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South Moon Under offers a mix of men’s and women’s clothing, swimwear, accessories, jewelry and gifts for the home. The company currently has 21 stores in Maryland, Delaware, Pennsylvania, Virginia, New Jersey and New York and is pursuing growth on the East Coast and online. What’s different about this retailer? Though the customers range in age and gender, the sweet spot, according to the firm, is a 20-to-30-something who is well educated, has a good job and loves fashion, art, music and great dining. “It is a rare niche,” says the retailer.
What sets the company apart from others, according to Jay Lepselter, director of real estate, is that it differentiates with its buyers, “doing a superb job of editing the lines that we carry, matching their buys to our customers’ taste, and provide unparalleled boutique-quality customer service in an upscale shop environment.”
Another retailer, Earls Kitchen and Bar, gears everything, from menu to décor to staff, toward attracting its target customer—Millennials. And another, Flywheel Sports, began as a simple idea of creating “making indoor cycling epic.”
What do these companies have in common? They are just a few of the many retailers that are more specialized and niche oriented, a trend that Wilson Commercial Real Estate president Scott Burns says is quickly becoming a national movement. “To compete in today’s retail world—against other brick and mortar stores and the Web—retailers must really differentiate their offerings,” says Burns.
There has always been niche retail—with places like Whole Foods, Lululemon apparel, Sunglass Hut, to name a few, but according to Burns, “today with income disparity, the Internet retailers are picking a segment of the market and focusing on it. They’re doing everything they can to tailor the experience to meet their respective customers’ needs.”
Faith Hope Consolo, chairman of the retail group at Douglas Elliman in New York City, tells Real Estate Forum that the old mantra, “location, location, location,” has given way to “experience, experience, experience.” Brick-and-mortar retailers have realized that they must be entertaining ‘places’ to shop to attract customers, she explains. “And online retailers have come to understand that they must add a physical component to broaden their audience base.”
Another example is Union Market Tustin, a new concept at the District in Tustin, CA, whereby a company is converting a former Borders space into a 22,000-square-foot artisanal marketplace of independent gourmet food, fashion and lifestyle businesses. Union Market Tustin will offer a combination of independent retail and restaurant concepts with a variety of indoor and outdoor communal areas for gatherings and events. The concept’s founders have done this successfully in two other places in the US—OC Mart on 17th Street in Costa Mesa, CA, which served as the seed idea for the ultimate partnership in the OC Mart Mix, followed by the recently opened Market LV in Las Vegas.
Union Market Tustin is the brainchild of Andrea and Russell Young. Andrea Young tells Forum that the concept was originally inspired by the Ferry Building Marketplace in San Francisco. “I was a store owner when the market dropped. I was paying very high rent on a large space and my husband and I came up with an idea to offer stores small square footage, all under one roof, living off each other’s synergy,” she says. By offering spaces that range from 200 square feet to 3,000 square feet, Union Market Tustin seeks to provide independent businesses a launching pad and attract tenants of emerging artisans and brands, says Young.
Current tenants at Union Market Tustin include Hatch, Rolling Boil, Grain and Vine, Taco Bandito, Olive Oil and Beyond, Kettle Bar, Oh Hello Friend, Timree, Luella, Le Pop Shop, Front Porch Pops and more. And according to Young, who refers to the concept as “retail revolution,” there are no plans of slowing down. “We absolutely plan to expand to more locations.”
Landlord Vestar embraced the concept because it expects the niche retailer will drive traffic to the center. Jeff Axtell, VP of acquisitions and development at the firm in L.A., tells Forum that “independents are important to the District at Tustin Legacy because it complements our existing tenants, creating the variety that the market demands.” He adds that “by giving shoppers variety unavailable at nearby retail centers, it entices them to come to the District for a different experience…it differentiates us from the other retail centers in Tustin and Irvine.”
According to Axtell, retailers are experimenting with different concepts, increasing service and spending dollars on their interior look in order to be more competitive to fight for consumer dollars, “especially when the economy is weak like it has been for the past several years.” Axtell says retailers are also experimenting with pop up stores to test concepts before they commit to major roll-outs.
“Niche retailers offer the consumer an alternative to the traditional national chain store,” he adds. “They offer a more eclectic mix of merchandise that is unique. It’s a small-lot concept versus the mass marketing-type retailer.”
If they’re not being (super) niche focused, retailers are finding other ways to differentiate themselves. For example, fashion retailer C&A Brazil took real-life data from Facebook and threw it back into the physical space. The company’s FashionLike clothing hangers tally up online Facebook “Likes” with clothes available to buy on the shop floor.
At last year’s ICSC RECon 2013 event, Randi Zuckerberg, founder and creative director of Zuckerberg Media, says this example was a retailer’s way of taking advantage of tech innovations to separate yourself. “Consumers are motivated by putting games to everyday events,” she told attendees during her keynote presentation at the event.
And in another example, a year or so ago, a retailer came out with a scale that could be configured to auto-tweet each weigh-in along with the number of pounds you need to gain or lose to reach your goal. “It’s about motivation,” said Zuckerberg, “something retailers should take advantage of.”
Next: Finding the "Hook"