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City Renews Role As Flagship Of Retail Opportunity

Monday May 27th, 2013 - 3:27PM

Credit Suisse analyst Michael Exstein in a recent investment report noted how the big-city flagship store is making a comeback.

Exstein attributed the trend in part to a brick-and-mortar hedge against the shift to e-commerce, whereby the large flagship store can be a high-profile pillar of a retailer’s position and staying power— as important as a brand-affirming attraction as it is a seller of goods.

Perhaps. But there is much more to the intensifying competition among retailers for prime urban real estate across the country. After decades of following consumers to the suburbs, retailers are plotting to get ahead of a growing segment of the population’s return to the cities. 

Contrasting Trends

According a report by Governing magazine, two thirds of the nation’s 277 cities with more than 100,000 residents grew faster between April 2010 and July 2011 than the national growth rate of .92%.

Retailers and marketers looking to capitalize on this urban renewal need to understand who is driving the shift; and how to recalibrate operational and merchandising requirements for them.

The urban population boom is being fueled by contrasting trends: young adults with tight finances seeking the relative affordability of smaller urban living spaces in locations that don’t require cars; and empty-nesting, baby boomers with plenty of buying power tired of cutting the lawn and bottleneck traffic. Both groups relish the chance to be part of resurgent urban communities within walking distance of or short mass transit rides to work and their favorite pastimes.

It is an opportunity for new retail options placed to serve revitalized city centers and neighborhoods; and for locations near city limits that also cater to the older, first ring of inner suburbs experiencing a population surge.

Urban Sweet Spots

Several big-box retailers have been on the front end of this shift— Target (with its City concept), Meijer, BJ’s, Jewel, Whole Foods, Home Depot to name a few— often with downsized, rearranged formats that feature groceries, consumables and smaller-pack basics that hit the sweet spots of urban consumption.

Retailers angling for a piece of the resurgent population can’t simply scale down their standard boxes. City retailing formats require a detailed understanding of the micro-market served by each store. The cookie-cutter approach won’t cut it. 

Merchandising Melting Pot

Whereby most suburban stores tend to cater to more homogenous consumer bases, the pool of shoppers for an urban store can be far more diverse— a mix of younger professionals, retirees, multiple ethnicities, business travelers, even tourists. Target, for example, reorganized its Chicago store to appeal specifically to urban customers. Athletic clothes bumped women’s apparel from the entrance. Air mattresses displaced lawn chairs. Paper towel four-packs replaced 24-packs. 

Housewares vendors craving a place on the shelf of this urban renaissance must rethink design, mix and marketing strategies for this promising, new merchandising melting pot.

Merchants and their suppliers must identify and target prospective consumers more accurately at each potential location. They must account for unique shopping cart dynamics, product configuration limits and cash-and-carry thresholds. Expect home delivery to take on a greater role. 

Heralding the comeback of the big-city flagship is just part of the urban retail renewal story. Retailers who get ahead of the population comeback to the cities could find an even bigger attraction for long-term sales growth.

—peter Giannetti