Resizing the Retail Footprint

For those of you who split your shopping time between shopping on the computer and going to the store, you are not alone. There are more and more folks pre-shopping than ever before. So what does that mean for retailers and landlords?

For office managers or parents of kids returning to school

know, Staples has all of your office/school supplies that you will ever need. Their typical stores carry around 7000-8000 SKUs or different items in stock. They are considered a “Junior Anchor” in retail real estate speak with around 18,000 to 24,000 square feet per store. Their new model, introduced last year, will be about 12,000 square feet and carry about 15% fewer SKUs.

How can a store shrink their footprint and inventory and be successful? Like so many retailers… follow Apple. The major retailer’s stores are beacons for innovation. Shopping is an experience, with kiosks and a touch and play ability of their products.

Apple have the success to show for it. Each store, at 7900sf, earns about $5600 per square foot per year in revenue. The closest competition, Tiffany & Co., is half of that with Coach rounding out the top three. For those of us not shopping at Tiffany or Coach; Best buy has around $800 per square foot in revenue. In order to mirror Apple’s success of a shopping experience and its revenue per square foot, Staples is looking to have new kiosks and online shopping within their new stores.

Other types of retailers are getting into the mix. When was the last time you saw a “red roof” Pizza Hut under construction? The older model was in and of itself its own signage. However stand alone “pad” stores cost more money than their inline brethren on a per square foot basis. The new look Pizza Huts are not only taking advantage of these lower in line costs, they are also shrinking the foot print by 30-40%, for less overhead.

With shrinking footprints, what does this mean for property owners? For many owners it may be about diversity. Are there ways, over time, to add more suites to your space if you have downsizing of tenants. Rather than look at the negative, think of the diversity of income and the experience for shoppers. Who are complementing retailers for your existing base? Furthermore retailers will be demanding a better experience for their shoppers, so expect façade and ground improvements to be key among tenants.

Written by Chris Norwood, NAI Norwood Group

For more information about commercial real estate, please visit our website: www.nainorwoodgroup.com