capped expense costs, kick-outs, and sublease options.
Tenant Reps Negotiate More than Just the Rent
Tenant reps analyze retail leases based on more than just the monthly rent, considering charges for real estate taxes, utility costs, construction costs, property insurance costs, CAM costs, and improvement allowances.
Tenant Reps Make the Difference
Entering your first negotiations with a landlord can be overwhelming and challenging. Without understanding the industry, the location, and the average lease costs for that area, many retailers end up signing on to deals that leave them with less profitability and more obligations. Tenant representation brings insight and expertise to the negotiation process.
Are You Ready for the ‘Escrow Surprise?’https://consultasg.com/wp-content/uploads/2023/04/escrow-headerimage-1.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
Every year at this time, we wait with bated breath for the spring renewal of all things beautiful, and somewhere in the middle, everyone scrambles to ensure their regular dance with the IRS is complete, and funds are exchanged. This same dance happens in retail at a much larger scale, in an episode that I now call the “Escrow Surprise!” It’s almost like an Easter egg hunt but not quite as full of childlike joy.
Every year, retailers’ leases require them to place funds in escrow (a prepaid an estimated expense, typically divided equally between twelve months) toward their portion of the Landlords’ annual tax billings. At the end of every year, Tenants receive a reconciliation of their share of the tax obligation, less what they have already paid toward that obligation, with a balance or credit due based on the actual assessments.
This year, as opposed to prior years, we are seeing wide variances in these estimated tax payments (escrows) and the final reconciliation. These variances often create large outstanding balances for retailers, sometimes in the tens of thousands of dollars. Whether this is a product of the government’s late-to-update property assessments, or owners/Landlords being behind in recognizing the increased obligations to retailers, the Escrow Surprise can cause angst for a Tenant with this new, unaccrued, and hefty financial obligation, particularly in an industry that has hit a wall.
We have some thoughts about protecting yourself. When it comes to commercial real estate tax escrows for retailers, both Landlords and government agencies play a crucial role in ensuring that these payments are made timely and accurately. In order to avoid missed escrows, it’s important for both parties to take proactive measures to stay on top of their responsibilities.
For Landlords, this means regularly reviewing their property tax bills and ensuring they are paid promptly. In jurisdictions where they are given discounts for early payments, they should seize these opportunities unless they plan to appeal. They should also keep accurate records of these payments and provide copies to their tenants as proof of payment. Additionally, landlords should communicate with their tenants regarding any anticipated changes in property taxes, new levies, or other fees that may impact their lease agreements.
Government agencies also play a critical role in preventing missed escrows. They should provide clear and concise information about property taxes, including due dates and payment options. They should also have accessible systems to track payments and ensure they have been properly credited to the appropriate accounts. Finally, government agencies should be responsive to inquiries and concerns from Landlords and provide assistance when needed to ensure that tax payments are made on-time.
Overall, the key to avoiding missed escrows in commercial real estate is clear communication, careful record-keeping, and proactive measures on the part of both landlords and government agencies. By working together, they can help ensure that Landlords are not burdened with unnecessary penalties or fees that cannot be passed on to the retailers.
How Retailers Can Protect Themselves
Most leases contain protection for the Tenant to avoid overpaying on expenses that are ultimately passed on to the Tenant (a pro-rata obligation). These come in the form of exceptions wherein Tenants are not responsible for fees assessed to the Landlord, or that Tenants are not responsible for paying at a rate they would otherwise pay, if they were paying these directly to the agency, county, or provider, especially with utilities.
Certainly over the past few years, what first seemed to be anomalous weather events that brought increases in Tenant-related expense for electrical, gas, HVAC, trash, insurance, snow and ice removal costs; appear to have quickly become the basis for escrow increases to these expenses passed on as an anticipated cost for the Landlord. Whether or not the logic holds, cost increases have propelled Landlords to bill at higher rates with the understanding that these “one-off” weather events are now a part of their anticipated costs, ultimately burdening retail Tenants with more upfront cost, and with the hope that they do their due diligence in reconciling these expenses correctly at the end of their periods, crediting any overpayments back to the Tenant.
For newer retailers, or retailers who are looking to renegotiate their leases, moving toward fixed-rate expenses (as often as possible) simplifies their portfolio and helps them to account for these expenses over the lifetime of their leases (read: ASC842, rent accounting). These fixed expenses, often with fixed increases each year, are easier to maintain and prevent any surprise costs from being passed through to the Tenant. A great example of this was the case with the Texas power outages of 2021.
Communication Is Key
Typically Landlords and Tenants have some form of process in place that is standardized for them. Landlord’s lease agreements, while potentially standardized for the larger national and international management companies, still have unique-to-Tenant language that must be reviewed and challenged by Tenant’s teams.
What we’ve learned over a period of time is that for many Landlords, utility expenses, additional Insurances, and overall increases to operating costs have been rarely communicated in a way that is justifiable to the Tenant or their leasing teams. Even when they are justified, clear communication is the best way to ensure trust in the Landlord-Tenant relationship, either by providing budgets in advance when Landlords anticipate escrow increases, or by more quickly making escrow adjustments on expenses when a reconciliation has been done and Tenant has any kind of credit or additional obligation (i.e., have been sent a Year End Adjustment).
Outsourcing Lease Management Can Help Protect Tenants
The onus is, unfortunately, on the shoulder of the Tenant at most times to push back on the Landlords when caps, fixed increases, and unallowable expenses are billed through on real estate taxes. However, it is the responsibility of the Landlord to, when appropriate, respond quickly when these discrepancies and disputes are presented, rather than tread water when a Tenant presents evidence of disparities. Preservation of the Landlord-Tenant relationship here is crucial when Tenants go to reevaluate their terms and any future lease agreements, and ultimately will impact the entire retail sector if- or when- Tenants evaluate their footprint in the physical retail marketplace.
Building a Brand Familyhttps://consultasg.com/wp-content/uploads/2023/02/BrandFamily-headerimage.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
When Olivia stepped into the corridors of her local mall, she was on a mission to pick up a few much-needed clothing staples for herself and her kids.
Weaving in and out of stores like Aeropostale, Eddie Bauer and Forever 21, she found most of the items she was looking for on her list. For the rest, she would stop at a department store on her way out, where she could find favorite brands like IZOD, Volcom and Nine West.
Although Olivia visited at least four different stores and shopped half a dozen brands, like most consumers, she didn’t realize that each retailer she visited fell under a parent brand’s umbrella. In other words, she essentially shopped at one company—a brand family.
In her scenario, the parent brand was Authentic Brands Group, a brand management company whose portfolio spans various industry sectors, including entertainment, sports, and beauty and wellness.
While each merchant carries different products and features a unique personality, vibe, and characteristics that are entirely their own, they all fall under the same umbrella organization.
We all have our favorite store or brand, but the above scenario begs the question: Who owns it? You may be surprised at the answer, as well as how a multi-brand strategy can help brands become market leaders.
What is a Sub-Brand?
A sub-brand is a secondary brand that is associated with a parent company. Often, consumers are unaware of the connection, yet sub-brands are common in most industries, from food and beverage to electronics.
The Toyota Motor Corporation has several sub-brands, including Lexus, Hino Motors, Fiji Industries, Isuzu and Daihatsu. Madewell is a sub-brand of J.Crew, while Amazon owns Audible and Ring. If you’ve been to a mall lately, you’ve probably been tempted to stop at Auntie Anne’s, Cinnabon and Jamba Juice. They’re all under the parent brand, Focus Brands.
It’s easy to understand why it’s not obvious that these sub-brands are connected. Each brand has its own comprehensive identity that includes a unique logo, color palette, images and messaging. Each brand has its own target customer as well.
While some sub-brands coordinate closely with a parent brand for strength and credibility, other sub-brands stand entirely on their own.
Take Ben & Jerry’s, which is owned by Unilever, the same company that owns Seventh Generation, Dove, Axe and Vaseline. Ben & Jerry’s revenue is $450 million annually, yet the respected brand in the ice cream industry stands on its own as a highly recognized product. With a loyal customer base and a strong commitment to social and environmental activism, Ben & Jerry’s doesn’t necessarily rely on Unilever’s affiliation and resources.
Yet Unilever certainly benefits from having a successful company like Ben & Jerry’s under its umbrella, and for the parent companies that expand their product lines and target different customer segments, they often see the advantages like building brand equity and enhanced creativity across the entire organization.
The Success Behind Sub-Brands
A parent company doesn’t always begin as a conglomerate of brands. In fact, one of the primary ways a company develops sub-brands is through acquiring other businesses. Others may create a new sub-brand if they see a void in a market and want to capitalize. They may also have organizational goals to target different customer segments.
Regardless of the reason behind developing a sub-brand, companies recognize that having multiple sub-brands can provide many benefits, and ultimately, success.
New Revenue Streams
Sub-brands offer a unique way to unlock new revenue streams. Companies may use them to differentiate products or see an opportunity to expand into new categories. In 2000, Abercrombie & Fitch acquired Hollister Co., adding a new brand concept that focused on a “laid-back California lifestyle.”
Other times, a company may deliberately create a different sub-brand to reach a new niche or market, as Abercrombie & Fitch did in 2022 when it announced an all-new activewear sub-brand, YPB. YPB stands for “Your Personal Best” and advertises itself as a fashion-forward yet functional activewear for men and women.
Sub-brands also create deeper connections with specific audiences. By better connecting with customers based on their distinct interests or values, companies can tap into the buying power of entire markets.
Since its launch in 2014, Aerie, a lingerie sub-brand of American Eagle Outfitters Inc., has achieved remarkable success through its #AerieREAL Life campaign. This international campaign aims to foster positivity and inclusivity by featuring models from diverse backgrounds. Photo retouching is forbidden.
The campaign has struck a chord with consumers, resulting in an impressive growth for both the brand and its parent company. As of 2021, American Eagle Outfitters Inc. has generated more than $5 billion in revenue.
In 2021, clothing giant Hollister introduced its gender-inclusive apparel brand, Social Tourist, in collaboration with TikTok stars Dixie and Charli D’Amelio. The brand empowers teenagers to discover their unique fashion sense and engage with their beloved TikTok influencers. Social Tourist’s inaugural brick-and-mortar store debuted on Melrose Avenue in Los Angeles, utilizing Leap’s technology. With Social Tourist’s potential to appeal to a younger demographic, Hollister can enhance customer involvement and potentially establish long-lasting loyalty.
Success, Even in Failure
Even when brands don’t find success in exploring new concepts without compromising their brand identity, they take away valuable lessons that can help them grow their businesses.
Lululemon’s launch of Ivivva in 2009 is the perfect example of this. The launch was aimed at expanding into the market for young girls’ athletic apparel. Although the brand was ultimately unsuccessful, Lululemon was able to learn some valuable lessons from the experience.
One of the key insights that the company gained was that the concept performed stronger when it was linked to the Lululemon name. Building on this knowledge, Lululemon has since applied its learnings as it expands into other areas.
For example, the company launched a men’s concept that focuses on athletic apparel and accessories, and it has also launched Mirror, a high-tech fitness equipment and content platform. In both of these cases, Lululemon has leveraged its brand recognition and reputation for high-quality products to establish itself in new markets.
Lululemon’s experience with Ivivva demonstrates the importance of brand recognition and the power of leveraging existing brand equity to launch new products and expand into new markets. By building on its reputation and focusing on high-quality products that align with its core values, Lululemon has been able to successfully expand its business and reach new customers.
A Multi-Brand Strategy: Top Trends and Benefits
If it ain’t broke, don’t fix it. It’s an old phrase used to express the idea that if something is working well, there is no need to change it. While this approach may be appropriate in some situations, it can also limit a company’s potential for growth and innovation.
In fact, a multi-brand strategy can provide numerous advantages to a company:
You increase your potential to expand your customer base. By offering different brands, a business can cater to a variety of customers’ needs and preferences, which can attract new customers who may not have been interested in the company’s previous products.
Cross-selling and up-selling becomes more effective. When multiple brands are available, it allows a company to offer complementary products and services to different customer segments.
You become the leader of the pack. A multi-brand strategy can help a company become a market leader. By offering a wide range of brands and products, a company can increase its visibility and appeal to a larger audience, which can lead to greater market share and revenue.
Internal competition is stimulated. Having multiple brands can stimulate healthy internal competition, which can lead to more innovation and growth.
Diversification reduces dependence. Building several brands allows a company to spread its risk and reduce its dependence on any one product or market. This can help the company weather market fluctuations and reduce the impact of any single product or brand failing.
A powerful tool for businesses, a multi-brand strategy offers many benefits. Yet it’s important to consider that having a successful multi-brand strategy requires careful planning and execution to ensure that the different brands complement each other rather than compete with each other.
How Landlords Can Help Form the Retail Futurehttps://consultasg.com/wp-content/uploads/2022/10/OppsHeader.jpg1440428ASGASG//consultasg.com/wp-content/uploads/2021/09/asg_195_WIP-web.png
The way we all live, work, and shop is changing. The owners of the spaces in which we do all of that living, working, and shopping contribute to creating the future—with new experiences and spaces that attract new and innovative tenants.
With the retail landscape, culture, technology, and customer expectations in an apparent state of change, it’s time to create the retail future customers want, retailers need, and landlords benefit from. It’s no longer business as usual. How can landlords adopt a growth mindset and change with the tides?
Flexible Lease Terms Help Attract New Tenants
New retailers are coming to the neighborhood, and landlords have a great opportunity to attract them to their spaces. It requires a change in mindset because landlords must rethink lease terms to attract these new and innovative brands.
Right now, landlords can change the nature of their relationships with their tenants by not only demonstrating a willingness to be more flexible with terms but also increasing investments in infrastructure and safety. Landlords will also benefit from supporting the success of their tenants. For example, accommodating retailers with a reduction in lease length in exchange for a percentage of the retailer’s online sales could benefit all involved.
Sure, it involves a shift in thinking for everyone, but this is how we will begin creating the retail future that we want. Here are some of the ways landlords can adapt:
Shorter lease terms. Landlords are enticing tenants to spaces by providing shorter-term leases that include a variety of renewal options.
Contract flexibility. Retailers are skittish coming out of the pandemic experience and need more flexibility in terms of force majeure definitions and lease adjustments based on situations beyond their control.
In addition to offering shorter lease terms, offering certain concessions can help attract tenants, including:
• Rent deferrals
• Sublet allowances
• Rent abatement
• Options for renegotiating lease terms
At the same time, landlords can ensure that they are protecting their own interests by:
• Requiring approval of any sublet
• Adjusting percentage rent to include online sales
• Increasing pass-through costs for climate and safety related updates
• Delineating specific recourse should the tenant fail to pay or abandon the lease
Help Tenants Meet Consumer Expectations and Deliver Better Experiences
Consumers have higher-than-ever expectations of the brands from whom they purchase, and retailers are looking for spaces that support the promises they are making to their customers. Landlords who are open to a changing relationship with their tenants will have the opportunity to help reshape the future of retail to be more resilient and sustainable. To successfully do this, the process must become less adversarial and more open; landlords and tenants must learn to work together, or they all suffer. Landlords can help by:
Offering improved safety and infrastructure. Many landlords are investing in improved HVAC, redesigns to enhance BOPIS, and technology infrastructure to make tenancy more inviting for retailers who are also having to adjust how they serve their clients.
Investing in Sustainability. Retailers whose brands have made promises of sustainability will expect landlords to invest in solar panels and make other necessary changes to their buildings to better meet consumer expectations.
Landlords are redefining the mix of businesses in their spaces by reevaluating how the space is used. For example, some landlords are converting space for retail health clinics, mixed-use spaces, and warehouse space for last-mile delivery.
“One direction for some malls is turning underpopulated sections into ‘digital districts,’ where ecommerce pure plays can try their hand at brick-and-mortar retailing in small-format spaces. The digital natives benefit from a curated location tailored to their audience, while the mall can advertise a slate of cutting-edge concepts.” – Retail Touchpoints
This is also a suitable time to reevaluate what kind of tenants are used to anchor your spaces. We’ve learned that retail spaces that are anchored by necessity shops – grocery, DIY – are more likely to remain solvent than ones anchored by outdated department stores.
The Pop-In Shop
Landlords with the willingness to be open-minded about what kind of shops occupy their spaces are also finding tremendous success with pop-ins, family entertainment, and co-working spaces. For example, empty spaces in neighborhood shopping centers lend themselves well to holiday-themed pop-in stores for Halloween and Christmas. These short-term, high-profit shops can be an ideal way to fill an empty space for the short-term. Start-up retailers are also enticed by the pop-in opportunities that let them test the waters before making a longer-term commitment.
From theaters and arcades to indoor paintball and laser tag, landlords that are welcoming tenants who offer entertainment value that keep consumers coming back have seen enormous success. These retail venues benefit other tenants as well, as once the customer is there, they may also want to shop, eat, and otherwise spend the day nearby.
Co-Working Spaces, Fitness Centers, and Ghost Kitchens
With more people working from home at least part of the time or working for themselves, co-working spaces are an easy way to fill empty retail space. Fitness centers are also becoming a popular way to fill empty spaces that attract consumers. And if the space has a kitchen, soup kitchens, shared kitchen spaces, ghost kitchens, pop-in food services, and other food-based organizations are jumping at the opportunity to leverage available retail spaces for innovative purposes.
“Landlords and tenants must forge viable partnerships. Landlords need stores and associated rents to meet their obligations and, right now, many retailers need financial accommodation to survive. Even so, the tenant has a contractual obligation to pay rent. Once adversarial, the landlord/tenant relationship is becoming more symbiotic.” – Chain Store Age
Both landlords and their retail tenants require appropriate protections and guarantees. However, if both sides approach the negotiations from a collaborative standpoint rather than an adversarial one, both with an eye toward future successes, they can both thrive.
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