ICSC Coverage: Retailers Embrace Customers, Change

by Nate Hunter

San Diego — Retailers stay relevant by offering unique merchandise and competitive pricing.

San Diego  — Capturing a consumer’s dollar isn’t nearly as easy as it used to be, according to ICSC panelists and attendees. Patrons now expect more out of their stores, including better deals, varied merchandise and an overall pleasant shopping experience.

No one knows that better than Scott Nelson, senior vice president of real estate for Target, and Alex J. Lelli, senior vice president of growth and development for ULTA Salon, two panelists from “A View From the Top of the Platform” session.

Both experts believe that it takes competitive pricing and a unique selection of merchandise to keep their stores competitive in this new economy.

“That’s always the question: Do you fight the price comparison or differentiate?” Nelson pondered. “One of our big strategies is aligning with designers that offer different and compelling products that you can’t get anywhere else.”

Target, for one, is known as much for its high-end designer collaborations as it is for its low prices. The chain experienced overwhelming demand for its Missoni collection, which made its debut last year. It’s hoping to strike gold again this holiday season when it co-launches a special design collection with Neiman Marcus that will feature 24 designers like Marc Jacobs and Diane Von Furstenberg.

ULTA, meanwhile, is in growth mode as it looks to add more cosmetic lines and stores to its portfolio.

“We have a very good method of keeping our merchandise changing and adding new brands,” Lelli said. “It’s so important to make sure you don’t lose sight of what’s going on inside the store. If you’re not doing something exciting on the inside, nobody’s going to come in. We constantly want to keep the customer interested in what’s new. That’s why we added Clinique and Lancome to our stores. New customers come once we add new brands, and we continue to experience store growth.”

Lelli noted ULTA’s comparable sales growth was at 9.3 percent for the second quarter of 2012. He also mentioned the company is hoping to open more than 100 new stores per year, though he believes this goal is getting tougher to accomplish with the lack of available space.

“ULTA’s growth is centered on new stores,” he continued. “But it takes a lot of creativity to come up with 10,000 square feet these days.”

Nelson has likely felt Lelli’s pain as his company rolls out the smaller City Target concept aimed at penetrating landlocked urban areas. A handful of City Targets are expected to open this year, including one in downtown San Francisco and another in downtown Los Angeles.

“We’re focused on optimizing the capital we have,” Nelson said, adding that Target owns virtually all of its real estate. “We don’t have the kind of development opportunities we had before, so we’re really getting as flexible as we can in terms of how we design our stores.”

Most of the smaller City Targets contain little more than 100,000 square feet, much of which is spread out over multiple levels, according to Nelson. Target’s new concept should provide a more diversified tenant base for the centers, as well as a more complete shopping experience for patrons, many of which aren’t used to buying groceries at a center like downtown Los Angeles’ FIG at 7th, City Target’s soon-to-be home.

Patrons at Newport Beach’s Fashion Island are undergoing a similar experience. The high-end shopping center recently opened a 32,000-square-foot Whole Foods. This was the first Whole Foods in Newport Beach and the first to open in a regional shopping center setting.

“This is a really unique use for this type of regional center,” said Dan Sheridan, president of retail properties for Irvine Co., which operates Fashion Island. “It fits very well with our vision for Fashion Island and with the city’s open-air, healthy environment. It’s in a neighborhood with offices and hotels, and this Whole Foods provides 10 to 12 unique shopping experiences within the four walls of its store. We’re trying to create a mix of uses and operators that really compel people to come to the center more often, and this will certainly help.”

Sheridan’s strategy of welcoming Whole Foods into Newport Beach and into the regional shopping center setting exemplifies what retailers must focus on to remain popular and profitable — uniqueness, a targeted demographic, diversified shopping experiences and an ambiance that complements that of the general area.

— Nellie Day

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