Posted onJanuary 27, 2025|Comments Off on Exploring Boomer Spending Trends: Insights for Marketers
Unlocking the Spending Power of Boomers
Americans are a diverse group, and their spending reflects it beautifully. Look at the picture above and the chart below and you will discover that Boomers spend the lowest of overall per capita, but they rival Millennials in their entertainment spending. Yet when you casually observe advertising in any format, digital or print, you rarely see a senior enjoying themselves on an adventure tour, or on an expensive trip to a theme park. Doesn’t make sense!
The percentage of global population by demographic cohort and estimated spending shows a similar situation:
Generation
Share of population (2024)
Global spending (2024)
Gen Alpha
19.5%
10.6%
Gen Z
24.6%
17.1%
Millennials
22.9%
22.5%
Gen X
18.3%
23.5%
Baby Boomers
12.1%
20.8%
Greatest and Silent Generation
2.6%
5.5%
Understanding these percentages assists in understanding the social and economic impacts that each generation has on our industry.
When comparing the population percentages with spending percentages, the following observations can be made:
Baby Boomers: Although they make up 12.1% of the population, their spending represents 20.8%, highlighting their substantial economic influence.
Millennials: Represent 22.5% of the population and their spending is almost the same.
Gen X: Consist of 18.3% of the population but account for 23.5% of spending. This generation shows a higher spending power relative to their population size.
These comparisons reveal that while some generations may have a smaller population size, their economic impact through spending can be disproportionately large, reflecting their purchasing power and consumption patterns.
Boomers, despite being the lowest in overall per capita spending, rival Millennials in entertainment expenditures. They enjoy expensive vacations, gifts for family, and trips abroad, highlighting their substantial economic influence in the entertainment sector.
How often do you see an ad for anyone over 65 doing anything but taking drugs? But they have money and spend money on expensive vacations, gifts for their family, and trips abroad.
If you are concerned about your return on investment and you are in the entertainment field, why aren’t you pitching to this group? Just common sense, don’t you agree?
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Posted onJanuary 12, 2025|Comments Off on Reviving Community – New Trends in Location Based Entertainment
Now more than ever, we need places for people to congregate and connect. With every lifestyle, regional, and community center showing big empty spaces from tenants that have gone dark (due to Covid-related loss) or just bad management and strategy, innovation is the key to rebranding and renewed Covid has been catastrophic for business with major shutdowns and the explosion of e-commerce.
But some things can’t be replaced, and I believe will never be replaced, such as the need for connection and communal gathering places. The isolation and emancipation screens bring for young and old elicits a more urgent need for human contact. As good designers, developers and owners, we can provide interesting, exciting and innovative experiences, and we can bring visitors back to our shopping centers.
The genres of new concepts are as old as the shopping centers themselves and as new as technology will allow. Here are some of the notable Location Based Entertainment (LBE’s) we think are reinventing the genres.
Eataly
Eataly is the delicious Italian gourmet food market/food court on steroids, with 10 locationsin the United States, including New York and Los Angeles.
Eataly is a global operator in Italian food, offering a concept combining high-end Italian food restaurant with retail.
Eataly’s business model was built around the “eat-shop-learn” concept, offering consumers globally a selection of high-quality Italian restaurants and retail experiences with an overwhelming variety of the finest Italian local “specialties” often impossible to buy abroad.
Eataly operates 27 directly operated flagship stores (14 in Italy, 10 in North America and 3 in Europe) and 26 franchised stores located in the Asia Pacific countries and Middle Eastern region, generating revenues of over €800 million globally (including franchise store sales). This indicates average store sales of £15 million per location.
Eatertainment and Sports
I hate the word Eatertainment, but it has become common in our lexicon. The concept involves combining eating and drinking with fun, sports and games. Anything from baseball to golf to bowling to curling (yes, curling!) are tapped to be themes for these venues, which fit nicely into a retail or mixed-use project.
The first class includes many new restaurants which offer simulators for popular sports such as golf and Formula 1 car racing. Top Golf is the most popular sports themed venue with the highest number of units and top grossing sales per unit of the new sports/food/beverage concepts. This concept combines golf simulators and games with food and beverage. The company offers more than 100 plus units with total sales of almost $1.8 billion, average sales per unit of $17-$18 million on newer units sized at approximately 65,000 square feet. Gross margins are known to be about 40%, indicating an EBDITA of $6.8 million. With an industry standard payback of four years, this indicates a warranted investment of more than $27 million, or $415 per square foot. This is the most proven and mature business model of the sports/food & beverage models.
Other models include:
F1 Arcade is based on iconic Formula One racetracks and is offered in Boston, Washington DC, Las Vegas and London. Featuring craft cocktails and seafood, Kobe beef, and bar fare with an upscale theme, the venue allows entrance to customers from 7 years of age and older. The Boston unit is approximately 16,000 square feet. Kindred Concepts, the parent company, recently raised $130 million in financing for expansion.
Camp Pickle is scheduled to debut in Denver and Tulsa in 2025. This new attraction will be like an old-time summer camp, the kind your grandparents attended. Of course, Pickle Ball is the theme, and food beverage and other activities are offered.
Spin is a concept created by Susan Sarandon in New York in 2009, themed on competitive ping pong. With locations in New York, Boston, Chicago, San Francisco, Toronto, Philadelphia, Seattle and Washington DC, the menu provides farm to table, locally sourced food. Units range in size from 4,000-12,000 square feet, fitting nicely into a shopping center configuration.
SixesSocial Cricket offers competition in a sport that many Americans know nothing about… Cricket, with karaoke offered as backup! The food is said to be excellent, featuring typical bar-fare. Bookings include an adjoining table for food and beverage. The first U.S. unit is in Dallas at the Colony.
Goodsurf is an 8,000 square foot sports restaurant based on surf simulator technology that allows waves to be created by machines, taking much less space than a typical wave pool. Food offerings include burgers, fries, vegetarian options, and ice cream for the kids. The first location is in Dallas.
Flight Club is a high-tech dart simulation game with seven units located in the United States in Las Vegas, Denver, Atlanta, New York, Los Angeles, Houston, Boston, and Chicago. The food offerings are gourmet versions of flat breads, tacos, salads and fries. The newest unit is in Denver at 10,000 square feet, close to Coors Field and the Ball Arena.
Culture
My favorite in this category is Meow Wolf, which began in 2008 as a collective of anarchic artists in Santa Fe (NM). It offers interactive installations, each with a different theme. The attraction offers six locations including Santa Fe, Las Vegas, Houston, Washington, and Denver. Each location has a different immersive art theme with hundreds of storytellers from throughout the world and local artists’ features.
The newest and largest store is located in Denver and features more than 70 immersive attractions in 90,000 square feet. (The Houston location is only 32,000 square feet.) Convergence Station, as it is called, is a multiversal travel experience between four alien worlds, inspired by the location near two freeway overpasses.
The newest store is scheduled to open in 2026 and is in final lease negotiations that will bring a Meow Wolf exhibition to West Los Angeles. The location is a vacant movie theater complex. The theme will be cinema. Meow Wolf’s move into its largest market yet is intended as a statement piece, a declaration that weirdness and art-focused ventures still have a place in an immersive economy that’s been racked by closures and layoffs, Meow Wolf included.
In April, Meow Wolf announced it would cut 165 employees. Exhibitions in Denver and Las Vegas were heavily affected.
General admission is $40 for adults and $35 for children and passes are available. The business model is based on buying/leasing low value properties in subsidy rich locales.
Destruction LBE’s
Can we talk about Las Vegas, the lab for all new location-based entertainment? How about Dig This, with an admission price of almost $205? This is a wrecking lot with real earth-moving machines, caterpillar D5Ks, bulldozers, and mini excavators. With instructions being the first step, a neon yellow vest and a hard hat are provided with in-cab training. Then, you get turned loose to wreck real things like a car! This is about the most male-oriented attraction of those researched!
Adventure and Technology Driven Formats
Location based virtual reality is a whole world unto itself with a following that includes mostly young boys and men. But the industry is making a Location Based-Social interaction with games to engage the consumer in a community experience. Some of the themes include war, exploration, and adventure. Research shows that female consumers are loving some of these group games, those that don’t require you to keep a body count!
(Now maybe I’m old-fashioned, but explain this to me. A whole bunch of your friends put things over their eyes where they can’t see each other nor speak to each other, nor touch each other. These are group games that seem to me to be a totally weird way to connect. Just this consultant’s opinion, but I think we have lost our way in terms of entertainment value and the sense of connection that is required to be human!)
Still, one concept is killing it!
Sandbox VR is a location-based concept out of the UK and Ireland, with two locations in the UK (one in London, one in Birmingham), and 31in the United States. Of these, seven are in California, one in Chandler (AZ) and another in Mall of America (MN). The average spend is £37 in the UK and $55 in the United States. The UK locations earn between $1.9-$2.6 million, with an EBITDA of 35%. Capital expenditure on the equipment ranges from $500,000-$750,000. Buildout of the average 5,000-6,000 sqft location ranges from $1.5-$3.0 million, cost of which is borne by the lease and/or can be negotiated with the landlord. The games are story driven and can change constantly. Collaborations with Netflix and Paramount are planned to provide content.
At the writing of this blog, Sandbox VR launched a game based on Netflix’s Zack Snyder’s “Rebel Moon.” This experience has players “gear up with their fellow rebels for battle against the ruthless forces of the Motherworld’s military,” per the game’s description. “Inspired by the vision of legendary director Zack Snyder, players become members of the resistance and are transported to the planet of Daggus, descending through skyscrapers, streets, and a subterranean mine while they defeat enemy soldiers and spacecraft.”
With the development of operating economics reported, this is one of the first VR experiences to complete a “proof of concept” and earn economic industry-standard return.
Intellectual Properties
My favorite location-based entertainment center based on an IP is the Crayola Experience. This format is based on (what else) the iconic Crayola Brand, with the flagship attraction in Easton (PA), where the factory and headquarters are located. At 65,000 square feet, and with lots of colorful activities to do, the attraction boasts an adult/child entry fee of $26.99. Other locations include Chandler (AZ), Bloomington (MN), Orlando (FL), and Plano (TX). Activities offered are very creative such as the Activities Studio, The Cartoon Creator, and the Adventure Lab.
In 2022, the brand began a licensing concept. The growth strategy presented in 2022 includes extending the location-based entertainment footprint domestically and internationally. “We are now looking to develop licensing partnerships that bring new capital and expertise to accelerate our LBE expansion, particularly internationally where local market access and expertise are important,” said Victoria Lozano, Executive Vice President Digital Strategy, GM Attractions & Retail for Crayola.
The first Crayola Experience opened 25 years ago as The Crayola Factory in Easton (PA). Crayola saw an opportunity in LBE and in 2013 reimagined the downtown attraction as Crayola Experience. The company also owns and operates Crayola Experiences in Orlando (FL), at the Mall of America in Bloomington (MN), in Plano (TX), and in Chandler (AZ). With venues ranging from 20,000-60,000 square feet, Crayola Experience engages more than 1.5 million kids and adults annually in activities inspired by/and incorporating proprietary Crayola products and technologies.
Crayola is continuing to develop creative concepts that will help scale its events and exhibitions LBE business. Early this year, Crayola debuted IdeaWorks at Philadelphia’s Franklin Institute, a traveling exhibition encouraging families to explore innovation, invention and design thinking. The company also collaborated with OceanX, a global ocean exploration nonprofit, on a national takeover tour of the Crayola Experience venues that began this summer and runs through summer 2022.
Other notable concepts of IP-based LBE’s include the LEGO Discovery Centers, branded popup retail locations with characters such as Barbie and Peppa Pig. Today, studios and other IP owners are monetizing their brands by creating places where their properties can be owned or licensed out to the LBE owner. One great example is MONOPOLY LIFESIZED, created by Habro (self-explanatory), and Sony has opened a division to license its intellectual properties for developers.
Other retail pop-ups with a brand LBE include Hello Kitty pop-up cafes, the Rolling Stones pop-ups, and the Barbie branded sales areas at Selfridges in London.
Conclusion
Most of the examples presented must continue proof of concept and financial goals. We hope many will stand the test of time and blossom to enrich our industry!
What are your favorites? Let us know, we always love your input and experiences!
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Posted onDecember 11, 2021|Comments Off on Retail Trends for 2022 and Beyond
As the Christmas shopping season continues and New Year’s is not far behind, our thoughts turn to the what’s next. What is the future of retail? The question is still on everyone’s mind and no one has answered it adequately. That’s because we are not fortunetellers, but we try very hard to predict the future, in spite of our shortcomings.
This week I listened to a podcast from Dana Telsey, a retail expert I greatly admire. She always says things that I think, “Gee, I wish I had said that, and so eloquently.” She talked about the three Ps in understanding and predicting change in the retail marketplace:
Process
Purpose
Profit
I keep thinking about these words and continue to develop insights that are essential for an understanding of the future of retail. Try it. Just think about the words and the application to your particular product, location, experience or store. You will find you are a brilliant prognosticator!
Just for fun, I came up with my own “10 Trends for Retail” that are practical and may help you plan. They are as follows:
Consolidations, bankruptcies and other market adjustments will continue until retail product, market supply and demand are equalized. They are good for the industry as a whole, however painful they may be for affected entities. The U.S. had too much unproductive space before the pandemic.
E-commerce and omni-channel selling of goods and services will continue. These formats work hand in hand with stores. They supply avenues to sell more goods! In this realm, the consumer is king. They have spoken loudly about their preference for convenience and choice. Things like BOPIS, curbside pickup, warehousing and other trends will continue because they are popular and help sell.
Retail THEATER and EXPERENTIAL RETAIL will drive successful locations. It is time we stopped being lazy about our shopping experiences.
Great locations will continue to thrive. A-mall location will evolve into even more mixed-use destinations.
The opportunity for development and deepening of our outdoor/lifestyle formats has never been stronger. We must recognize and acknowledge the essential change in post-pandemic behavior. Consumers require more space indoors and have a preference for being outdoors if possible.
Discounters and “Dollar” stores provide the biggest growth opportunity currently. This is not permanent. These types of retailers always thrive in a recession. (Yes, we are in a recession!)
Cause and purpose are missions to always keep in mind in retail. Millennials prefer products that offer some good to the world.
“Value” is another concept to understand and build into your mission. It does not mean cheap; it means giving the consumer something she treasurers as she shops.
Exurban and suburban locations supply the best opportunities for growth. Keep this in mind as you develop and expand.
Shifting demographics and the concomitant shifts in Process, Purpose and Profit will drive retail development.
Keep these prognostications in mind as you move along with your day, today and tomorrow. Here’s hoping they will help you bring joy and success to you!
Posted onJuly 9, 2020|Comments Off on The Rumors of Retail’s Demise Are Greatly Exaggerated – Who Will Win, Who Will Lose?
A new poll conducted by Chain Store Age asked about the best customer service retailers across 160 retail sectors. The survey was based on more than 20,000 customers who have made purchases, used services, or researched data about the company from 2017 to 2020.
The Top 3 made me laugh because… well, look at who they are:
Disney Cruise Lines
Neiman Marcus
The Ritz-Carlton
These top three companies are high-end with customers residing in the top income tiers. Besides the irony of Cruise lines in the age of Covid, a department store that recently declared bankruptcy, and a hotel chain when few are traveling, one of the most important customer service behaviors of these examples includes treating customers well.
The other seven retailers noted below in rank order, appeal to a broad demographic, several in the mid-market category:
Edward Jones
Chick-fil-A
L. Bean
National Storage Affiliates
Embassy Suites
Publix
Beau Coup (Wedding, Baby Shower and other “Significant Event” Party Favors)
While we understand that many businesses in the middle to moderate income space equate cheaper prices with less sales associates and very little customer service, that won’t work in these very competitive retail times.
As an example of doing it right, number 1, Disney, began calling their customers “guests” early on in their corporate culture. The difference between a guest and a customer is clearly shown in the simple definition of the two words:
A customer is a person or organization that buys goods or services from a store or business.
A guest is a person who is invited to visit the home of or take part in a function organized by another.
When #2 ranked Neiman shook up its executive suite in 2019, Scott Emmons, who led the company’s “Innovation Lab” wrote as a parting statement: “…we know that retailers are far from delivering what they must to guard against doomsday scenarios for physical stores. After 16 years working for a top luxury retailer, I can say with confidence that traditional players in the US and abroad are not innovating the right way. Processes are broken, execution is too slow, politics stalls decision-making and resources are too scarce.”
Retail is a microcosm of the culture it lives in. One of the first steps in solving a problem is to recognize there is a problem! The wrong way to be a stellar retailer I liken to Trump, who’s following has fallen precipitously in recent weeks. To be successful, retailers must aspire to be good enough for the majority of the population who now demand to be treated well, whether shopping at a Walmart or at a Sur La Tab. These consumers are driving the future of retail, and on a larger scale, the future of the United States! As we begin to thaw from the current months of lockdown and America returns to stores, restaurants, museums, and travel, the CUSTOMER EXPERIENCE will determine the winners and losers at the full spectrum of retail. And while many of our favorite brands may not be left standing, those who continue to sharpen their “experience” skills will come out on top.
Do you agree or do you believe out-of-home shopping is gone forever? Let us know your assessment. We always love to hear your view!
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These days, my blog just seems to write itself. Experiences and new ways of accomplishing almost everything, from washing clothes to shopping, are the norm. But as humans, it takes an exceptionally long time to change our ways so that all our new activities feel stiff and unfamiliar. Take for example, shopping, my passion! Here in Napa County, we are in Phase Two A of the process. That means many retail locations can reopen, except ones that involve person-to-person contact like salons, nail parlors, gyms, and spas.
About a week ago, my husband and I went to the University of California San Francisco hospital, where he had a follow-up appointment for a recent health scare. Since no one is allowed in the hospital other than the patient, I had to occupy myself with walking around nearby.
UCSF is in Mission Bay, as is the beautiful new Chase Center Warriors and concert arena. This venue opened in September 2019 at a cost of half a billion dollars. Besides the 18,000-seat arena, the project boasts 580,000 square feet of office space and 100,000 square feet of restaurant and retail space. Additionally, a new light rail system connecting the arena to downtown is also proposed, at a cost of $1.0 billion. The MANICA designed arena opened with a Metallica concert playing to a sold-out crowd.
Huge investment full of vision and promise. A community gathering space that would be alive at least 250 nights each year. The one and only first-class arena for concerts in San Francisco. A new space for artists to add to their tour routes! We attended the Sara Bareilles concert in January and though the house was set in the concert-configuration at 10,000-capacity, it seemed like we were onstage with her.
Here is what it looks like now:
Eerie. A boarded-up ghost town cordoned off to all seeking to visit. The many restaurants were either not yet operational when the Pandemic began or closed now because of it. A special favorite of Northern Californians is Gotts, a local hamburger and milk shake joint that now offers sushi and other fancy stuff. I almost cried when I saw this:
How could this happen? Who could have predicted this devastating blow to a brand-new entertainment venue in one of the best entertainment regions in the world?
And just like that, everything changed again! Last week, stores were allowed to open in Napa County, where I live. I was thrilled. It was advertised that the Napa Premium Outlets were not yet open, but that the Vacaville Premium Outlets were (both Simon Properties). I drove the 35 minutes to the Outlets and was greeted by a very spotty opening sequence. Most stores were still closed, and signs disclosed they would be open next week or the week after. The few stores that were open look like this:
One or two customers in each shop. The stock was plentiful because it has been sitting in a warehouse for two or three months, awaiting opening of the stores . I felt particularly sorry for a new William Sonoma Factory store that just opened for the first time, with no customers in its beautiful store:
I have PTSD from trying to keep up with the world. It’s like when you have your first baby, or worse yet, your second baby, and just when you think you have it nailed, their behavior changes, they start sleeping less or more; they don’t like the food today that they loved yesterday; they cry endlessly for no reason, and you want to run away. But of course, you don’t, except for maybe a minute or two when you lock yourself in the bathroom and sob for, which is all the time you are allowed to yourself as a new parent. That is what I feel like today. I want certainty; I want routine; I want to get on a plane and go on my summer vacation; I want to see my grandbabies; I want to kiss my kids! I will just keep muddling along, as I imagine we all will. And I will keep writing blogs that someday may seem like the poetry you wrote when you were a stoned college kid.
What are you doing to stay sane? Share with us your tips for slogging through your days.
Posted onMay 11, 2020|Comments Off on Musings From a Bored Feasibility Consultant
My practice lives and dies with innovation and optimism. With most clients and friends scared to death about what this crisis will bring when it is over, or whether it will ever be over, my normally optimistic client base is taking a nap. They are shut down and not practicing good old American ingenuity.
I have lived through many downturns and booms, a litany of business cycles. My space in the entertainment development world falls between the idea and execution. Is this idea crazy? Does it have legs? Can I afford to develop it? Where will I get development funds? Am I nuts to be thinking this right now? These are some of the questions my practice is hired to consider.
In all cases, I provide one of the following answers:
Brilliant idea. Let’s do some preliminary testing.
Hmmmm, I think that’s been done before, but maybe we can improve on the existing model.
I like it, but I really think the idea needs more development on your part, or if you like, we can help you move it along.
That is the dumbest idea I have ever heard. Save your money, don’t hire me, or if you’ve already hired me, you should fire me!
A couple examples of the ill-though-out ideas:
A large INDOOR entertainment center on the beachfront of a major East coast resort. The branding strategy: It’s a beautiful beach day, let’s all head inside!
A 100,000 square foot museum at a major Indian casino in the U.S. with the theme “The slaughter of the tribe by the White man.” (Footnote: The gamblers at the resort are 95% White.)
A major entertainment company’s decision to disallow wine at a park in France.
The decision to build two competing 20,000-seat amphitheaters across the highway from each other in a major Orange Co. California city.
But happily, more of my practice involves ideas that have you smacking your forehead and saying, “Why didn’t I think of that?”! Some examples:
American Girl Place (built and wildly successful),
Academy of Motion Pictures Museum (to open year’s end 2020),
Hollywood and Highland (the initial plan didn’t follow our advice);
Sony Metreon (also, didn’t follow our advice);
A new hospitality/retail/dining/entertainment/ development in Mecca, the Hajj (they didn’t hire us: I wouldn’t have either!);
A mixed-use sports and entertainment-infused $1.0 billion development in downtown Edmonton (The Oilers got 60% of their Phase One development funds from our numbers, the first time ever a sports venue received public funding in the province):
Maybe soon we will have a few new brilliant ideas to report to you. Until that time, stay safe, well, healthy and hopefully, not too bored!
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Posted onMay 1, 2020|Comments Off on Some Bright Spots on the Jobs Horizon
While we’re all at home doing a bit of R&R and obsessively watching the news (oh, maybe that’s just me) for any glimmer of hope, I found some good news. While the GDP shrank by 4.8% in the first quarter of 2020 and unemployment nationally is upward of 16%, there is plenty to worry about.
But some companies are expanding and hiring like mad! These are the frontline businesses that need to ramp up workers to meet the short-term growing demand for their products and services, according to a report by Linkedin. Here is a list of some of these growing companies:
CommonSpirit Health is hiring for more than 2,200 positions.
Mercy is seeking to hire more than 2,000 co-workers for essential health care roles.
Fidelity Investments plans to hire 2,000 people to fill roles, including financial consultants, licensed representatives and customer service representatives.
Blue Apron is looking to hire in New Jersey and California.
Land O’Lakes is looking to hire to meet increased demand.
Support.com is hiring a for remote positions.
These businesses are essential retailers or those with strong cloud formats They include drug stores; other “Essential Retailers” (especially those that offer cheap good such as Dollar Tree), and businesses that can conduct all business remotely.
Will these firms continue their growth for the long term, or are they merely meeting new demand generated by the COVID-19 pandemic? That’s the big question! Let us know your thoughts? We love hearing from you!
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Recently, I participated in a round table discussion with other retail experts in Southern California. Shopping Center Business just published the following article about that discussion entitled “Revealing National Trends.”
Feature Article, May 2010 – Shopping Center Business
“Revealing National Trends”
Southern California Roundtable leads to discussion of trends that can be applied nationally.
Roundtable moderated by Jerrold France and Randall Shearin
Shopping Center Business held a retail roundtable hosted by Holland & Knight at the City Club on Bunker Hill in Los Angeles.
Shopping Center Business recently held a retail roundtable in Los Angeles, hosted by the law firm of Holland & Knight at the City Club on Bunker Hill. Attendees of the roundtable were Pat Donahue, Donahue Schriber; Sandy Sigal, Newmark Merrill; Jill Bensley, JB Research Co.; Jeff Kreshek, CIM Group; Bill Stone, Excel Realty; Jeff Green, Jeff Green Partners; Mark Schurgin, The Festival Companies; Greg Lyon, Nadel Architects; Julie Brinkerhoff-Jacobs, Lifescapes International; Tamsen Plume, Holland & Knight; Karl Lott, Holland & Knight; and Susan Booth, Holland & Knight.
SCB: Southern California is an important market as a lot of retail trends are created here. What do you get as an overall sense of the market here?
Donahue
Donahue: We are better off than we were a year ago. There were relatively no transactions last year. Things are starting to thaw out. We have exposure to four states and Southern California held up much better than Northern California, Arizona, Nevada and Oregon. Our occupancy in Southern California is even with a year ago, where our portfolio is off 400 basis points. Our rents in Southern California year over year are flat to plus two, versus a portfolio that was negative 11. Out of our entire portfolio, 80 percent is in California.
Stone: Our concentration is in the Southeast [United States]. The Southeast has been better; we have a number of centers there at 100 percent occupancy. When you go to the centers, not only are the parking lots full, but there restaurants are full. There are not as many people shopping out west. The whole country has been waiting for the other shoe to drop. In California, everyone is worried about the state. There has been some hesitation here on the part of people to go out and spend. People are holding their money.
Bensley: I looked at the personal savings rates back to the 1960s. This year, the savings rate is 3.3 percent, and that is down, which is good for the shopping center industry because consumer spending is two-thirds of our economy. Last year, it was about 5 percent. In 1991, during the last recession, the savings rate was at 7 percent. In the 1980s, it was at 10 percent. It just shows you the transition of what we’ve done in taking out money from our homes. That is where all that money came from. It was the spending of cash that was then all lost with the value of our houses.
Donahue: We, as a country, took on more debt in the last 7 years than in the previous 40 years combined.
Bensley: It is astounding. It is bad for retail when people save more, but at some point we have to even out.
Donahue: If we go to what we were doing, we will all be out of business. We have to have a positive savings rate. The idea that you are supposed to live above your means is not good. I’m thrilled we’ve shifted to a positive savings rate. It is going to wreak havoc on our business, there’s no question, but it is going to weed out the people who shouldn’t be in this business. Circuit City, Linens ‘N Things and Mervyn’s only lasted 12 months in the downturn. These aren’t retailers who weathered the storm. They shouldn’t have been in business when they were. This recession is weeding those players out. At the end of the day you will come back with a much stronger economy, a much stronger country, and consumers who are doing the right things. We can’t be leveraging ourselves into this.
(Left to right) Stone, Schurgin and Sigal.
Sigal: A lot of the retail failures were a function of the credit markets shutting themselves off. We are seeing a return of some financing to the marketplace. There are the haves and have nots — there are tenants who have access to the capital markets and the REITs who have access. The have nots are just holding on for dear life. If their debt gets called they are done. California is such a large market, you can’t say ‘California is recovering.’ We have centers in the inner city, denser communities. That customer has continued to visit because there is nowhere else to go. Our tenants are the 99 Cents Only and the discounters. In this kind of environment, their marketplace has grown. They have the base who has no one else to go and they have a new group of shoppers. A lot of people will discover retailers like Walmart, K-Mart and Target, and once they discover it, they will keep going. Our L.A. region has seen no increase in vacancy. We are still at 95 percent. In San Diego, we’ve been affected; we are 400 basis points worse there, just around 90 percent. It is a function of high rents and it is dependent on the housing market. The Colorado market has been our best market. It has been steady…
As a corollary to my last blog, I am thrilled to provide a recent real world and personal example of a first class retail experience I had with the group that owns the “Cheap Chic” category. Of course, I am talking about Target. My husband, older son, and I were on my birthday trip to Truckee to visit my youngest son. We weren’t leaving until 9PM because of family scheduling nightmares. We decided to split the 10-hour trip from Ojai, in Southern California, to Truckee in Northern California into two legs. For the first leg, we would drive about three hours to stay in San Luis Obispo (SLO), made famous by a recent episode of “The Bachelor.” (Don’t lie; you watch it just to see how awful Vienna will be, what slutty and inappropriate thing she will say, and how much she will embarrass herself when Jake isn’t looking.)
We took off at 9PM on a Thursday evening. I had two bags packed – one with my essentials (make-up, shades and meds) and one with my clothes. I always count on my husband to pack the car. (That’s the man’s job, right?)
So we took off and spent a lovely first night in a SLO hotel where I only brought in my “essential” bag. The next morning, after a good night’s sleep and an early start, we went out to the car to begin the next day of our journey. We put all the bags in the back of the 4Runner and I noticed we were short one bag.
“Did you pack my red rolling bag?” I queried Charley, my husband.
“No, I thought you had everything in the ‘essentials bag’!”
“Are you kidding me!??” Has he met me? I am extremely high maintenance. When I travel, especially to a cold place, I bring along coordinated outfits including no fewer than three pairs of shoes, no matter how short the trip. And I am not one of those people who can do black, white (or tan), and one additional color. Oh no, I need the pink shirt, the red sweater, a couple of jackets, etc, etc.
There I was, on my birthday trip, with no clothes! And I was wearing ratty old sweats (for the drive), and a pink sweater and jacket from Sears! (Remember my last blog about Sears? This is what I bought along with a pair of red sandals that I, incidentally, didn’t bring to the snow. Oy vey!)
So I stressed for a few minutes and then decided what the hell – there was nothing to be done, another excuse for retail therapy!
Now realize – I had no clean underwear, no socks, no sweaters, and nothing dressy for my birthday dinner… nothing but what was in my essentials bag. And we were traveling on I-5 through the Central Valley of California, not really a stopping mecca. Not a Nordstrom to be found along the way – not in Stockton, not in Modesto, not in Sacramento, nowhere!
“Why don’t we look for a Wal-Mart?” suggested Charley. “We can have lunch and you can get what you need.”
Again – have we met?
But then I got the bright idea. “Let’s look for a Target!” They are my favorite when I go ‘cheap shopping,’ which is a bunch more often since the recession hit.
So we looked for the distinctive logo (which up until then I didn’t realize was a real target!). When we found one, I was thrilled. I was on a mission to get a whole trip wardrobe for under $150.
What would I need? Underwear, jeans, black tops, and a pair of black sweat pants. Remember, I had jackets and shoes, so I was good in those areas! While the boys went to get lunch at the Starbucks in the Target, I picked out two pairs of jeans, a black tank, a black paper-thin long sleeve tee, a black cotton V-neck sweater, three pairs of undies, and a new comfy pair of black sweats. All fashionable, all reasonably well fitting, and none of them cheap looking! I am thrilled to say, I wore all the pieces for five days on the trip, even to my fancy birthday dinner!
And so here’s to you Target, for saving my birthday trip, and being the best in class. Oh, and by the way, I had a ball with my husband and two boys, a trip to remember, uninterrupted by a forgotten suitcase.
I love to shop. I’m talking about reason to live, first thing you think about in the morning, when can I go again love! I guess that is why I have been a retail analyst most of my adult life. So I consider shopping, retail, the shopping ambiance, the retail experience, whatever we call it these days since the recession, I consider these my avocation and my vocation. I am an expert!
My mother imparted this love to me, as is the case with most girls. It is imprinted on us like little ducks from an early age, this need to gather, to get the prettiest, most current, loveliest shoes, sweaters, pants, skirts, purses, that we can afford. And as a corollary, there are certain shopping rules, again imparted by our mothers. For example, my childhood in an upper middle class suburb of Chicago, taught me that there were only a few department stores where we were allowed to shop for clothes: Marshall Fields and Carson Pirie Scott. WE WERE NOT ALLOWED TO STEP FOOT INTO SEARS! Now I know this is deathly un-PC and there were not a boatload of clothes to be had at Sears back then, no “softer side of Sears,” still we were not allowed to step foot into the store on a girls shopping trip.
When I became a retail analyst, that had to change, but I still have the “No Sears” song in my head. As most of us know, Sears has done quite a bit in the last ten years to deserve my scorn. They have made many decisions, none of them based on being a great retailer. Considering the ruthless competitive landscape in retail, it’s a miracle that Kmart (who now owns Sears) has survived. Tough rivals in the discount segment abound, including WalMart Stores, Target, and Costco. All three of these behemoths have much stronger brands and customer loyalty than either Sears or Kmart. And regardless of whether hedge fund manager and Sears chairman Eddie Lampert is involved — his mere presence often seems to make some investors consider Sears’ future as a hedge fund, not a retailer — Sears and Kmart both lost their brand luster many years back.
Why am I blogging about Sears today? One thing Sears had going for it way back when was its great brand of appliances, ease of shopping for them, great repair service and service contracts. They were vertically integrated. So all of our appliances are from Sears and they are for the most part, work horses. But when they break, it has been a tear-your-hair-out nightmare to get an appointment for service. We had a minor part break on our refrigerator this summer and it took six visits to get it fixed because they kept sending the wrong part or the service man didn’t show up at the appointed time or they had to cancel or some other excuse that never made sense. It didn’t bother me too much because the refrigerator still worked, although it was very funny to receive a white door for the unit when the refrigerator is stainless steel! (Doors are very big and bulky to mail!)
The last appliance to break was the clothes dryer. I called to schedule an appointment to get it fixed and knew it was going to be a nightmare, but we bought the service contract so we are on the hook with Sears. The agent at the scheduling center told me I had to wait three weeks. I told him that was unacceptable, at which point he pretty much told me to go “F” myself, that I could take it or leave it, that they had no complaint department, he had no supervisor and if he was in my position he would just leave it alone. So I called a local service to fix the problem and sent Sears the bill with a letter of explanation, a very rational letter, and enclosed the repair bill. I fully expected nothing, but I felt better doing it.
Two months later, my husband got a call (in fact now 4 calls) from Sears. He referred the first caller to me. They told me they were extremely sorry for the way I was treated, but they had no control over their repair servicing arm, which of course, they don’t. He told me he would be sending a check for $18.75 for parts (the bill in fact was $100) and that they would be sending me a $50 Sears gift card for my trouble. Will this make me ever consider Sears again for anything? This is called “customer mop-up.”
So here I was with a $50 gift card for a store that I now had multiple reasons not to shop. I tried to force myself into our local store three times before I finally made it. So what was my experience this time, with the 2010 “softer side of Sears?”
I was sad to see that Sears lived down to my expectations. With so many category killers doing a superb job in their niche, they just didn’t do anything well. They didn’t own the “cheap chic” category, they didn’t own the “cheap/inexpensive” category, and oh my god, the quality of the soft goods was abhorrent!
So they have stuck with the warning from my childhood, “NEVER SHOP AT SEARS!” The store carried cheaply made goods (soft and hard), mostly unattractive, AND FOR A PREMIUM PRICE!!!! .
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