Retail Strategy

Retail Location Data

Make the Right Move with Retail Location Data

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In the retail industry, where competition is cutthroat and every move matters, the right location can be the ultimate arbiter of success. Yet, astonishingly, many ambitious retailers fail to recognize the untapped potential and invaluable insights that retail location data offers. 

We get it. It’s easy to get wooed by a vacant retail space in a trendy neighborhood or an open location that has high foot traffic at first glance. But ignoring valuable insights before making a decision can lead to missed opportunities and potential pitfalls.

Empowered with retail store location analysis, retailers can strategically select a site that provides the best opportunities to achieve objectives and maximize profit potential. 

But what kind of information is useful in determining the right location for your retail business so that you can make the best decision for long-term success?

A Data-Driven Approach to Evaluating Retail Locations

In a dynamic marketplace, retailers must stay ahead of the curve before they ever even open. Harnessing the power of data and leveraging it to make informed decisions about where to invest in real estate is critical in today’s competitive retail landscape. 

But what exactly is location data, and how can it help your business? On a macro level, location data refers to information that indicates the geographic position of places, people or objects. While location data can provide details like latitude and longitude coordinates or direction of movement, this information can also provide valuable details like patterns, trends and even historical information that can help businesses make important decisions. 

For example, this type of data is widely used in targeted advertising. By analyzing location data, businesses can understand the behavior and preferences of their target audience in different locations, enabling them to tailor their marketing campaigns accordingly. 

Location data can also be utilized in supply chain management, helping businesses optimize logistics, track shipments and improve overall operational efficiency. By analyzing historical location data, businesses can identify patterns and trends, optimize routes and reduce delivery times, ultimately saving costs and enhancing customer satisfaction.

When evaluating retail spaces, location data is a specialized type of intelligence that can unveil hidden secrets and untapped potential of each possible storefront. The data isn’t only about roads, buildings and traffic patterns. Location data can unveil who lives in an area, their average incomes, the types of homes they live in and more demographic details. 

Thanks to advances in location data, retailers can now explore potential locations by leveraging sophisticated analytics and predictive modeling that analyzes a wide range of factors like competitor proximity, demographic information, and consumer behavior.

Retail Location Data

Key Data Points when Evaluating Locations

A retail store location analysis involves examining several data key points that include:

  • Demographics: Beyond population size and income levels, savvy retailers now delve into the nuanced intricacies of the community. They unravel the aspirations, values, and lifestyles of potential customers, tapping into the emotional connections that drive purchasing decisions.
  • Competition: Competition is no longer just a hurdle to overcome. It’s an opportunity for collaboration and differentiation. Retailers armed with this new mindset embrace the strengths and weaknesses of their counterparts, crafting innovative strategies that set them apart. By harnessing the power of partnerships and symbiotic relationships, they create unique experiences that resonate with customers on a deeper level.
  • Foot traffic: Foot traffic analysis evolves into an art form, a delicate dance between prediction and anticipation. Retailers move beyond static numbers and tap into real-time data, understanding the ebb and flow of customer movements. By embracing the patterns of time and space, they strategically position themselves to intercept the ever-changing currents of consumer traffic.
  • Accessibility: Accessibility encompasses more than physical proximity. Retailers now navigate a complex landscape of convenience and connectivity. They reimagine the concept of accessibility, exploring parking availability, public transportation integration, and the interplay of digital and physical realms. By seamlessly blending the virtual and brick-and-mortar experiences, they become beacons for modern consumers.
  • Cost: Many retailers struggle with achieving a delicate balance between investment and potential returns. It’s no longer a straightforward calculation. Visionary retailers consider the intangible assets and the value they bring to their chosen location. They weigh the cost of leasing or purchasing against the transformative power of their unique offerings, creating a new formula for success.

In this era of retail reinvention, the evaluation of retail locations transcends the mundane checklists of the past. It requires a fresh perspective that relies on a retail store location analysis, embracing collaboration, and tapping into the pulse of the community. 

Retail Location Data

Consumer Migration Trends to Keep an Eye On

Another essential piece of data retailers should consider are the latest consumer migration trends. Consumer migration trends in the context of retail locations refer to the patterns and movements of consumers in terms of their residential locations and preferences for shopping destinations. 

These trends can provide valuable insights into where consumers are moving, how their preferences are changing, and how retailers can adapt their strategies to align with these shifts.

Consumer migration trends can be influenced by a variety of factors, including changes in population demographics, economic conditions, urban development, and lifestyle preferences. 

For example, a neighborhood or city may experience an influx of young professionals, leading to a rise in demand for trendy boutiques and upscale dining options. On the other hand, suburban areas may witness an increase in family-oriented retail establishments as more people move to these areas for a quieter lifestyle.

In our hometown of Columbus, Ohio, community leaders and businesses are leaning into the concept of developing mixed-use spaces in the East Franklinton neighborhood, which is adjacent to downtown, and experiencing a rebirth into a trendy, more progressive area. This area is seeing more young professionals move in just as the business district is developing Gravity – a mixed-use space that caters to entrepreneurs, artists, and other social innovators. 

By analyzing consumer migration trends, which can evolve over time, retailers can identify emerging markets and potential growth opportunities. They can adjust their expansion plans, allocate resources effectively, and tailor their product offerings to meet the needs and preferences of the target consumer base in specific locations.

The Right Location for Long-Term Success

Whether you’re a retailer looking for the right location to jump-start or expand your business, you can significantly benefit from using data to inform the decision-making process. 

Yet knowing how to obtain this data and then use it to make an informed decision can be challenging. Retail location analytics technology platforms can offer a tailored approach to generating real estate data with the goal of empowering clients so they can make confident decisions. 

When choosing analytics technology platforms, look for qualities like:

  • A user-friendly interface that is designed to simplify the analysis and visualization of data
  • Modeling capabilities that leverage historical data and market trends to forecast the potential success of a retail location
  • Integration capabilities that allow seamless data integration from multiple sources, such as demographics, foot traffic, and competitor analysis
  • Advanced geospatial analysis tools that enable businesses to understand the spatial relationships between different retail locations, competitor proximity, and customer density
  • Real-time data updates and monitoring features that provide up-to-date insights into consumer behavior
  • Data security and privacy measures that ensure the protection of sensitive information
  • Customization options that allow businesses to tailor the platform to their specific needs or metrics

By leveraging advanced analytics and artificial intelligence, businesses can make strategic decisions that align with their target market, mitigate risks and capitalize on growth opportunities. 

To learn more about how a retail data platform can help businesses, check out ASGEdge.

The Importance of Lease Management for Business Continuity

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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.

The more comprehensively your lease management practices, the stronger your business continuity planning will be. This should include:

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 Representation

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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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

  1. 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.

tenant rep

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.

See it in action: learn how we help Vineyard Vines problem solve & save money >

Sustainability: What Does it Take?

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Sustainability is mission-critical for retailers. Consumers demand it. Shareholders want it. The earth needs it. So why is it so hard to walk the walk?

There’s a common misperception among retailers that investing in sustainable building will be too costly to achieve any kind of ROI. Yet efforts to reduce carbon footprint, while perhaps more costly upfront, can be beneficial for retailers in the long run. While it takes effort to source products that are sustainable, using eco-friendly designs and recycled materials in retail locations are just two examples of ways brands are getting closer to sustainability goals.

As we’ve explained before, improving sustainability requires a willingness to do business differently. We’ll explore sustainable building in retail and what the future holds for this approach.

The Importance of Sustainable Building Practices in Retail

According to Microsoft, sustainability is a growing priority in retail and consumer packaged goods. Industry leaders, employees, investors, partners, and consumers who buy the goods care about sustainability.

  • 93% of CPG leaders spend more time on sustainability issues today than five years ago
  • 73% of Millennials prioritize sustainability over pricing
  • 55% of recent CPG market growth came from sustainability-marketed products

By implementing sustainable practices, retailers not only gain a competitive advantage with eco-conscious consumers but also reduce their carbon footprint.

Virtue Signaling vs. Environmental Commitment

Retailers who talk sustainability without verifiable actions raise doubts about their commitment. Virtue signaling – talking the talk without walking the walk – can instantly destroy a brand’s credibility. And even though there is a gap between what consumers say they expect and what they purchase, the intent for better sustainability is a growing trend among consumers and stakeholders. And with more legislation requiring specific commitments to sustainable practices, getting ahead of the curve can be cost-effective.

Sustainability Begins Before Building

As retailers refine their sustainability efforts, the first consideration is location. More than ever, sustainability includes answering the question, “How far do I expect my customers to travel to shop in my store?” The answer is often not as far as they used to. Smaller stores embedded in neighborhoods are a more sustainable alternative to larger stores that use more energy and require a longer trip to access.

What Steps Are Retailers Taking to Be More Sustainable?

There are a number of ways retailers can incorporate sustainability into buildings and materials—some might be easier and more cost-effective than you think.

Energy-Efficient Lighting
Energy-efficient lighting is one of the key components of sustainable building. It’s more than just LED lights, although that is an important component. LED lighting uses much less energy than traditional lighting and can last decades longer. However, other considerations can help with more sustainable lighting as well. Choosing to construct buildings in ways that take advantage of natural lighting can help save even more.

Efficient HVAC
Energy-efficient HVAC systems help significantly reduce energy consumption. While lower utility bills are the most obvious benefit of an efficient HVAC system, other benefits include better air quality and reduced health risks for employees and consumers.

Eco-Friendly Materials
IMM-Cologne explores the use of sustainable materials in retail design in great depth. They suggest solutions from the circular economy:

  • Terazzo floor slabs, bricks, and recycled concrete produced from construction waste.
  • Recycled PVC or vinyl floor coverings.
  • Recycled clothing made into curtains, shelving, counters, and more.
  • Alternative construction materials such as hemp, rapidly regrowing bamboo, or recycled plastic.

IMM-Cologne makes the argument for the importance of pursuing sustainability:
“Rising energy costs, shortages of raw materials, the new awareness in society and the increasingly visible consequences of climate change call for a new way of thinking. This should ultimately benefit everybody: companies, people and, above all, the environment.”

Eco-Friendly Retail Design
Sustainable building can also include using eco-friendly designs like green roofs and walls. Green buildings reduce heating costs by adding insulation while also reducing the urban heat island effect. According to the University Corporation for Scientific Research on urban heat islands,

“Heat islands form as vegetation that is replaced by asphalt and concrete for roads, buildings, and other structures necessary to accommodate growing populations. These surfaces absorb—rather than reflect—the sun’s heat, causing surface temperatures and overall ambient temperatures to rise.”

When retailers incorporate green roofs and walls into their structures, they help reduce this effect.

The Benefits of Sustainable Retail for Businesses and Consumers
Sustainable retail practices are good for the environment, but they also provide measurable advantages for businesses that implement these practices and the consumers who support them. Sustainable building can save retailers money on energy and water bills while also allowing them to connect with consumers on a deeper level, earning more customer loyalty. Plus, consumers benefit from a healthier shopping experience in buildings with improved ventilation and natural lighting.

“Some people will say sustainability is an additional cost, but once they’re doing it, it becomes second nature and integrated into how they do business,” said Sabine Schlorke, global manager for manufacturing at the International Finance Corporation, a member of the World Bank Group, in an interview with PWC. “If you see it as part of your business, it’s not a cost; it’s an opportunity.”

A Consumer Shift

“I hope when the industry slows down (in a good way), we will be able to focus more on using the sustainable products of the future—fixtures, building materials, flooring, and even playing around with 3D printing to make small tables and stuff,” he says. “It’s the future. I hope we can use it to think bigger.”
– Andrew Miller, ASG procurement and materials manager.

Consumers are becoming more environmentally conscious, choosing products with sustainable packaging and shopping brands whose values match their own with regard to sustainable efforts. Retailers have been rushing to get ahead of pandemic-related supply chain struggles, but making efforts to implement sustainable building practices where feasible demonstrates that they are listening to their customers. The effort and transparency go a long way in building a strong brand reputation and earning customer loyalty.

Are You Ready for the ‘Escrow Surprise?’

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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.

Tapped Out: What It Takes for DTCs to Thrive Now

Tapped Out: What It Takes for DTCs to Thrive Now 1440 428 ASG

At first, the DTC model seemed unstoppable.

Companies found they could cut out intermediaries like retailers and distributors to offer their products at lower prices. With greater control over their brand and product offerings, DTC companies could provide a personalized and convenient shopping experience. With a sea of customer data, DTCs have valuable insights into customer preferences, allowing them to also optimize product offerings and marketing strategies.

But now, the DTC model is coming into question. Let’s dig into what has changed for DTCs and learn why it’s not so easy to thrive now.

Stiffer competition: As the DTC model found its footing during the pandemic, more brands jumped into the game. But this crowded marketplace has made it difficult to stand out and new entrants have difficulty differentiating themselves enough to capture market share.

Scaling is tough: Whether the DTC is a slow burn or an overnight success, scaling the brand can be an impossible balance between speed to consumer and maintaining the level of product quality and customer experience that got the brand there in the first place.

Continued rising CAC: The cost of customer acquisition has continued to increase with the increases in marketing costs. CPC is often too high to reduce the cost of acquisition. According to a new study, CAC has risen 60% in the last five years.

Supply chain issues: DTCs, like every other retailer, rely on a myriad of solutions to move their products through production and into the hands of consumers. Every step along the way can be costly, with disruptions that can swiftly cause trouble for the brand.

Profitability Is elusive: The DTC model demands a lot of upfront investment – in product development, marketing, and customer acquisition as well as supply chain. Profitability can be slow to achieve, making it difficult for the brand to sustain long enough to get there.

How DTCs Can Strengthen their Brands

Building and scaling a strong brand and delivering an exceptional experience is the goal, but achieving profitability requires addressing challenges in new and innovative ways. Yes, DTCs need differentiation and cost control; they need operational excellence and agility; and they need to deliver an unmatched customer experience. But these are the results, not the actions.

What actions can DTCs take to improve viability?

As the market contracts and more DTCs are going under, the ones who are determined to survive will need to become experts in diversification, pivoting to in-person, embracing wholesale, right sizing their brand, and repositioning with agility.

How DTCs Can Strengthen their Brands

“I remember there was a time where we used to acquire customers for $16 per customer — I mean, it was kind of crazy,” Sara LaFleur explained in an interview in Modern Retail. “We always thought of the subscription box as the acquisition channel, and then our customers would find themselves in either our showrooms or our e-comm channel shopping for themselves. And so that’s how customers were being pathed. And I think with the change in performance marketing and realizing just subscription was no longer working as an acquisition channel, the thought there was let’s shift our acquisition channel to now be from something else, and [using] our stores [as] a source of acquisition. And it actually absolutely has been. So rather than thinking of showrooms and retail as a retention channel, we’re now playing around with it also being an acquisition channel.”

Pivot to In-Person

For many DTCs, the best way to attain profitability and longevity is to make the move to in-person. Strategically opening physical stores can help raise brand awareness, attracting customers who were not already aware of the brand and increasing loyalty from existing customers.

“Consumers inherently trust brands that have a physical presence over those based solely online. In a recent report by global data intelligence company Morning Consult, roughly one-third (34%) of US consumers surveyed stated they don’t trust retailers with just an online presence. Meanwhile, 68% trusted retailers with just a physical store, and 73% trusted retailers with both a physical and online store.” – Chute Gerdeman

Embrace Wholesale (Again)

From partnering with larger online marketplaces to getting the DTC brand featured in a store like Target and other retailers, partnerships allow the brand to gain visibility while reducing marketing and customer acquisition costs. Two major sneaker companies – Adidas and Nike – were all in on DTC just a few years ago; now, in the face of ongoing struggles to maintain profitability, both brands are regrouping with a new love for wholesale. Another DTC sneaker company, Allbirds, reported a 40% decline in stock value. Their CEO, along with Nike and Adidas executives, all explained their plans to slow down on store openings and increase wholesale partnerships.

Compare those results to Skechers, who are on the path to achieving $10 billion in sales by 2026 by focusing on a true omnichannel, integrated experience for customers.

“We want to get the product to wherever the consumer is going to be.” – Skechers CFO John Vandemore.

Social Selling and Influencer Marketing

Social selling and influencer marketing is undergoing seismic shifts. DTC brands want to reach consumers where they are, when they’re ready to buy. But it’s much harder to gain traction as a new brand or an existing DTC with new privacy laws coming into effect. HBR recommends focusing on the 4 Cs of manufacturing organic marketing (content, consumers, creators, and celebrities).

“…between privacy concerns and Apple’s iOS 14 changes, Facebook has become much less effective in targeting customers, reducing the overall efficiency of digital customer acquisition. These changes have led brands to search for ways to manufacture organic marketing again. Faced with these challenges in 2023, new DTC brands, as well as existing incumbent brands, have to develop strategies that will allow them to generate organic attention and marketing.”


Pop-ups give DTCs the chance to test out the world of in-person retail without a huge commitment to a lease or a location. The amount of data the brand can collect from a pop-up location is immeasurable and can help define next steps.

“The pop-up is the equivalent of a fancy customer intercept survey. You can gather a lot of customer data with very little investment to determine whether or not it’s a good location, what kind of traffic you can expect, and what your product mix should look like, explains Carrie Barclay, President, ASG – Chute Gerdeman in ASG’s Path to In-Person Guide. “Pop-ups have increasingly become an effective way to test a market and make sure it’s a good fit for your brand before getting too heavily invested in the location.”

Right Sized

The goal of being right-sized is to achieve growth without sacrificing quality and experience. But for DTC brands, being right sized can have layers of meaning, from the kind of packaging being used to the number of showrooms, popups, and retail stores are opened. It can influence product mix, number of staff, and more. So what does it mean to be “right sized”? Right sized is the magic of finding the perfect balance between growth and profitability, operating at that point where their ability to scale is both sustainable and cost-effective.


While repositioning is always a part of retail strategy, when the market is contracting it is more important than ever for DTCs to use relevant and current consumer data to tighten their focus on meeting the need and wants of their customers, adjusting product mix quickly with marketing and customer experiences that reflect the quick response. It’s more than just being out there; it’s telling the story that connects the brand to the consumer in a way that shifts their behavior. As Matt Charlton writes in The Drum,

“The whole point of marketing, insights into the irrationality of people, real creativity, clever media, and brilliant product and experience is to allow brands to not have to wait around for consumers to organically adopt stuff. Anyone can do that, but to find ways of opening up awareness, desire, and validation to get people to change what they think they like and believe you have to make everything you can truly memorable. If I don’t remember much then you have to hope I buy because I’ve got no other choices and that is not what most D2C is about.”

What’s Next for DTC?

In an interview with Forbes, Bryan Mahoney, co-founder & CEO of Chord, a Commerce Platform-as-a-Service for fast growing D2C and omnichannel brands, explained the concept of DTC 3.0:

“DTC 3.0 is defined by a more substantial connection to customers, and a real reliance on first-party data. It’s almost as if we’re going back to basics: the focus is on getting close to consumers, understanding what they need, and offering them a unique experience that includes community. That’s what this new iteration of DTC is proving itself to be: a more collaborative, brand-building relationship between businesses and consumers.”

DTCs are facing sometimes insurmountable challenges, with more players going out of business. To survive and thrive, it will be necessary to make changes to strategy.

Fashion-Forward: Unconventional Business Models for Modern Consumers

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Fashion and apparel brands with unorthodox business models are shaking up the industry, challenging the status quo, and creating exciting new opportunities for consumers and retailers alike. From degrowth principles to the persistent rise of subscription e-commerce, we explore a few innovative, fashion-forward brands changing the face of the industry.

Modular Fashion

The fashion industry is constantly evolving, and one of the latest trends to take the industry by storm is modular fashion. This concept involves creating clothing that has detachable components, enabling a piece of clothing to have an extended life cycle.

Fashion brand Buhndi has embraced this trend by allowing customers to create multiple looks from a single garment. For example, customers can purchase a base garment that matches all the blueprints and add-ons available. As new blueprints are launched, customers can keep building their look, reducing the number of clothes they purchase and extending the life of their wardrobe.

WGSN, a trend forecasting platform, has identified modular fashion as one of the top five trends for the next decade, attracting and empowering customers who are looking for a more sustainable and cost-effective choice.

Accessible Fashion Styling

Stitch Fix is a popular online personal styling service that uses data and technology to curate a personalized selection of clothing and accessories for its customers. The company’s business model revolves around leveraging algorithms and human stylists to create a unique and customized shopping experience for each customer.

Stitch Fix‘s business model combines technology and human expertise to offer a personalized shopping experience for its customers, which is both convenient and enjoyable. By leveraging data analytics and machine learning, the company can provide a tailored selection of clothing and accessories that match each customer’s style and preferences, while also allowing them to try items at home and providing valuable feedback to improve future selections.

Degrowth Principles

Degrowth is a concept that involves a managed reduction of the economy to bring it in line with planetary boundaries and meet climate goals. It has recently entered the mainstream sustainability lexicon, and some fashion brands are embracing this approach.

Early Majority, an outerwear brand, operates on a community-driven membership model and applies degrowth principles to its designs to create functional garments that can be worn anytime, anywhere.

In a Vogue Business article, founder Hoy Howard said the brand aims to create clothing that is not only sustainable, but is also functional and fashionable.

“The functionality and aesthetic of each garment should be able to take you from the bike to the boardroom, or from the bar to the backcountry, and the brand’s community member fees will eventually contribute more to overall revenues than product sales,” he said.

This approach aligns with degrowth principles, which aim to reduce consumption and promote a more sustainable way of living. While some view degrowth as a radical concept, many scientists believe it is necessary to meet climate goals.

Subscription eCommerce

Subscription commerce is growing at an exponential rate. In fact, the global subscription e-commerce market size was expected to hit just over $120 billion in 2022. It’s expected to reach more than $900 billion by 2026.

Subscription commerce allows customers to sign up for a recurring delivery of a particular product or service, such as clothing, beauty products or food. Brands use data and analytics to personalize the subscription experience. This model increases revenue through upselling or cross-selling relevant products.This approach not only increases customer loyalty but also helps brands to reduce inventory costs and better manage their supply chain.

At one point, many of us participated in subscription ecommerce (think back to our magazine and newspaper subscription days). However, subscription ecommerce has evolved into a solid strategy for other types of retail brands to reach a broader range of customers. In fact, subscription brands grew their customer base by 31% in 2021.

Some of the most popular subscription brands on the market include FabFitFun, which has nearly 200 million subscribers and sends them curated boxes of six to eight full-size items of the customers’ choosing. Digital content subscriptions like MasterClass has 1.5 million subscribers and provides video lessons taught by professional instructors and offers a special section of classes on design and style.

One advantage of the subscription commerce model is that it creates a predictable revenue stream for brands. Instead of relying on one-time purchases, brands can rely on a steady stream of revenue from recurring subscriptions. This allows brands to invest in product development, marketing and customer service to improve the overall subscription experience.

Clothing Rental

Rent the Runway is a clothing rental service that allows women to rent designer dresses and accessories for special events or everyday wear. The brand’s business model is based on the idea that women can rent high-quality clothing at a fraction of the cost of purchasing it. By renting rather than buying, consumers can enjoy the latest fashion trends without having to worry about the high cost of ownership.

Rent the Runway has also recently launched a subscription service called “Unlimited,” which allows users to rent up to four pieces of clothing or accessories at a time for a monthly fee. This subscription model allows the brand to offer an even more affordable and convenient option for customers who want to keep their wardrobes fresh and up-to-date.

Secondhand Treasures

There’s the saying, “One man’s trash is another man’s treasure.” More and more retail platforms are embracing this wise advice–and building a brand in the process.

Thredup is a large online retail platform for women’s and kids’ apparel, shoes and accessories that allows consumers to buy and sell secondhand clothing. The company’s business model is based on the growing trend of consumers shifting their spending toward secondhand clothing, which is gaining market share at the expense of fast fashion, department stores and luxury brands.

A recent study found that the global apparel resale market hit $182.4 billion in 2022. That same research found that resale has grown 25 times faster over the past five years than the retail clothing market.

So how can companies profit from this business model? Thredup attracts high-quality supply without directly spending money to acquire sellers. Sellers choose Thredup’s managed marketplace to conveniently clean out their closets and earn a payout that can be received in the form of cash, Thredup online credits, select RaaS partner credits or a charitable donation receipt.

Unique Models will Continue to Emerge

While traditional business models still dominate fashion, there are several unique business models that are gaining popularity among brands. By leveraging technology and innovation, fashion brands can create a unique value proposition for their customers, which sets them apart from the competition.

These models offer flexibility, convenience, and sustainability, which are key factors that modern consumers are increasingly prioritizing. As fashion brands continue to experiment with new business models, we can expect to see more disruption and innovation in the industry, leading to more personalized, sustainable, and customer-centric fashion experiences.

Building a Brand Family

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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.

Deeper Connections
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.

Retailers are Banking on Buy Now Pay Later

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Today’s shoppers are used to recent innovations like BOPIS and curbside pickup for delivering products, and they want more payment options at the register too. Buy Now Pay Later (BNPL) solutions, also known as Shop Now Pay Later, caught fire last year, making up nearly 2.5% of the global eCommerce market, and the payment method is now catching on in U.S. brick-and-mortar stores.

Many retailers are now turning to BNPL platforms, such as Afterpay, Klarna, and Affirm, to create an alternative payment option for the in-store shopper. Retailers are using BNPL as a payment differentiator to diversify their target market and lure Millennial and Gen Z shoppers who love the contactless nature and budgeting muscle BNPL options provide.

BNPL 101

As inflation remains high, consumers are looking for ways to fulfill their holiday lists while overcoming economic challenges. Enter “Buy Now, Pay Later,” the modern-day reverse layaway option that allows buyers to get the product they need now, but pay for it later in interest-free installments. In most cases, a consumer makes an upfront payment or initial payment. The balance is then spread out over a predetermined number of payments. There are usually no added fees for the consumer unless the borrower misses a payment.

Are consumers using it? In a big way, particularly Millennial and Gen Z shoppers, whom retailers want to woo. With their general distrust in credit cards, many Gen Z shoppers like being able to budget for their goods post-purchase, without the plastic or a hard pull of their credit. That helps explain why BNPL loans grew more than 10 times from 2019 to 2021 and they have only been increasing.

A recent survey found that 48% of Gen Z respondents said they planned to use BNPL to pay for gifts this holiday season, other generations of consumers aren’t far behind. Nearly 47% of millennial respondents and 40% of Gen X respondents said that they plan to use BNPL to finance some of their holiday gifts this year. Only Baby Boomers bucked the trend, with 14% of respondents stating they intended to use BNPL for holiday spending.

Experience Driven Loyalty

In survey after survey, consumers consistently put “experience” at the top of their wants list when it comes to retail. And as retailers continue to refine their shopping experiences, they must empower customers to pay how much and when they choose. It’s the type of satisfaction that can drive repeat business.

Although the U.S. has been somewhat slower to adopt BNPL than retailers in Australia and Asia, it has certainly come in with a boom. In a recent podcast, Karen Strack, Senior Vice President of Transformation at Unibail-Rodamco-Westfield, explained how retailers can use BNPL as a positive differentiated experience that brings shoppers back.

“The powerful appeal of such payment configurations cannot be overlooked when it comes to reimagining the in-store shopping experience to provide consumers a better overall experience,” said Strack.

World Pay Head of Vertical Growth, Maria Prados, said in the podcast that the loyalty engendered by BNPL platforms was unexpected. “Buy-now-pay-later creates a lot of loyalty and community, which is very unusual for a payment method,” said Prados. “But 30% of shoppers won’t buy unless there’s a BNPL option. It’s the fastest-growing method globally.”

Strack also shared how BNPL can help consumers through the product lineup journey. “One of the observations that we have had is that a lot of the shoppers are graduating through that process. So, especially with a luxury client, they might actually just start with buying an accessory or a scarf. And then they start to really understand the value in that [they] can control their budget, and they’re graduating to handbags and higher-end prices. And from a retailer perspective, that’s creating lifetime value in your shopper. It’s a really big bonus.”

The Downsides

One of the biggest disadvantages for merchants is the fees associated with working with BNPL platforms. Some have fees as little as 1.5%, making this a great option for reducing credit card fees that they pay, which can be as much as 3.5%.

Another consideration is what the future holds for the BNPL industry. With a substantial increase in consumers taking advantage of this service, it has caught the eye of financial services regulators who are concerned about potential risks.

The Consumer Financial Protection Bureau (CFPB) warns that borrowers face inconsistent consumer protections—protections that are standard elsewhere in the marketplace. As more BNPL providers are creating digital profiles of users, the CFPB is also warning consumers about the risks that come with monetizing consumer data, including the threat to consumers’ privacy. As a merchant, it’s important that you work with credible third-party providers. It’s also likely you will need to stay on top of industry regulations to ensure you don’t play a role in any consumer protection violations.

Give Shoppers Control

Sure, the appeal of BNPL is the ability to spread out costs over time. But what BNPL really offers consumers is control, something consumers have been craving since the pandemic. Prados told Business of Fashion that the pandemic spurred retail five years ahead in innovation in a matter of months.

“While it will be painful for the industry and economy at scale, the situation allows for so much necessary innovation,” she said. “Payments can be an afterthought, but we are talking about the very end of your conversion funnel — it could not be more key.”

Big Brands See Return from Small-Box Formats

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What goes around, comes around—karma, boomerangs, design, and fashion trends. Retail experience is no exception. Small-format shopping has been on the decline since the dawn of big-box shopping, but could we be returning to our old ways?

You may have that one produce manager, cashier, or bagger you say hi to every time you stop at the grocery store. You might chat it up for a quick minute, but it’s hard to catch up when there are 50 people behind you waiting to ring out their thanksgiving turkeys.

Instead, if the store were smaller with multiple locations as opposed to a major central post, employees could give more time and attention to individual guests. The focus could shift from maintaining store operations to connecting with every person. This model allows brands to mold their shopping experiences specific to their neighborhood audiences and make a positive impact to strengthen brand loyalty. In this instance, shoppers no longer feel just like a cog in the machine of a running corporation; they feel like truly valued patrons.

People like to be acknowledged, appreciated, and made to feel special. We’re currently facing a brand renaissance in which consumers expect brands to interact with them personally. Brands represent human qualities, values, beliefs, and actions—all of which are now part of a brand’s messaging, shared with the public alongside their products or services.

Smaller-format stores that prioritize connection with the individual make us feel seen while humanizing the brand. More time to connect meaningfully with guests means more time to authentically sell the brand.

Retail with a Local Lens

Getting consumers to leave their houses these days has become quite the exercise. There better be a good reason to spend extended time at a business, whether it’s a unique offer, sensory engagement, or just a great shopping experience. Nordstrom local offers the typical nordstrom store features, with options for tailoring, alterations, gift packaging, and even a way to give clothing donations. Smaller floor plans and less space to fill allow brands to save money on fixtures and square feet and rather invest in valuable differentiators and experiences.

It might sound like common sense, but smaller stores mean less cost. Brands can use these savings to open more stores in an area, upgrade the finishes and features of a smaller store, or simply bolster the bottom line. Having smaller-format stores allows for the flexibility to enter very specific markets. Smaller locations also give brands a less risky way to enter new markets. Less space and investment keep brands from getting backed into corners, trying to make store models work where they don’t.

Locations specialized for the population fulfill the true mission of any retail business— providing a community with what it needs. Daily life isn’t quite the same in San Diego, CA, as it is in Portsmouth, OH— that’s obvious, and we’re watching our big-box brands evolve their business models and stores to bridge the gap.

In New York, Rent-a-Center has recently opened a small-format store to better serve a dense, urban population. By downsizing, customers in the city now have easier access to the showroom without having to travel out of the city to peruse a massive warehouse. Saving money on square feet, rent-a-center can invest in endless aisle technology for shoppers to browse the entire store selection with help from the in-store associates.

In the United States, Target has been unveiling small-format stores that serve smaller, walkable communities, such as college campuses. These smaller locations consolidate the communities’ shopping habits and needs into a convenient store location without wasting space on unnecessary product that doesn’t resonate with local shoppers.

Data-Driven Local Insights

Smaller stores mean less room for merchandise, but that isn’t necessarily a bad thing. We use countless tools and technology to curate our advertising, sales forecasting, locations, and more, so why don’t we apply revelations from the data we collect to specialize our product offerings? Sure, it might be used from time to time to sort in-store vs. online supply or create a few specially merchandized displays, but what if we truly listen to our consumers at a smaller scale? Trends vary and evolve across communities, so what resonates to one group might fall short for another. Rather than attempting to cater to a large swath of varying personalities and communities, we can use data to truly speak to our local consumer in the store.

Small-format shopping lets companies and store employees have easier control over store details and the ability to make the store their own. Bringing in local culture and personalities gives a human voice and touch to the brand.

Guided or option-based programs for stores to pick and choose branded assets provide structure while adding a customized look to the smaller space. Nike’s new concept, Nike Style, embraces local collections and unique environments to create intriguing customer experiences with different offerings at each store. The boutique-styled stores aim to provide customers with premium experiences over traditional wholesale.

Aesop has even taken the initiative to utilize local materials to imbue its spaces with the culture and history of the area. These stores that marry local culture and history with the brand and products intrigue customers and acknowledge shoppers’ roots.

With big-box stores going small format, shopping at every store has become its own experience. Our big brands are embracing this to encourage education, connection, loyalty, and reinforcement of the brand mission. Creating unique, localized experiences in smaller-format stores opens the door to a brand’s evolution of personality and substance.

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