Latest Retail Trend May Surprise Millennial Watchers

Hip Gen-Y’s Shopping Habits Reveal Price Sensitivity

Retailers and retail real estate companies are paying close attention to Millennial shoppers as they progress. After all, 80 million consumers (one-quarter of the U.S. population) with annual spending power of $600 billion are not to be ignored. Although over half of Millennial households currently live on under $50,000 per year, their prime earning period is on the horizon and some will inherit assets from their Boomer parents.

And though it may come as a surprise, hip Generation Y loves Wal-Mart. A recent study by InfoScout indicates that Millenials spend 32 percent of their annual purchases in the grocery, cleaning and health/beauty categories at Wal-Mart. This is more than their elders – overall, Americans plunk down 24 percent of all dollars spent on those product categories at the Bentonville Behemoth’s big box stores.

Hipper Target is a close second on Gen-Y’s list, with 11.6 percent of their spending on groceries and related items funneled to that chain. The total average US household’s annual spend in the same category at Target is 8.6 percent. When it comes to fashion and home accessories, Target tops the list, especially at the younger end of the demographic range. Twice as many in the 18-24 age cohort say they often shop for fashion at Target as in the 25-plus group, reports BIGresearch.

Two Factors Drive the Latest Millennial Retail Trend

Wal-Mart executives credit the company’s aggressive commitment to online and mobile as a driver of their appeal to Millennials, the first generation of Americans born and raised in a computer-centric world. They also cite the impact of a distressed economy during the formative years of this group. “The Millennial customer grew up with a lot of hardship. They see Wal-Mart as a place where they can save money,” observed Matt Kirsten, Wal-Mart’s SVP-Consumer Insights and Analytics. Mix that experience with a less-than-robust job market plus heavy student debt (currently standing at a total of $1.2 trillion) and it’s easy to see why Millennials are price sensitive.

Millennials’ List of Go-To Retailers Also Includes Macy’s and JCPenney

When Moosylvania, a St.Louis-based digital ad agency, surveyed 1,500 Millennials regarding their brand preferences, Wal-Mart and Target again scored near the head of the list of 50 favorites, at spots five and six. Other retailers among the top choices were JCPenney and Macy’s, both in the top 20, and both catering to price-conscious consumers. Further down were Forever 21 (36), Victoria’s Secret (38) and Aeropostale (46). Only two luxury brands, Chanel (43) and Ralph Lauren (30), made it as Millennial favorites. (http://moosylvania.com/millennials/Moosylvania_Millennial_Study_2015.pdf)

Millennials and the “Experience Economy”: Another Retail Trend

Gen-Y may be flocking to the above retailers for another reason. They are pinching pennies on commodity purchases and clothing to splurge on “experience.” A recent survey conducted by Harris for Eventbrite reported that 78 percent of their Millennial participants said they would rather have experiences than material things (tech is the notable exception). Instead of acquiring high-end possessions, this group said they would choose to splurge on concert and sports tickets, travel, hobbies, dining, fitness, cultural pursuits and various special events. Called “the experience economy” by Eventbrite, this trend is growing across virtually all generations, supported by sharing on social media via mobile.  

Tech-Enabled, Price-Conscious Gen-Y Will Continue to Drive Retail Trends

Will Millennials then move beyond Wal-Mart, Target and JCPenney to Neiman Marcus and Nordstrom? Become fans of the aspirational brands? At this point, that’s hard to predict, but it’s a safe bet that these digital natives with frugal habits and the tech power to find deals and compare prices will continue to set a new pace for bargain-hunting.

For more about Millennial Shopping Trends, go to:

http://www.forbes.com/sites/danschawbel/2015/01/20/10-new-findings-about-the-millennial-consumer/

http://blog.thestorefront.com/millennials-shopping-habits-are-reshaping-the-retail-industry/

http://adage.com/article/cmo-strategy/surpriise-walmart-wins-millennials/299030/

http://www.refinery29.com/millennials-brand-loyalty

 

 

 

 

 

Tenanting Strategy: The Key to Successful Retail Leasing

Market Demographics and Traffic Drivers Are Main ConsiderationsA Conversation with Jake Frantzman, Senior Leasing Representative

What’s the secret to creating the “right” tenant mix?

There’s no secret to it at all. It’s about analysis and understanding of two key factors: the demographics of the local market and the traffic drivers that deliver shoppers to the property. As a leading retail leasing company with more than sixty years of success, we consider these two as the foundation of our tenanting strategy.

We want to create shopping destinations. So we study the character of each market, including income levels, population, competition, and vehicular traffic patterns. There’s no template here. Each market is individual. What works in one, won’t necessarily work in another.

The right tenant mix in retail leasing is about variety. You want to combine big brand names in diverse categories with day-to-day-service providers. We look for an anchor store for each of our centers. This is the key driver. Typically, the anchor is a grocer.

Why are grocers such sought-after anchors?

The average American consumer makes two to three grocery buying trips per week. That frequency benefits every store in the center, as shoppers combine their errands or act on impulse to buy something at a neighboring store or grab a bite to eat. The pharmacy, the dry cleaner, the dollar store, the nail salon, the pizzeria, and others all get spillover from that anchor traffic. And obviously, grocers are selling goods that people need, so even in a negative economic cycle, they still draw shoppers. That’s why they’re such a cornerstone in a successful retail leasing strategy. Nothing matches them for pulling in a steady flow of shoppers.

What are some other must-have tenants?

Fast-casual restaurant chains, large brand name drug stores, discount fashion retailers like T.J.Maxx or Kohl’s – we’ve found these to be strong traffic drivers.

Any thoughts on the right mix of local vs. national retailers?

Our focus is always on the national brands. These are your mega traffic drivers. We go for these big names and then maybe backfill smaller spaces with regional franchises or local services like nail salons, dry cleaners, and banks. Specialty boutiques can work, too, as they often offer unique products and services and can bring a strong following locally. Again, when you’re leasing retail space, it’s all about area demographics and brand appeal.

First-to-market tenants…what’s their overall value?

A hot new brand that people have been waiting for in their particular locale has tremendous value. Its reputation boosts traffic and creates overflow to other tenants. And the presence of a hot brand can revitalize the entire tenant mix, by attracting other desirable tenants. They’ll often say: “If they come, I want in too.” But again, the new brand has to be a good fit for the market demographics. A good recent case is the Fairway Market lease in Post Road Plaza in Pelham Manor, N.Y. Being close to the city, area residents knew of and wanted ready access to this brand and the demographics were right.

Any other recent retail leasing cases you’d like to share?

Edgewater Harbor, a 100,000 square-foot mixed-use development on the Gold Coast of the Hudson River in Edgewater, N.J. comes to mind. Phase One is completed with 480 high-end condo units and a borough municipal office. Upcoming phases will include a hotel plus other businesses. A big grocer wasn’t quite right for this property, so we went with HomeGoods for our anchor. Another key tenant is CVS, which offers grocery items among its inventory. The rest of the tenants are higher-end retailers and service businesses – just right for the “captive audience” of residents and office employees in this property.

How do you plan ahead for vacancies?

We pay close attention to trends – demographic trends and trends in retail. And based on those, we project the kind of new tenants that will ensure the continued success of the properties under our management. We know, for example, that apparel retailers are challenged right now, while off-price merchandisers are solid. We’ll factor that knowledge into our tenanting strategy. As our tagline says we’re “positioning retail real estate for a new generation.” Understanding the trends are part of that positioning.