Business Management News

You know your industry, let us help you manage your small business.


Anchors Away

Monday, August 31, 2009

How Small Retailers Can Stay Afloat Even If A Big Box Sinks
By Phillip M. Perry

When a large Marshalls anchor store closed at a mall in California’s San Fernando Valley last fall, the remaining retail tenants were faced with a dilemma: How could they survive until mall management found a replacement?

One option was to do nothing. Just hunker down and accept some dismally slow customer traffic until the problem was resolved.

The retailers figured that wasn’t a solution. Instead they banded together to design and promote a soccer weekend complete with celebrity players from college and professional teams, soccer clinics and related promotions.

“The event was a tremendous success,” says Donald J. Bredberg, managing director of Stone Creek Partners, a real estate consulting firm based in Westlake Village, Calif. “It drew crowds of families.”

If you operate a retail outlet in a shopping center or mall, that California story may sound familiar. The recession has resulted in a steep pullback of consumer shopping habits and a shuttering of many big retailers including Linens ‘n Things and Circuit City. Such chains have long operated so-called anchor stores—high profile operations prized for their ability to attract crowds of shoppers that neighboring small retailers depend upon.

The failure of an anchor store can cause a shock that’s as much emotional as financial for surviving retailers.

“If you are a small retailer, the closing of an anchor store is almost like the loss of a loved one,” says Bredberg. “You cannot deny the psychological impact on you and your fellow shop owners.”

But, you can take action to mitigate the potential financial loss and improve the well-being of the surviving small retailers. Here’s how.

Create Value
The California shop owners demonstrated that aggressive retailers can take action to spark business and turn around a bad situation. The secret is to create a more exciting retail environment that recaptures the public’s attention.

“Attracting retail customers is really about value—not only with the merchandise but with the whole shopping experience,” says Jule Gassenheimer, professor of marketing at Rollins College’s Crummer Graduate School of Business in Winter Park, Fla. “Creating a good experience is what made Starbucks successful, especially in the days when it was considered the coffeehouse. For many people it is still the third place away from work, away from home.”

The same principle applies to your shopping center.

“People will come back to your mall if the experience is there,” says Gassenheimer. “They are not necessarily drawn just to merchandise—after all, they can get that at a lot of other places.”

To create a great experience for the public, start by finding out what new initiatives mall management may be planning.

“When an anchor leaves, developers often step up to the plate with some creative marketing,” says James Dion, president of Dionco Inc., a Chicago-based retail consulting firm. “There are tons of different promotions that can get footsteps in the mall.”

You need to face the fact that promotions cost money and that the developer may ask all tenants to increase their contributions to the center’s marketing fund, which normally runs from 3 to 10 percent of rent.

Participate in any large scale promotions planned by management.

“There are efforts being made by some of the larger developers to improve their marketing,” reports Murray Shor, veteran commentator on the mall industry and publisher of Shopping Center Digest newsletter. “They are running more promotions—such as fairs, auto shows and charity events—to bring people to their malls. Smaller retailers can participate in these promotions with basic marketing efforts using flyers, advertising and radio spots.”

Join Forces
But don’t just rely on mall management. Join forces with your fellow retailers to dream up successful promotions.

As for getting organized, you may already have a structure in place in the form of a local retail organization.

This is the time for your organization to soft pedal any ongoing political battles with mall management and
start working collaboratively.

A team effort can help keep retailers from jumping ship and leaving depressing empty storefronts in their wakes.

“Everyone is invested in your location,” says consultant Bredberg. “If two or three retailers decide to take a loss and move on, that’s not good for you.”

Don’t have a merchants association? You can still group with your fellow retailers to brainstorm ideas for stimulating foot traffic.

“If your center does not have a strong merchants association, this is the time for everyone in the mall to become big buddies and make sure everyone works the oars on the same boat,” says Bredberg.

Spark Excitement
Design promotions to appeal to your target audiences. If you’re catering to young families, for example, you’ll want events that kids love.

Consider these other ideas:
1. Farmers market
“Some malls have asked farmers markets to come sell their goods to bring their traffic in,” says Gassenheimer. “Farmers markets are really entertaining, and people love them.”

2. Student events
“When you bring in students, you also get their friends, parents and grandparents,” says Gassenheimer.
Consider providing a venue for a high school band performance or art fair, for example.

3. Charities
“Events that are connected with the community will bring in people,” adds Gassenheimer.

4. Mall money
Some malls are creating their own currency. For example, shoppers may spend $85 to get $100 of mall currency. Shoppers can then spend that $100 at shops in the mall.

5. Green initiatives
Promote the concept that mall shopping is eco-friendly because customers only need to make a single car trip.

6. Buy-local promotions
Promote the idea that when consumers buy from local businesses, they help support local employment, local neighborhoods and even the local tax base.

“Sales taxes pay for first responders such as police officers and firemen,” says retail consultant Dion. “Inform shoppers how taxes contribute to the quality of life in your community.”

7. Street entertainers
Jugglers, singers, magicians, mimes—any performer who generates interest and excitement can be effective at grabbing attention.

“They are often great quality and can really increase traffic,” says Dion.

One more thing: Is it time to change your operating hours?

Faced with a slowdown in sales a year ago, some retail tenants at a mall near Miami decided to modify their store hours to take advantage of the foot traffic from the center’s new late night entertainment events. They shifted from the traditional 10 a.m. to 9 p.m. to a new schedule of 3 p.m. to 1 a.m. It paid off in more sales.

While team efforts are great, don’t overlook smaller events at your own store. Take a tip from successful big guys such as Williams-Sonoma, which is known as a specialty retailer of professional-quality cookware.

“Williams-Sonoma has been good about doing cooking classes,” points out Gassenheimer. “That shows the value of going beyond thinking in terms of products into thinking of what related services you can provide.”

A regular in-store program can be something as simple as local musicians or storytelling by senior citizens.

“If you’re really creative, you can do some things that don’t cost much if anything, but can help hold clientele or bring in new people,” says Bredberg. “The big thing is to try some things to see what works. Don’t belabor whether it will be a tremendous success.”

Be Patient
Dig in for the long haul. Realize that it will take time to rebound from the loss of an anchor store.

“You are likely to be anchorless for several months or maybe longer,” says Bredberg.

Can you help shopping center or mall management locate a replacement anchor? Not likely.

“Know that the mall owner is as anxious as you are to replace the anchor,” says Bredberg. “You are like a passenger on an airplane encountering turbulence—you know the pilot wants to keep the plane in the air as much as you do. For the owners, the amount of money invested in the mall is massive so accepting failure is not an option. Success will depend on time and creativity.”

Bear in mind that your shopping center may look different once the dust has settled.

“Many times malls end up getting retrofitted and reworked when anchors close,” says Bredberg. “Rather than a new anchor, the space might be devoted to entertainment or to a bowling alley or to a cluster of restaurants. The mall’s nature can change from a center featuring convenience to one supporting lifestyle activities.”

Success, then, means staying flexible with your promotions and planning for the long term.

“When an anchor store closes you have to realize your business model just went out the window,” says Bredberg. “No one wants to give up, so you only have one option—get strong.”

Veteran New York City writer Phillip M. Perry enjoys shopping at all of his local independent retailers.


Connect with Us