Specialty And Experiential Retail Concepts Offer Retailers Path For Growth
Specialty retail products and services are driving today’s retail market. Big department stores, like Macy’s, Sears and JCPenney, are struggling, downsizing and closing stores, while specialty retailers are thriving.
Bisnow caught up with CBRE’s Anthony Buono (snapped here at the San Diego Convention Center), chairman of the Global Executive Retail Committee, and JLL EVP Scott Burns, who leads the SoCal retail team, at the ICSC 2016 Western Division Conference to get their take on the future of retail.
Food and beverage, health and beauty, and entertainment are expanding faster than any other brick-and-mortar retail areas, Anthony told us. “Retail real estate is being used differently, and landlords will have to be flexible,” he said, suggesting some old-school retail owners will struggle with the shift.
He said increasing online sales are impacting tenant mix at shopping centers, moving centers away from dependency on fashion to retailers that offer things customers can’t buy online, such as nail and hair salons, gourmet grocers and experiential categories like fitness concepts, health and beauty spas, arts and crafts, and entertainment—movie theaters, restaurants, craft-beer pubs, trampoline parks, etc.
“People want to be entertained while they shop, so there’s a blurring of the lines between categories,” Anthony said. Food halls are a growing, popular food concept; grocery stores are becoming "grocerants" with a full-service restaurant and bar; and gourmet grocers like Eataly, which specializes in Italian food preparations, also offer cooking classes. Pictured above is the Eataly in Seoul, Korea, which offers a café, restaurant and counter service, a selection of Italian-oriented groceries and home goods, as well as cooking classes.
“There’s more changes in the retail now than anytime in my lifetime, but the changes are positive in many ways,” Scott said. “Customers are getting a better shopping experience and better-quality products specialized to particular needs.”
He said the focus on specialty retail, combined with a strong US economy and a pause in retail expansion in the UK due to Brexit and other market conditions, has generated a new wave of UK specialty retailers. JLL has a pan-European team based in London, which is working with its US counterparts to help UK retail clients find space in SoCal locations appropriate to their products and price points, Scott said.
He offered us a rundown of JLL UK clients seeking locations in key US markets. Rapha, a UK retailer specializing in all things cyclist, is expanding in the US, and the West Coast is a priority market, Scott said. Established in 2004, this specialty retailer has Rapha Clubhouse locations in key cycling cities around the globe, including New York and San Francisco.
The Rapha Clubhouse is both a store and meeting place for serious cyclists, selling high-quality activewear, accessories and equipment. It also offers coffee and food and provides a place for cyclists to meet and socialize. Clubhouses also screen live races and host exclusive exhibitions and events. Pictured is a Rapha Clubhouse storefront.
Rapha also operates Mobile and Pop-Up Clubhouses. Mobile Clubhouses, which consist of a fleet of character-themed vehicles, visit popular rides, races and events to supply riders and spectators with coffee, screen live races and sell a selection of limited-edition products. The Pop-Up Clubhouses are temporary—and can happen in any urban location with a concentration of cyclists, but provide products and services similar to Rapha Clubhouses.
London-based Penhaligon’s, a creator of handmade fragrances from natural ingredients, already has a boutique store on Rodeo Drive in Beverly Hills, but plans to expand its presence throughout SoCal. Founded during the Victorian era, Penhaligon's uses rare ingredients, like hand-squeezed Bergamot and jasmine costing twice the price of gold, to create 34 fragrances. Pictured is a Penhaligon's boutique in the US.
Farrow & Ball, a UK craftsman-style paint and wallpaper store, is opening another store in Los Angeles and is looking for space in other California locations too, Scott said. This manufacturer specializes in eco-friendly wallpapers and paints.
Wallpapers are created with traditional block and trough printing methods and Farrow & Ball’s own richly pigmented paint, rather than ink. Shown is a Farrow & Ball showroom in northwest London.
Hamleys, a toy manufacturer and global retailer, is bringing its toy shops to US locations, and will be seeking space in SoCal markets. A London landmark, Hamleys is known for its unique, quality toys. Pictured is the Christmas rush at Hamley's London store in November 2014.
Anthony also said US specialty momentum is bringing more Asian retailers to US markets. Lots of interesting brands are headed this way, he said, citing Gentle Monster, a Korean eyeglasses concept, as a notable example. Gentle Monster offers distinctive eyewear and is popular among celebrities, Anthony said. Shown below is Gentle Monster's US flagship store in New York City.
Scott also said urban and high-street retailers are moving into newly gentrified areas of the urban core. Retail has lagged behind residential development in Downtown LA, but is now drawing attention.
Scott said with department stores downsizing and closing, structural changes in the suburban retail market are just as dramatic as in the urban core. He said Macy’s has announced the closure of 100 stores so far, and Sears has closed 10 Sears stores and 68 Kmarts this year alone.
“What to do with the space vacated by department stores is a dynamic topic,” he said, suggesting the solution may be mixed-use, including residential, retail and entertainment venues. Scott said large-format stores could be chopped into smaller spaces for grocers, specialty retailers and services.