Thursday, January 10, 2008

The Next Best Thing: Micro-retail

by Callison

The way we shop now

Shopping patterns and preferences have segregated into dozens of what demographers call "clusters," described in Michael Weiss's book The Clustered World, as "consumption communities defined by demographics, intellect, taste and outlook."

Each of these clusters (Weiss names 62) has their own initiations, ceremonies and cultural effects - think of the annual rally of Harley Davidson owners in Sturgis, South Dakota, the appetite for adventure-sports that young technology professionals share, or the environmental sensitivity of gen-y'ers - which influence the types of products and experiences each group seeks.

While this market segmentation is not new, it has been manifested mainly through product differentiation and advertising. Now, however, it is starting to direct the style and substance of our shopping destinations.

The so-called lifestyle center is clearly one type of segmentation - though given its upscale offerings, a more apt name might be the "Elite Suburban" center. Another is the rising number of co-tenancy clauses in lease agreements, where one tenant requires the presence of specific, complementary tenants.


These moves signal the start of a larger trend toward what Callison calls "micro-retail." Unlike the "all things for all people" regional shopping mall, micro-centers are targeted, thoughtfully packaged destinations that appeal to a given slice of the increasingly stratified American lifestyle pie.

Like a micro-beer, which is developed as a niche product aimed at specific tastes, these new developments feature carefully chosen ingredients, attention to detail and craftsmanship, custom packaging, and a characteristic, often sociable experience that surrounds its consumption.

Savvy developers will apply similar principles to create 21st century retail destinations, using targeted leasing, packaging and experiences to connect with a particular cluster or clusters.

The Payoff
Like all business today, retail development is far more complex than it used to be. Is it worth it? With its potential for both social and economic rewards, we think so. But don't take our word for it. Next time you decide to kick back and pop a cold one, just ask yourself: Local specialty brew, or Bud? Cheers.

If the mantra used to be location, location, location, today it's tenants, tenants, tenants - with the right mix.

1. Replace the rolodex with research
The days of "rolodex" leasing for large retail centers are numbered. More important than who you know is what you know - about the offerings that will best satisfy your shoppers.

2. Bundle tenants
Tenant bundling can be either horizon-tal or vertical. Horizontal bundling serves a range of needs (apparel, hard goods, specialty, food and beverage) for a defined customer profile. Vertical bundling builds a tenant package around a specific concept, like recrea-tion, wellness, or culinary interests. Resist the temptation of cross-market deals, which dilute performance.

3. Think beyond 3-5-9
People will drive 25 miles, even more, to a place created just for them. Get the tenants you need by selling the idea, not the location.

4. Look local
Including local tenants may require extra legwork, but the effort pays off in a stronger identity and customer loyalty. Shoot for 20% local or regional offerings; consider community organizations or business services as well as stores and restaurants.

5. 30% to 40% food and beverage
Cafes, bars and restaurants are increasingly popular among consumers for three big reasons: less time, more money, enough stuff. Last year, Americans spent 46% of their food budget outside the home, a number that is expected to increase to 53% by 2010. (National Restaurant Association.)

Customized packaging will leverage the value of a well-bundled tenant mix. Establish an appropriate "look and feel," while addressing fundamentals such as convenient access and smart layout.

6. Borrow from other models
Look to hospitality, wellness, cultural, entertainment or other models as a way to focus and differentiate your position. Remember, it's not just about shopping. Good experiences and relevant services rank right up there with more stuff.

7. Ditch the theme
Consumers up to their eyeballs in "reality" TV and synthetic environments ala Las Vegas and Disneyland increasingly value what is tangible, sensual and emotional. The superficial nature of themed environments now strike us as unnecessary, if not silly. Instead, create places and offerings that activate the senses - live music, fresh air, wood you can knock on, looking across the table and having a real conversation.

8. Identify yourself
Loyalty increases when people identify with a place. Foster a sense of ownership and pride by shaping a relevant design character. Be sensitive to time, people and place.
People crave rich experiences. It's a well-documented desire that testifies to a broader search for meaning that transcends material goods.

9. Make room for meaning
What types of everyday experiences will be meaningful to your customer? A moment of peace? An energizing crowd? Family fun? Should they be intimate or grand? Offbeat or mainstream? Urbane or down-home?

Set the stage for relevant "third place" experiences to unfold, and hit home with customers no matter where they live.

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