Sears department stores disappear from Milwaukee area amid retail challenges

Paul Gores/Milwaukee Journal Sentinel - If you want to illustrate just how much the brick-and-mortar retail landscape has changed, you could sum it up with this:

For the first time in more than 90 years, the Milwaukee metro area doesn’t have a full-line Sears department store.

The last Sears department store here closed a week ago at Brookfield Square.

Sears in Milwaukee dates to 1927, when it had a store at N. 21st St. and W. North Ave. 

“It’s sad,” said Debi Damron, a 15-year Sears employee who rang up deeply discounted merchandise for customers at the Brookfield store on its final day in business last Sunday. “I can’t believe that they decided to pull completely out of a million-person city.”

Milwaukee isn’t alone. 

Once the king of U.S. retailing, Sears has shuttered more than 300 stores in the last decade nationwide, including nine in Wisconsin, as shoppers have reduced visits to malls and are buying more online. 

Sears also has been hurt by new retailers focused on a single category of what had been a department in Sears. Stores such as Home Depot and Ulta Beauty, for example, have scooped away market share from Sears' home improvement and cosmetics departments, respectively. At the same time, apparel retailers catering to every size and sense of fashion have popped up in storefronts all along the mall.

Today, Sears has fewer than 550 full-line department stores in the United States, down from 861 in 2007. Although some Sears stores that sell limited merchandise like appliances, hardware and mattresses still dot the Wisconsin map, only six full-line Sears department stores remain in the state. The closest to Milwaukee is in Janesville.

“It surprises me that a market your size doesn’t have a full-line Sears still operating, but that just means you’re ahead of the curve. It will happen elsewhere,” said retail industry consultant Jeff Green, of Jeff Green Partners in Phoenix. 

The population of the Milwaukee metro area is just under 1.6 million.

Paul Gores talks about the the closing of the last Sears store in the Milwaukee area. Why it happened and what mall owners are hoping to replace it with.

The question for Milwaukee is, “Will Sears be missed?”

“I think some people will miss it. The Sears name, it’s a venerable name. I think of Sears and still think of the big thick catalog we used to get at Christmas and circle things we wanted,” said industry consultant Nick Egelanian, founder of SiteWorks Retail Real Estate Services in Annapolis, Md. “But I don’t think they’ll miss it from the standpoint of how they’re living their daily lives and how they’re consuming today. I think they’ll miss it more from a nostalgic standpoint — another kind of marker on the road that goes away.”

Consultant Dick Seesel, owner of Mequon-based Retailing in Focus, said the heyday for Sears came mostly in 1960s and ‘70s. The Sears store at Brookfield Square opened in 1967 as one of three anchors. The two other original anchors — J.C. Penney and Boston Store — still are there, although the parent company of Boston Store, Bon-Ton Stores Inc., filed for Chapter 11 bankruptcy in February.

“In the ‘70s when they started building their own shopping centers in some parts of the country, they were flying pretty high,” Seesel said of Sears. “But that was before there was Walmart. That was before there was Home Depot.”

'Everything under the sun'

Sears stood apart from other dry goods department stores in that it had almost everything a consumer might need.

“Sears was always all things to all people,” Seesel said. “They were selling appliances and lawn mowers and hardware and all sorts of things that were really meant to appeal to that customer moving to the suburbs.”

Seesel continued: “What happened long before Amazon is they started dealing with a lot of competition in various parts of their business. There was somebody like Home Depot able to chip away at Sears' market share in those kinds of businesses. You had Best Buy growing. You had a lot of category specialists in big box stores growing up that made that Sears model of everything under the sun under one roof somewhat obsolete.”

At the same time, he said, Walmart was on the march, starting in small towns and heading toward suburbia on its way to supplanting Sears as the world's largest retailer.

In 2005, discount retailer Kmart and Sears merged, creating Hoffman Estates, Ill.-based Sears Holdings Corp. But things didn’t get better for Sears, industry experts said.

“It’s a pretty common theme in retail that two weak players, when they merge, don’t necessarily end up with one strong retailer, and that’s part of the story of Sears right now,” Seesel said.

In 2002, Sears bought classic clothing retailer Lands’ End, of Dodgeville, to create a store-within-a-store concept. But Sears Holdings spun off Lands' End as a separate company in 2014.

Transformation in progress

Annual revenue for Sears Holdings in 2017 was $16.7 billion, down 25% from 2016 and only a third of what it was in 2007. The company lost $383 million last year, an improvement from a $2.2 billion loss in 2016. It hasn’t posted a profit from continuing operations since 2010.

Sears says it’s in the midst of a transformation that includes more digital selling.

“We are making significant progress in our transformation as a company,” said Sears spokesman Larry Costello.

He said Sears has made progress toward a return to profitability, and has significantly expanded its “Shop Your Way” loyalty program. Costello noted the company’s partnership with Amazon, in which Sears' Kenmore appliances and DieHard brand products will be sold on, and pointed to the company’s new DieHard state-of-the-art auto centers in Texas and Michigan.

Sears sold its Craftsman hardware brand in 2017 to Stanley Black & Decker.

“This year, we built on the success of the smaller-format stores we opened in 2016 by opening several innovative new store formats across the U.S. that highlight the power of our company’s integrated retail capabilities,” Costello said. “The Sears Appliance & Mattress stores in Texas, Pennsylvania and Hawaii showcase two of our strongest categories, while blurring the lines between the traditional brick-and-mortar and online shopping experiences.”

Costello said that for competitive reasons, he couldn’t disclose whether a smaller Sears selling appliances and mattresses will be part of the redevelopment of the Brookfield Square space where Sears had stood.

Plans call for most of the Brookfield Sears building to be demolished. In its place will be a 41,000-square-foot BistroPlex, operated by Marcus Corp., and a 45,000-square-foot restaurant and entertainment center that includes WhirlyBall, a game in which teams of players in bumper cars use hand-held scoops to pass a ball to one another as they try to score by hitting a basketball-like target. The Brookfield Square WhirlyBall facility also will have laser tag and bowling.

Many shopping malls in the U.S. are redeveloping with restaurants and entertainment venues as fewer people shop at brick-and-mortar stores.

“The fact that there are redevelopment plans behind these Sears stores is a great thing for not only the mall developer, but also the consumer,” said consultant Green. “They are going to put in other uses that are more relevant to the consumers than Sears was.”

He added: “I don’t see anything that’s bad about it other than it’s a little bit jarring to see the changes that are occurring in the retail industry.”

After a harrowing holiday season, struggling department stores reach a ‘tipping point’

Alessandra Malito/MarketWatch - That avalanche of promotional emails and in-your-face advertisements isn’t cutting it for shoppers, and it’s costing department stores sales and profits — as well as their employees and locations.

This week, Macy’s M, -1.17%   announced it’s cutting more than 10,000 jobs and identified 68 stores out of the 100 closures it announced last year, Sears SHLD, -4.81%  announced on Thursday it’s closing 150 stores; and Kohl’s KSS, -1.13%  said on Wednesday its holiday sales were “volatile.” Meanwhile, year-round promotional sales have recently come under renewed scrutiny: Macy’s, Sears and Kohl’s, along with J.C. Penney JCP, -5.02% were sued last month for allegedly misleading shoppers over big discounts, according to the LA Times. Kohl’s and Sears declined to comment; Macy’s said it does not comment on ongoing litigation and J.C. Penney did not respond to a request for comment. “I think it is a tipping point for the department store industry,” says Jeff Green, an independent retail analyst based in Phoenix, Ariz. “They really all lack a point of differentiation.”

Off-price stores such as T.J. Maxx and Marshalls, owned by TJX Cos. TJX, +0.16%  , and Ross Stores ROST, +0.21% are happy to tempt customers away from Macy’s and Kohl’s, experts said. Shoppers can “treasure hunt” at these off-price stores in the hopes of finding a rare designer item at a massively reduced price, according to a recent analyst note by Wedbush Securities, a financial and investment firm. And there’s not always much of an adventure to be had in a mid-market promotional sales store where everything always appears to be discounted, Green adds.

Many consumers, of course, are moving online en masse, spending more this year than any other previous year, according to software company Adobe Digital Index. Online sales in the 2016 holiday season rose 11% from a year earlier to nearly $92 billion, according to data released late Thursday by Adobe. Among them: Online retail giant Amazon shipped more than 1 billion items around the globe this holiday season, and nearly a third of shoppers were expected to do 75% of their holiday shopping online last year. Department stores are also a venue for “showrooming” where people view items in the store only to buy them online for less, said Michelle Madhok, online shopping expert and founder of deals site

It’s also easier to price compare online — and then binge on Netflix NFLX, -0.09% — and shoppers can get overwhelmed when they walk into a store replete with red signs offering unbelievable discounts, experts said. After all, retailers are also piling on the advertisements in their email inboxes and on television, and fluctuating price tags of their items. Of course, consumers love discounts, but given the barrage of offers it’s no surprise that they appear to be more discerning before parting with their cash, Madhok said. “It’s not necessarily the one big sale a year,” she said. 

But department stores aren’t going down without a fight. Companies are building apps for an easier shopping experience, including lists and points, and opening their own off-price stores of their own. Macy’s opened four discount stores called Macy’s Backstage, to compete with stores like T.J. Maxx, and Kohl’s came out with Off-Aisle. 

It’s also getting easier to compare prices among competing retailers, Madhok said. “It’s definitely like a full-time job to follow all the sales,” she said. Set up price alerts for items you’ve recently bought or plan to buy, as you can finagle a price adjustment if something you purchased a few days ago went on sale. There are also apps that help shoppers save, Madhok said: Paribus, which hooks up to your Gmail account and reads receipts to find price adjustments; camelcamelcamel, which tracks Amazon price history; and PriceGrabber, which looks for the lowest prices of goods.

Is Black Friday falling behind Stormy Monday?

Suzette Parmley/The Philadelphia Inquirer - As Gail Kerick began her holiday shopping in earnest last week, she was steadfast in her intent not to shop at all on Thanksgiving Day.

"Absolutely not," said Kerick, 64, a retiree from Morrisville, as she combed the women's sweater racks at a local Kohl's. "Everyone needs a family day. You can shop the day before, and the day after, but definitely not on Thanksgiving."

That sentiment is shared by at least 50 national retailers, including Home Depot, REI, Lowe's, and Nordstrom, along with the Mall of America, the country's largest. All decided to close on Thanksgiving, holding Black Friday to Friday, Nov. 25, and giving workers the holiday off.

Three Philly-area malls - Plymouth Meeting, Moorestown, and the Gallery II - owned by Pennsylvania Real Estate Investment Trust will also close.

Some call it a seismic shift for retail with the unprecedented number of store closures this year; others call it a cultural backlash to corporate excess.

Black Friday has traditionally been the kickoff to the critical holiday shopping season. Some sectors, such as jewelry stores, generate a third of their annual sales in November and December alone. For almost all department stores, such as JCPenney, Macy's, and Sears, the period accounts for about a quarter of annual sales, and explains why they open on Thanksgiving, according to a report this month by Cushman & Wakefield and the National Retail Federation (NRF).

Yet, despite the announced closures, this holiday season remains on track to be a profitable one, thanks to the increasing clout of digital shopping and aggressive, early promotions.

The retail federation anticipates holiday receipts in November and December will top $655 billion, up 3.6 percent from last year.

A 2016 Deloitte Holiday Survey found that consumers nationally, and in the region, feel positive about the economy overall and with their own financial situation, setting the stage for a robust shopping season. The arrival of several big-name retailers in Center City and a new $250 million wing boasting mostly luxury brands at King of Prussia Mall can't hurt either.

Another notable occurrence this year, whose effect won't be known for a while, was the election season. The tumult seemed to depress shopper turnout in the race's final days.

"The nation had been consumed with the election more than ever before, and we don't know yet whether that has caused a chill on shopping and spending," said Steven H. Gartner, managing director for retail services at CBRE Inc.

Analysts say the big day, when stores make a last-ditch effort at year's end to move into the black, has lost luster.

"Because retailer 'door-buster savings' are common throughout November, it has taken the wind out of Black Friday," said retail consultant Jeff Green. "What seems to be more important to retailers is now the spread of sales over the seven-week period beginning Nov. 1, and more specifically, the week before Christmas, which now seems to have much more importance than just Black Friday."

In the past, opening first on Black Friday was a quest for bragging rights in ads.

But the Saturday before Christmas weekend, Dec. 17, is expected to be this season's busiest shopping day, not Black Friday.

The mighty Mall of America in Minneapolis, which includes an indoor amusement park, announced Oct. 5 that it was closing on Thanksgiving. Only three of 520 stores in the mall, with each having the choice, have chosen to open.

"We think Thanksgiving is a day for families and for people we care about," said Jill Renslow, Mall of America's senior vice president of marketing. "We want to give this day back."

Most of the 1,200 mall workers will have Thanksgiving off, though some maintenance and security staff must monitor the three open stores. The mall officially reopens at 5 a.m. Black Friday.

Closer to home, in deciding to close three area malls, PREIT CEO Joseph Coradino said those facilities generated the least traffic over recent years during the holiday weekend.

PREIT wants to celebrate "the holiday, while also meeting the demands of a high-volume shopping weekend," he added.

Employee respect may also be gaining.

"It's a cultural shift," said Ramon Avila, a marketing professor at Ball State University and founding director of its H.H. Gregg Center for Professional Selling. "With the economy in much better shape, these same workers could be facing larger crowds than in previous years. They will be dealing with more inventory and customer issues than ever before. You can't expect them to be fresh and work the entire holiday season by having them come in on Thanksgiving, too."

Noelle Nelson, a professor of marketing at the University of Kansas, said REI, the outdoor sports apparel company, got a ton of positive media for closing on Thanksgiving last year, one of the few to do so.

This year, some firms are openly critical of retailers doing business on the holiday. The electronics and appliance chain P.C. Richard & Son, for example, ran an ad last Thursday in the Inquirer attacking stores that stay open on Thanksgiving as "un-American" and "anti-family."

"Other companies saw the goodwill that REI generated," Nelson said. "Being viewed as family-friendly to their customers is a good thing and why so many decided to close this year."

But others, like Green, who counsels national retailers on growth strategy, say it's purely a business decision.

Many retailers have viewed being open on Thanksgiving as a "necessary evil," he said.

"In other words, they are only open because their competitors are," he said.

A Morning Consult survey this month of 2,000 U.S. consumers found more than half - 59 percent - said they did not support stores opening on Thanksgiving, while 48 percent said they were more likely to visit a store on Black Friday if it didn't open early on Thanksgiving.

Some retailers - without the heft of a Wal-Mart, Target, or Best Buy - can't justify staying open, said Christa Hart, head of the consumer and retail practice at New York-based FTI Consulting.

"Wal-Mart and some other retailers have increased hourly wages paid to associates, which makes it more expensive to open earlier and stay later," Hart said.

Rob Rosendale, 27, a homeowners insurance adjuster from Newtown, said he ventures out after his Thanksgiving meal for one thing: $5 DVDs from Target.

"It's a holiday that should be enjoyed," Rosendale said in the Macy's men's department at Oxford Valley Mall last week. "You won't find me out shopping for good deals. One more day won't hurt you."

But C.J. Savage, 35, of West Philadelphia, a disability counselor at Villanova University, said people should have that option.

"Some people want to get their shopping done early to beat the crowds on [Black] Friday," Savage said as he checked out sneakers for his son at King of Prussia Mall. "Otherwise, you'll have all this [traffic] backup on Friday with everyone going out at once."

But for those who work on Thanksgiving, Savage said, "employers should fully compensate them for their time and throw in something extra, like a Thanksgiving meal, to make them feel appreciated."

Online shopping is expected to play a bigger role, with Americans ordering more on Cyber Monday - the Monday after the Thanksgiving-Black Friday weekend - than they did last year. The NRF forecasts 2016 holiday online sales will grow from 7 to 10 percent up to $117 billion, topping last year's $105 billion.

"Mobile phones make it easy to comparison-shop, so customers [can check in] real time to get the right prices," FTI's Hart said.

Azza Semlali, 23, of South Philadelphia, celebrates the Muslim holiday Eid al-Fitr (End of Ramadan) that's akin to Thanksgiving in her native Tunisia.

"Back home, there's no shopping on that day - only food preparation," said Semlali, as she and her mother, Hajar Semlali, took a break from shopping at King of Prussia Mall last week. "Every holiday should have its own day. You don't have to rush [out] to buy clothes just because they're cheaper" that day.

Kerick, the Bucks County shopper, offered a solution: "If [retailers] all closed on Thanksgiving, then they wouldn't be competing with each other on who's getting the earlier start to Black Friday," she said. "Hopefully, we can get them all to close.

"Let people eat their turkey and be with their family."

Fall Of The Mall? How Mergers and Millennials are Changing an American Icon

Bryan Pearson/Forbes - In Dearborn, Michigan, Lord & Taylor has been tailored for Ford. The Fairlane Town Center in suburban Detroit is retrofitting the former department store space and several other vacancies to accommodate offices for Ford Motor Co. The automaker will move 2,100 workers to the mall as it converts 240,000 square feet of former retail space into a product-planning center.

If it sounds unconventional, that’s the point. “Most major malls are overbuilt, meaning they can’t support the square footage they have allocated to retail,” retail analyst Jeff Green told Michigan Live for a story about the project. “Which is why they’re starting to look at nonretail uses being brought on the mall site.”

True enough, Fairlane is one of many malls across the country signing on non-traditional, high-traffic tenants as mall vacancies rise. Retail mergers and consolidations have resulted in fewer traditional department store anchor options. And younger consumers, accustomed to round-the-clock digital stimulation, are more likely to find the standard mall, with its cavernous walkways and recurring terrain of familiar shop windows, boring.

 Fairlane is one of many malls across the country signing on non-traditional, high-traffic tenants. Photo credit: Fairlane Town Center

Roughly 200 U.S. malls are at risk of shuttering in the coming several years, according to Green Street Advisors. The analytics firm also estimates retailers will need to close about 800 locations, or a fifth of total mall anchor spaces, in order to achieve sales productivity of the mid-2000s.

That’s a lot of wide-open retail space. The risk for mall operators is falling for seemingly sexy new tenants that may not have the staying power of experienced retailers that better understand their market bases. Experienced retailers such as Apple, which has installed glass staircases and Edwardian decor to complement the locales of its many locations. Or custom menswear chain Alton Lane, which serves cocktails and conversation to better understand its customers.

Which leads to the question: If today’s major mall can serve as a planning center for a major automobile manufacturer, what will the mall of tomorrow hold? One hint: To survive, it must serve the shopper’s desire to connect and preserve the shared, relationship-based shopping experiences people long for.

Art Markets And Aquariums

In order to predict what tomorrow’s mall will hold, it is helpful to explore what today’s mall is changing into. For some centers, such as the redeveloping Stony Point Fashion Park in Richmond, Virginia, change means fire pits and gourmet grocers. At the Great Lakes Crossing Outlets in Michigan, it meant adding an aquarium.

Here is what some others are doing:

  • In some shopping centers, displays of household items are being replaced with actual households. The Monmouth Mall in New Jersey is being converted to include apartment units and hotels. At the Laguna Hills Mall in Orange County, California, renovation plans include 350 apartments, and at the historic Arcade Providence in Rhode Island, former eateries and shops have been transformed into nearly 50 mini-lofts.
  • At University Mall in Tampa, Florida, major redevelopment plans include a 37,000-square-foot health club to replace a former J.C. Penney. Among a health club’s advantages, mall operators said, is it brings people in several days a week and at different times of day.
  • In New York, the Westfield World Trade Center, scheduled to open in 2016, will include a Ford Hub as well as a couple bakeries and a range of specialized merchants from Dior to Kingkow kids clothing. Overshadowing its lengthy tenant list, however, will be the features that enable shoppers to connect. Among the services: the ability to order online and pick up in the store, and in-mall screens featuring products mall-goers can purchase via digital devices. The center’s developers describe it as a place “Where playtime, ‘me’ time and a new outlook comfortably coincides.”
  • In some cases, the methods used to attract tenants are as creative as the tenants themselves. At Prescott Gateway Mall in Prescott, Arizona, the Miller Valley Indoor Art Market is filling a space vacated by Kirklands. Among the incentives the mall operator is offering new tenants is free rent during certain periods.

The District Detroit aims to be a game changer for city

Christina Cannon/Heartland Real Estate Business - Summer may be approaching, but workers on the Detroit Events Center are cooling off as the practice ice begins to take shape. With work on the roof and training facility underway, the new home of the NHL’s Red Wings is right on schedule to open for the 2017-2018 season. With so much excitement surrounding the construction of the arena, it’s easy to lose site of the other components that will make up The District Detroit. In addition to the 20,000-seat arena, 50 blocks between downtown and midtown will be transformed into five bustling neighborhoods containing a mix of office, residential and retail space.

To read more, follow the link: Midwest RE News May 2016: District Detroit.

Retail as Multifamily Development Opportunity

Jeff Green & Jerry Hoffman/Multifamily Executive - With mixed-use opportunities on the rise, development professionals are capitalizing on the growing trend to cross-categorize the retail real estate and multifamily housing markets to create a sense of "place." This is especially visible in major urban markets like New York and Dallas, but we're now starting to see the trend trickle down to secondary and tertiary markets, as well.

For multifamily decision makers, understanding the essential elements of cross-market development is becoming increasingly important. That understanding includes a sophisticated appreciation for what it takes to cultivate a thriving community with a diverse and engaging mix of tenants, and an awareness of the importance of examining the interaction between real estate and local demographic/market forces.

Multifamily executives who understand the dynamics at play can apply these principles and strategies to their own projects to ensure their next development creates a memorable and enduring sense of place in the diverse mixed-use neighborhoods that continue to expand in markets throughout the U.S.

Trend Lines and Demographic Dynamics
From a retail industry perspective, having a strong on-site demand component is an attractive proposition. Retailers are increasingly recognizing just how valuable it can be to have a built-in consumer base. On the residential side of the equation, the growing popularity of quality mixed-use with a strong multifamily residential component is being driven by important demographic trends. This includes the simple desire of families and individuals to live near places where they can eat, shop, go to the movies or an evening concert, and generally enjoy a wide range of convenient amenities in a comfortable residential setting.

The mixed-use/multifamily trend seems to transcend geography, taking root not only in larger urban markets, but also in secondary markets and smaller cities and towns across the country. It's being driven by the evolving preferences of two extremely influential demographic groups: young professionals looking for dynamic and engaging spaces to live, work, and play, and empty-nesters drawn to the convenience and wide range of amenities that comes with apartment-style living in a mixed-use environment. It's worth noting that these groups encompass two demographics—millennials and baby boomers—that wield a staggering amount of spending power and social influence.

For multifamily executives and decision makers, the question then becomes: How can you create and/or benefit from this mutually beneficial dynamic, and what kinds of strategies, principles, and key considerations should be prioritized to identify and capitalize on promising mixed-use opportunities?

Principles and Priorities
Maintain "double vision." It's extremely important to program for both retail and multifamily uses at the same time. Retail can lead multifamily, but both elements have to be accounted for and accommodated with regard to design, development, and demand.

A classic mixed-use challenge is parking. Ideally, you want an abundance of convenient parking to meet the needs of retailers. One of the most popular parking solutions, the parking deck, doesn't always go over well with residents (or even retail, for that matter). Any project that leans too heavily to one side of the retail–residential scale will run into difficulties, and the fact remains that to benefit from mixed-use synergies, you first have to accommodate mixed-use priorities.

Consider geography. Don't try to force a square peg into a round hole. Consider geographic and market context carefully, making allowances for preferences and site characteristics. Residents in urban areas are typically more used to structured parking, for example, while people in more suburban markets tend to be far less enthusiastic about it.

In denser urban environments where space is at a premium, going vertical with residential above ground-floor retail can be an effective way to create density and enhance the dynamism and energy of the space. In a suburban context, or in secondary markets where more land is available, it may be more cost-effective and practical to add a multifamily component on the site of an existing parking lot or an adjacent property.

There's more than one successful mixed-use formula. The key is to understand the marketplace and maximize the resources available to you.

Stick to site-selection basics. When evaluating any potential mixed-use/multifamily opportunity, always remember to review the fundamental retail site-selection considerations that are key to any predevelopment evaluation. These include visibility, accessibility, ingress/egress, parking, and co-tenancy. Promising opportunities will check all of these boxes; failure to account for even one of these core principles could compromise or even cripple a project’s long-term viability.

Consider co-tenancy. Think critically about how the integration of uses plays a role in co-tenancy considerations. In many respects, the co-tenancy criteria that retail developers rely upon are directly translatable to co-tenancy thinking in mixed-use/multifamily projects. The reality is that many suburban “apartment homes” are not really true communities because they lack the amenities, services, and cohesive and defining sense of place that is present in all great mixed-use environments. Programming decisions and co-tenancy considerations should be made with an eye toward what enhances the value of the real estate, the businesses there, and the multifamily housing component.

Conduct professional market analyses. The right multifamily components in a retail/mixed-use context can help foster a sense of community, a mutually beneficial social and commercial energy, and a powerful and self-sustaining economic engine. But while retail and multifamily certainly work well together, their combination can also be compared to that of a potent chemical reaction: It takes precise measurements, extensive experience, and a keen understanding of the elements at play to ensure that the desired reaction takes place, instead of fizzling out or blowing up in your face.

It’s not magic, but it is art. It takes that artistry (along with a little bit of science) to evaluate these opportunities and successfully bring them to life. When possible, work with development professionals who understand how to create synergies instead of making awkward compromises, and who have an established track record of creating a powerful and lasting sense of place.

And, perhaps most important, conduct a comprehensive and integrated market analysis that's fully cognizant of the need to match your multifamily property with existing or anticipated retail. A successful market analysis doesn’t look at these things as separate; rather, it analyzes them together and provides guidance accordingly.

'Most major malls are overbuilt' so Michigan shopping centers are changing

Paula Gardner/MLive - Metro Detroit quietly stepped to the forefront of U.S. mall transformations early this year with a deal for a ¼-million square foot anchor tenant that won't display the latest fashions, attract new customers or push sales per square foot. Yet retail experts say that Ford Motor Company moving 2,100 employees into Fairlane Mall shows the type of creative leasing that should not only bolster the 1.4 million-square-foot Dearborn mall, but also set an example for shopping centers across the U.S. seeking new anchor tenants.

The reason: it comes at a time when top malls remain highly valued, yet the industry – which is worth hundreds of billions of dollars - feels increasing pressure over its largest retail spaces due to anchor store consolidation and store closings.

In the Fairlane case, the Ford office will fill both a long-closed Lord & Taylor store and small-tenant space.

"When you have a mall like that, it's not the worst thing to have (a couple of thousand) more people coming into that location," said Chris Brochert, a partner in Lormax Stern Devlopment Company in Bloomfield Hills.

Malls account for about 20 percent of retail sales in the U.S., according to the 2016 mall outlook report by Green Street Advisors.

It's a big business: Green Street Advisors says destination retail centers in major markets drive most of the mall value in the nation. The value of the top five mall operators was estimated at $156 billion by the real estate research firm at the beginning of the year; publicly traded mall real estate investment trusts were valued at $112 billion.

Meanwhile, many mall REITS showed increased net operating income in early 2016, according to the International Council of Shopping Centers.

About 300 national malls are "A" quality, with strong demographics and tenant mix – and sales per square foot of $470 or higher. About 200 malls are at risk to close within the next several years, according to Green Street. That leaves 389 malls in the "B" grade, according to Green Street.

In the Metro Detroit market, 14 properties fit the retail definition of a mall, which typically denotes multiple stores under a shared roof with connected walkways; the properties tend to be located near population and transportation centers.

Across Michigan, there are about 50 top shopping centers, though some are "power centers" with connected big-box retailers and smaller outlots. Some of the largest malls outside of Metro Detroit include Rivertown Crossings in Grandville; Woodland Mall in Kentwood; and Genessee Valley Center in Flint.

In Metro Detroit, five "A" grade malls drive 74 percent of the mall value and generate sales of roughly $640 per square foot, according to Green Street. Seven additional properties are graded "B," with two considered "C" or "D."

"B" malls may have solid occupancy and sales of about $360 per square foot, but they're also looking at limited options to replace their anchor if that becomes necessary.

"Strong anchors are imperative for the long-term viability of a mall," according to Green Street.  "However, traditional department stores are no longer the key traffic drivers of the mall given the business is in a secular decline."

The sheer size of Detroit's regional malls – which range from about 1- to 1.5 million square feet – add to the complexity. While most have healthy occupancy rates, they also face changing consumer patterns, including increases in online shopping and the draw to destinations that have more than retail options.

"Most major malls are overbuilt, meaning they can't support the square-footage they have allocated to retail," said Jeff Green, a national retail analyst based in Arizona and a Detroit-area native.

"Which is why they're starting to look at nonretail uses being brought on the mall site."


The Starwood deal with Ford – which fills about 1/6 of Fairlane's space with dedicated office space for a single tenant – was called an "excellent example" of new mall strategies by Green.

"That's going to be a way for malls to survive, long-term," Green said.

Southeast Michigan's shopping centers so far are staving off the anchor store closings affecting hundreds of malls across the US.

But – recognizing that the climate for backfilling a large mall store vacancy poses limited retail options – many mall owners are moving to find new uses for the properties.

Strategies beyond turning to office conversions include:

• Using excess parking space: Briarwood Mall in Ann Arbor turned to its most-used entrance to build two restaurants in December 2014.

• Turning to typical outdoor 'power center' retailersMacomb Mall's new owners attracted Dick's Sporting Goods to fill a former two-story anchor department store space.

• Adding entertainment components: Great Lakes Crossing Outlets added an aquarium early 2015, five years after it converted to an outlet format. And in early 2016, a Legoland Discovery Centre opened at the Auburn Hills mall, adding a 32,000-square-foot theme park next to the food court.

"I think it's a genius move to put those kinds of uses in malls," said Brochert.

Even some stores can be considered attractions: The Mall at Partridge Creek in Macomb County's Clinton Township will have Michigan's first LL Bean store and Vera Bradley Outlet.

After years of planning and months of construction, Sea Life Michigan aquarium is officially open to the public.

Each move to create a destination experience expands the uses and reach of the traditional malls, retail experts said.

"More and more people are looking into mixed use projects," said Chuck Bechara of Starwood Realty Partners and director of leasing for Fairlane.

By approaching the traditional mall space as mixed-use redevelopment opportunities, Bechara said, mall owners are replicating the essence of a downtown, where multiple real estate functions coexist in a walkable setting.

Brochert agreed, saying the mall moves parallel some of what is seen in the downtown Detroit revival.

That the success of downtowns like Detroit is due in large part to milennials isn't lost on the retail industry.

"There's a fallacy that milennials don't like the mall," Green said. "That's not really true."

The demographic is a social one, Green said.

"They like being around others. What they don't like," he said, "is to not be entertained by the retailer that's there. They need a little more stimulation from a retail environment."

The Fairlane campus, with a movie theater, several restaurants and stores, should fulfill that for Ford's employees who move to the mall, Bechara said.

"I think that's one of the attributes and one of the key points and deciding factors (for Ford)," he said. "We already had a lot of the entertainment, shopping and restaurant components in place."

However, converting to non-traditional anchors has to come with considerable thought, said AJ Weiner, managing director of Jones Lang LaSalle's Metro Detroit office.

An office tenant, for example, likely won't be on-site on weekends. That means the use  "doesn't really complement the other retailers in a traditional way by driving traffic, which anchors are designed to do."

While Metro Detroit's malls haven't seen other examples of the size of Ford's deal, Weinert said the number of jobs coming into the mall to fill the empty space may balance that out.


Nationally, examples of mall owners seeking to diversify the real estate uses on mall properties are increasing, with entertainment and gathering components high on the list, and offices still emerging. One example is in Nashville, where Vanderbilt University established medical offices in 40,000 square feet of Hundred Oaks Mall.

The most notable national mall change: some owners are now looking at housing.

In Monmouth, New Jersey, Kushner Companies sought to invest $500 million in the Monmouth Mall to expand its lifecycle to 24/7.

From "(The vision is for an) open-air hub that will have retail shops, dining and entertainment, along with a hotel and one - and two-bedroom apartment units. It will also have an outdoor plaza, green spaces and a streetscape."

Renovations at Laguna Hills Mall in Orange County, Calif., include plans for the addition of 350 apartments by 2017. Arcade Providence in Rhode Island now has 48 micro-lofts.

While hotels are frequently built near southeast Michigan's malls, housing is less common.

The Enclave community of apartments and condominiums was built starting in 1984 across a parking lot from Twelve Oaks Mall.

Housing is adjacent to Fairlane in the form of The Union, privately built student housing for the University of Michigan-Dearborn campus that opened a few years ago. UM-D was the last school in Michigan to have housing on or near campus, according to a 2012 report in the Dearborn Press & Guide. That $30 million project offers 'by the bed' leasing for 504 people.

"There is a lot of multifamily proposed for major malls around the country," Green said. "Not a lot has been executed yet.

"But it's a way of densifying the site ... and probably putting the highest and best use on the piece of real estate."

Bechara said Starwood plans to look at more development options for the Fairlane property, which has room to park 8,000 vehicles. The nearby student housing may inspire more residential uses there, he said.

"We're still looking at that," he said. "It's something we'd probably be interested in doing."

Mall closures in Metro Detroit aren't likely. Experts say that Eastland Mall in Harper Woods, which moved into receivership in 2015, faces the most struggles.

Northland Mall in Southfield was demolished this spring, and the city – which paid $2.4 million for the property - now is seeking a developer for the land at Eight Mile and the Lodge. Summit Place in Waterford is closed and listed for sale.

On the other end of the spectrum is Somerset in Troy, followed by Twelve Oaks in Novi.  Briarwood, in Ann Arbor, joins Green's list of most-viable malls in southeast Michigan.

"Those three aren't necessarily overbuilt for what they are," Green said. "They're such strong performers, any retail concept is going to look at going into Somerset first, or if not that, Twelve Oaks."

Meanwhile, the Ford deal is changing more than the tenancy at Fairlane. Starwood bought it in 2014 from the Taubman company, the original developer, in a 7-property deal.

The company went in planning to build value for a likely eventual sale, Bechera said.

"Now we think we'll keep it, and nurture and develop it," he said. And the company – the seventh-largest mall owner in the US - will see if large office deals make sense it its other markets.

The lesson in the situation for mall owners, Bechera said, is that "you try to maximize the potential of the property. Sometimes it doesn't work and maybe it doesn't resonate with the market. ... But I think there's a high degree of success potential there.

"It's worth the risk."

Competition is putting owners & retailers under pressure to make shopping even quicker & easier

Joel Groover/Shopping Centers Today - If the global real estate industry were to hold its own Top Buzzwords contest, the term “experiential” would surely be in the running. After all, landlords and retailers worldwide are keen on exploring new ways to create the kinds of brick-and-mortar destinations shoppers love to visit. Often the goal is to boost the amount of time shoppers linger by offering them trendy bars and restaurants, outdoor cafes, special events, personal services and the like. But thanks to such factors as e-commerce and the near-ubiquity of smartphones, observers say, a practical imperative is increasingly in play as well — namely, the need to make the experience fast and hassle-free. “Convenience is the major driver of 21st-century shopping,” said consultant Paco Underhill, CEO and founder of Envirosell, a consumer-behavior research firm. “Even during the recession, if you asked people whether they felt more money-poor or time-poor, the answer was often time. That’s part of why we have so much mobile e-commerce today: It saves time.”

SCT asked several experts to share their thoughts on the opportunities and challenges associated with making malls and stores more convenient. The following articles explore a range of issues: convenience-oriented strategies like the use of technology to create “smarter” parking lots or faster checkout lines; the potential for easier-to-shop store formats to boost convenience across grocery, specialty apparel and other categories; and similar subjects.

To be sure, the subject is complex. Landlords and retailers should bear in mind that the proper role of convenience may vary widely among different stores and properties, according to consultant Nick A. Egelanian, president of Annapolis, Md.–based SiteWorks Retail. For commodity-oriented convenience  stores, drugstores, grocers, big-box discounters and warehouse clubs, in particular, striking the right balance between price and convenience is critical, Egelanian says. “Customers are constantly making subconscious choices between price and convenience,” he said. “Let’s say you have a gas station sitting right in front of a Walmart. The gas station sells gum for a dollar a pack. The Walmart sells six packs of gum for a dollar. Why would anybody not go to the Walmart to buy gum? Because they value their time more than the price.”

By contrast, convenience tends to be less important for specialty-focused stores and malls, Egelanian says. In these environments, people feel more comfortable slowing down and spending their discretionary time and money. “A Simon mall really cannot compete on convenience,” he said. “What they are competing on is exclusivity of merchandise.” Nonetheless, amid gridlocked roads, overscheduled kids, longer work hours and other pressures of modern life, some mall owners should consider ramping up convenience for their time-pressed shoppers, Underhill says. According to the World Health Organization, about 54 percent of the global population now lives in cities, up from 34 percent in 1960. As cities continue to grow, malls stand to benefit by functioning as one-stop-shop destinations that make life easier, Underhill says. “It’s common for malls in Asia and Australia to have locksmiths, supermarkets, day-care centers, medical offices and gyms to help drive traffic,” he said. “In most U.S. malls, the focus is still on apparel and gifts, not these edge-city functions.”

THE CHECKOUT PROBLEM Cash-register lines have always sparked complaints, and some want to eliminate the hassle altogetherRetailers and tech firms across the globe are working to make shopping as easy and convenient as possible by speeding up, or even doing away with, checkout lines. But the challenges here are not just technological: Banks and credit-card issuers also shape the payment process, and their focus tends to be on fighting fraud rather than boosting convenience, observers say.

Consider the global shift to chip-enabled credit cards. While the technology has been in wide use across the European Union for upwards of a decade, many U.S. retailers began accepting so-called smart credit cards only in 2015. Much to the consternation of some, this transition to a more secure payment technology slowed checkout lines just as the holiday season was getting under way. “The one thing you hear retailers talk about — and they have been talking about this since 1975 — is improving checkout,” said consultant Todd Werden, a vice president at Boston Retail Partners. “And what have we done to checkout? We just screwed it up.”

When all goes smoothly, the shopper inserts the chip card into the reader and waits for completion of the verification process before removing the card. This system takes longer to process than a swipe, however. Worse, at times a shopper will remove the card too soon, which forces the clerk to restart the transaction. In other cases, a consumer will dutifully insert the card into the reader only to be told to swipe as usual, because the POS system has yet to be upgraded to verify chips. “The amount of time it now takes to pay for something has gone up by a multiple,” Werden said.

In 2005 banks made smart cards the norm in the EU by forcing retailers to accept liability for any fraud perpetrated by means of the older, magnetic-stripe cards. A similar liability shift took effect in the U.S. last October. But though getting away from the older cards has caused headaches, a sharper focus on security should make it easier for retailers and tech firms to forge ahead with next-generation checkout systems, according to an American Banking Association statement submitted to a subcommittee of Congress.

Chip cards (sometimes referred to as EMV — for EuroPay, MasterCard and Visa, which originally developed the technology) are necessary in today’s era of hackers and data breaches, the American Banking Association noted in its statement. Other weapons in the fight against hackers include systems that encrypt payment data at all points of the transaction, as well as so-called tokenization technologies that replace account numbers with random digits at the point of sale; Apple Pay and Samsung Pay fall into this latter category. “In addition to today’s sophisticated neural networks, which spot fraud at the point of sale, these new technologies will be layered on top of EMV and create multiple dynamic layers of security necessary to fight increasingly sophisticated forms of fraud,” the association said in the statement.

Ultimately, technology holds -potential to eliminate what has always been the most inconvenient part of shopping: the checkout line, says Jeffrey S. Edison, a principal and the CEO of Phillips Edison & Co., which specializes in boosting the value of underperforming, grocery-anchored centers. “You’re going to be able to do it in real time,” he said. “There will be cameras all over the store that can tell what you pick up and put into your cart.” This is precisely the idea behind Atlanta-based NCR’s new whole-store scanner system, Edison notes. According to NCR’s U.S. patent application, “the process can be as simple as placing items in a cart, picking up an electronic or paper receipt and leaving the store.” The system can integrate with shoppers’ mobile-payment apps as well as retailers’ self-checkout units, which might still be needed for alcohol purchases or to weigh fresh produce, according to the patent application.

The new Fast Scan system being tested at several Texas stores by grocery chain HEB aims to speed up checkout rather than eliminate it altogether. Shoppers put items on the conveyer belt, which whooshes them past automatic bar-code scanners. This eliminates the need for shoppers or clerks to manually scan the items. “It’s like we’re living in the future,” said an HEB clerk in a YouTube video about the technology.

Given the near-universal adoption of smartphones today, mobile solutions represent another potential way to speed up the checkout process. Tech firms such as U.K.-based Powa Technologies, or Dashlane, which has offices in Paris and New York City, aim to expedite checkout by offering encrypted digital wallets and faster payment platforms. In one scenario, shoppers scan items with their phones as they walk through the stores, instead of waiting for clerks to do the scanning. “When I show up at checkout, my cellphone automatically downloads everything I just scanned,” Werden said. “I then use Apple Pay or something similar to complete the transaction, all on the phone. Within five years, we’ll see that kind of scenario routinely.”

PARKING SMARTER Leveraging tech to take the headaches out of parking. When Unibail-Rodamco opened the Mall of Scandinavia last November, an estimated 50,000 shoppers in Solna, Sweden, got their first look at the 1.1 million-square-foot mall’s experience-oriented architecture and tenant mix. The experience includes hundreds of shops and restaurants, along with entertainment venues such as an Imax movie theater and a Formula One racing simulator. Convenience, too, is part of the offering — the mall is the latest retail property to offer so-called smart parking, which can help shoppers find open parking spaces when they arrive, and then, when they are ready to go home, help them avoid the maddening experience of being unable to remember where the car is parked.

At Westfield’s newly redeveloped Valley Fair Mall, in Santa Clara, Calif., shoppers can find open spaces by looking for green lights positioned above. On the way out, they can type in their license plate numbers at a kiosk to see a visual representation of where they are parked (of course, the trick here is to remember one’s plate number). Along the same lines, two city-owned parking decks that serve Macerich’s Santa Monica (Calif.) Place mall guide shoppers to open spaces by means of sensors and lights; reader boards and end-of-aisle arrows point drivers to the number of open spaces in each direction.

Efforts to bolster the convenience of parking are strategically sound, given the potential for a stressful parking experience to linger in a shopper’s mind, observers say. “It is shocking, but the parking field really defines a lot of people’s feeling about convenience,” said Jeffrey S. Edison, a principal and the CEO of Phillips Edison & Co., which specializes in boosting the value of underperforming, grocery-anchored centers. “An extra 50 yards of walking will bother a lot of people. They will feel that it isn’t convenient anymore, even though you’re only talking about 15 or 20 seconds.”

Does this mean that every shopping center should buy expensive parking technology in a bid to stay competitive? Not necessarily, says Mark Braibanti, director of marketing and business development for Santa Monica–based ParkMe, a software and data company that specializes in smart parking. The company’s database of parking information includes some 29 million spaces across 64 countries, according to Braibanti. Some of the data is static, such as parking-garage addresses, hours, costs and similar fixed info. ParkMe also works with parking-facility operators, however, to obtain real-time occupancy data showing exactly how many spaces are available in a particular lot or deck. “If a parking garage or lot is ticketed or gated — meaning if someone has to pull a ticket to get in or out — we can tap directly into that information,” Braibanti said. “We have software integrations with all of the leading parking companies.”

ParkMe licenses this occupancy data to car companies, which funnel it to drivers’ onboard navigation systems and to parking software or app developers. ParkMe’s own consumer app and website leverage the information as well. “If I’m headed to a downtown Los Angeles shopping area, I can open the ParkMe app, see what lots are available, and even look for prompts like ‘Get two hours free if you shop at this store,’ ” Braibanti said. “If a lot is 80 percent full, we can show drivers that information before they get there.”

ParkMe users rave about being able to find or even reserve parking spaces in congested areas, Braibanti says. But in the future, the ongoing shift to “connected cars” — GPS-connected vehicles that can be tracked at all times — will make smart parking even more widespread, he says.

When most cars on the road are connected, ParkMe will be able to tap satellite feeds to supply car companies with real-time occupancy data even for unmanaged parking areas, Braibanti says. This would make smart parking viable even for a regional mall or power center with a large parking lot rather than a ticketed, structured deck. Because unmanaged parking is commonplace across the industry, connected cars will enable more landlords to do things like offer real-time occupancy maps of their parking fields on websites or apps, or reservations and similar smart-parking services — all without investing in expensive new hardware, Braibanti says. Over time, he predicts, smart-parking functionality will become something drivers simply expect to have as a standard feature of any vehicle. “We really feel like, with the future of transportation, smart parking is going to be fully integrated into your car’s navigation system.”

THINKING SMALLER Ramping up convenience via smaller stores and showrooms. In response to the fiscal crisis of 2008, many retailers focused on slashing prices in their existing stores or even launching off-price spinoffs. But another strategy — shrinking store formats and merchandise offerings in a bid to make shopping more convenient — is gaining ground around the globe, experts say. “When both Macy’s and Lord & Taylor have value concepts, you know value is saturated,” said Rachel Elias Wein, founder of WeinPlus, a consultant firm specializing in competitive strategies for real estate owners and retailers. “People have been trained to continuously get 50 or 40 percent off. The alternative is convenience.”

The trend is perhaps most visible in food retailing. According to an April 2015 Nielsen report titled The Future of Grocery: E-commerce, Digital Technology and Changing Shopping Preferences Around the World, consumers are shifting toward smaller, easier-to-shop grocery formats. The 33-page report uses data from surveys of 30,000 consumers across 60 countries and other Nielsen market research. “Across the globe, we’re seeing the rise of proximity retailing,” said Patrick Dodd, Nielsen’s president of global retail, in the report. “In the eyes of global shoppers, small and simple is beautiful right now. While there is some growth for large stores, the real winners are mini markets, small supermarkets and convenience stores.”

According to Nielsen, the growth of smaller-format stores tends to be strongest in developed economies. Nonetheless, the authors write, “convenience and drug stores demonstrate strong growth potential in both developed and developing markets, which underscores consumers’ desire to use brick-and-mortar stores for quick trips and special (often urgent) purchases.”

Whole Foods Market’s 365 by Whole Foods Market spinoff typifies this trend, according to consultant Paco Underhill, CEO and founder of Envirosell, a consumer-behavior research firm. The roughly 30,000-square-foot 365 by Whole Foods Market stores offer what Whole Foods says is a “curated” — meaning streamlined — product selection dominated by the chain’s 365 private-label brand. According to a press release, the company has signed eight leases for the smaller-format concept thus far, with the first stores opening this year and up to 10 additional ones set for next year. “In the United States, as in Europe, the fastest-growing chains are Aldi and Lidl,” Underhill said. “The idea is to have a smaller, curated store with your own branded products in it. Today people do not see house brands as a compromise. Part of what is driving the convenience factor is the recognition that we have reached the apogee of the big box.”

Cavernous stores filled with thousands of products can actually be inconvenient for some shoppers by requiring longer drives and overwhelming them with too many choices, says Jeff Green, who heads an eponymous retail consulting firm in Phoenix. By contrast, he says, smaller-format stores such as Trader Joe’s and Sprouts are all about a quicker and easier experience. Within the grocery industry, in fact, some even speculate about a future in which smaller stores supplant traditional supermarkets, according to Jeffrey S. Edison, a principal and the CEO of Phillips Edison & Co., which specializes in boosting the value of underperforming, grocery-anchored centers. “We’re not big believers in the model, but the idea is that the center of today’s supermarket will basically go away,” Edison said. “You’ll buy your Cheerios, Campbell’s Soup and other commodity items online, and then go to smaller-format stores to buy your perishables, prepared foods and meats.”

Fashion, electronics and other nonfood chains are also using so-called curated merchandise selections to make shopping more convenient, observers say. Wein cites British fashion retailer Ted Baker, which operates some 350 stores and concessions across 24 countries. “Ted Baker is my new -favorite store,” she said. “They have one of each size on the rack, with plenty more in the back for you. The customer service is fantastic, but the point is, you can breathe and see. It’s much more of a boutique experience.” By comparison, shopping at some department stores can seem like a chore, Wein says. “You walk through and the racks are just packed, with clothes falling off the hangers and onto the floor. If there are 10 places in a store where you can find a black skirt, that is not convenient for anyone.”

Though the specialty sector does not typically rely on convenience-oriented strategies, the showroom-style stores of such chains as Bonobos, Pirch, Restoration Hardware and Warby Parker highlight the potential benefits of making shopping easy by eliminating clutter, Wein says. Restoration Hardware’s new RH showrooms feature multiple floors of carefully arranged furniture, lighting and other home furnishings — all of it sold as delivery-only, with no backroom for inventory. “RH, the new Restoration Hardware format, truly looks like a home you would never want to leave,” Wein said. “Affluent shoppers — RH’s target customers — can walk in and say, ‘I want all of this.’ That’s convenient. Customers don’t have to run around town and deal with an interior designer. They can just walk in, love it and have it.”

Formerly online-only retailers like Bonobos and Warby Parker, in particular, are adept at running showrooms in ways that please the customer, says Green. “They’re already accustomed to delivering all of the merchandise,” he said. “We’re going to see this [showroom model] more and more as other online retailers go into the brick-and-mortar space.” Bonobos and Warby Parker take convenience a step further by focusing on personalized service as well, Green says. “Convenience is more than just your proximity to a store,” he said. “It’s also about how much interaction you have with the salesperson.”

The showroom model is certainly not appropriate for every retailer, cautions Jerry Hoffman, founder of Hoffman Strategy Group, an urban retail and integral-use consulting firm. “When people go shopping, they often still want to leave the store with their items,” Hoffman said, “but if you’re doing something like tailored clothing, then the showroom is a brilliant model.”

In adopting smaller store formats with fewer items on display, retailers also risk losing out on revenue from impulse purchases, notes Underhill. “Part of what we know is that in the grocery store and mass-merchandiser sectors, half of what we buy we had no intention of buying when we walked in the door,” he said. Even something as seemingly benign as removing clutter can, in some cases, carry unintended consequences, Underhill says. “If you stop somebody on the street or in the store and ask whether they like clutter,” Underhill said, “it is sort of like saying, ‘Do you beat your wife?’ The answer is always no. But research shows that once you take the clutter out, sales decline.”

In its own way, in other words, a “stack it high” merchandising approach can communicate messages about the balance between price and convenience at a given store. For Nick A. Egelanian, president of SiteWorks Retail, an Annapolis, Md.–based consultant firm, JCPenney’s failed reinvention is a cautionary tale about the need for such messages to be easily understood by consumers. “When Ron Johnson went to Penney [as CEO], he moved to everyday low prices trying to compete with the Walmarts and Targets of the world,” Egelanian said. “But Penney was never going to be as convenient as Walmart and Target, which are positioned much closer to the customer.”

Moreover, Egelanian observes, Johnson’s focus on bringing specialty store-in-store concepts to Penney sent a contradictory message — namely, that the chain aimed to focus on specialty retail, which is typically associated with higher prices. “Trying to be something that appeals to the discretionary income of the customer, that didn’t work, either,” Egelanian said. “If it doesn’t compute, you don’t go. Johnson confused customers, and they stopped going.”