Retail Space
The store environment is an essential branding tool for any retailer, explains Jerry Gelsomino.
Getting your product, service or built-environment noticed by the target customer is a prime motivation of any brand development campaign. Media marketers use electronic, print and digital media to communicate the promise of quality, value and availability for their retail clients.
But all too often promises made in media marketing are not realised by the customer when they enter the store, browse, or make a purchase. It is as if the staff wasn’t told about the company’s mission or commitment to the customer.
The translation of advertising or company taglines into tangible, achievable customer-centric attributes is one of the key objectives in using the environment as a branding tool.
Lessons to learn
Retail branding has become a much-talked about concept in recent years; an idea that is often misunderstood and not applied very effectively. As one surveys the retail landscape, you will find numerous situations in which the brand the store hopes to project, misses the mark. The critical point here is that the best marketing and branding companies in the world, armed with surveys and statistics, can do nothing to brand the store.
A study by Ernst and Young, contributing to the annual consumer awards issue of Chain Store Age Executive Magazine, noted, “While companies do control the messages that they push out regarding their brands, they cannot, in fact, control how those messages are received by consumers.”
Personal experience within a store, and with the brands it carries, determines how the customer will rank the associated company. For example, “I’ll only shop at … if I have lots of time,” or “When I shop at . . . I always find something new and unusual.” Depending on what the retailer intended to portray, these opinions are either detrimental or complementary.
Impressions last
So what do retailers want customers to say about their store upon exiting? What would we like them to remember and what would be a disaster if they never forgot? If you’re not ready to make a projection of what your customer likes best about you, let’s first understand the company and what it is capable of. Ask yourself these key questions:
What segment of the market does the retailer want to own? You can’t be everything to everybody.
How does the consumer shop for that product or service? Customers have needs which must be fulfilled in order to make an informed buying decision.
Is the retailer prepared to commit appropriate resources toward achieving a competitive advantage? Consistent delivery of brand-building attributes can only be assured if everyone in the organisation understands and is dedicated to the same goal.
Once clear responses to these questions are gathered, the development process begins. With a determination of the preferred brand personality, a dynamic environment can be created to embody the marketing strategy, respond to shoppers’ behaviours, and effectively utilise the company’s resources.
Translating brands
Translating marketing and branding strategies into the store environment, designers focus on touch points; elements which have a profound effect on the experience the customer has with the store. These include the store layout, architectural theme, color and materials, lighting, sound, product presentation and availability, and communication, whether delivered by signage or store personnel.
In order to assess which areas of a store need the most attention, the retailer should predetermine a list of desired customer responses and then strive to achieve them. A well-planned strategy will include merchandise categories, promotional activities placed in high traffic areas, painted in dominant colours and duplicated throughout the store.
During the translation process, a useful exercise is to think like your customer and ask, “How would I, as a customer, like it to be?” If your store intends to prioritise service as your leading attribute to attract customers, how should a service-oriented company act, not only when a new customer enters the store, but also when a returning customer has a complaint or wants a refund? If low price is your strategy, how can you promote yourself as a leader, besides displaying large banners, announcing discounts and showing comparable value with competitive pricing to other popular brands. Consider awarding unannounced price reductions at the checkout after the shopping trip is completed. Delighted customers will remember your store as the place to save money, above all else.
These examples demonstrate a key principle in using the store as a branding tool: the intended brand personality should be simple and singular, repeated consistently, but differently for every merchandise category.
Case in point
Duane Reade is considered a retail landmark in New York. With 253 drugstores, “There is one next to the subway, one across the street from work, one next to the grocery store. If you wanted to buy your toothpaste somewhere else, you would be challenged,” describes the New York Times. Proud of their ubiquitous locations, their slogan was, “Everywhere you go, Duane Reade.”
But with the introduction of their new tagline, “Your city, Your drugstore,” they now claim they know New Yorkers best. How will they communicate this intimacy that they have gained over the years? Widening aisles, adding lighting, changing the layout and improving signage will not necessarily differentiate it from other retailers.
It’s better for the retailer to update facilities to mirror the way New Yorkers like to shop - always in a hurry and on their way to something important. Store owners can apply their knowledge of New York culture to crete store layouts and amenities that reflect urban lifestyles and shopping behaviour. These stores can become tourist attractions, encompassing all the stereotypes of the Big Apple.
We’ll watch for progress Using a store’s physical space as a branding tool is a highly visible means for communicating the personality and service on offer. Not just lip service, but how the company lives the brand. It can and should be accomplished boldly, intensely, as well as subliminally.
The store environment and the presentation of merchandise is also the biggest investment a retailer will make. Why not use it to its best advantage?
Jerry Gelsonimo is the Principal of FutureBest, a Marketing Consultation and Brand Coaching Firm, and has written for numerous trade and commercial publications. Based in Hong Kong, you can read more at jgbrandcoach.com.
Singapore Sling
With huge mall projects coming online just as the economy feels the full force of credit crunch, Ashford Pritchard investigates the outlook for Singapore’s retail market.
The retail real estate market in Singapore is experiencing its most exciting expansion just as its economy is facing its most frightening contraction in 40 years. Figures from the Associated Press make for nail-biting reading for any retail related business. As one recent release stated “Singapore retail sales suffered their biggest drop since 1999 amid the city-state’s worst ever recession. Retail sales fell 11.7 percent from a year earlier, after dropping 7.3 percent in March and 5.5 percent in February.” In fact, continues the release, the economy is expected to decline by as much as nine percent in 2009, marking it the worst performance since the city state became independent in 1965.
These results would be worrying given any set of circumstances. But, following years of unprecedented growth, Singapore is in the midst of a construction boom that will see a huge spurt in the amount of high grade retail space, not only in the central Orchard Road district, but also in outlying areas. According to a Cushman and Wakefield report, an estimated 4.6 mil sqf of retail space is currently in the supply pipeline, with 35 percent of this scheduled for completion in the third quarter of 2010. Dr Chua Yang Liang, Jones Lang LaSalle’s Head of Research for South East Asia and Singapore, corroborates these figures, and notes that “there is at least 4.2 mil sqf of primary and top grade real estate coming online in the next two years, the majority of which is concentrated in the Orchard area.”
Dwindling demand
The Singapore Retailers Association predict that overall retail sales in May 2009 fell by 10.3 percent over the previous month, and by 4.6 percent compared with May 2008. According to Dr Chua, luxury and big ticket items are suffering the most; “the market sentiment is weak due to current demand.” Certain sectors are faring better, he notes, particularly suburban malls, as consumers will always need their staple daily goods, and “the demand for basic goods is still stable.”
The drop off in retail demand was also recorded by CBRE in their Asia Market Overview, in the first quarter of 2009: ”retailers felt the brunt of the economic downturn and landlords were forced to make tenant retention a top priority and offer incentives such as increased rent-free periods and the passing of property tax rebates to tenants.” In fact, the report notes that prime rents for Orchard road properties fell 3.3 percent quarter-on-quarter and four percent compared to this time last year. For suburban rents, there was a more moderate drop of 2.4 percent and 2.7 percent respectively.
Dr Chua says rental rates are contracting severely, noting that both base and gross turnover rates should be taken into account. Base rents have for the most part remained fairly stable since 2000, due to the institutional structure of many mall-owning and operating entities. The main changes have been in the gross turnover rates, which can vary highly from 2 to 20 percent depending on the trade type and landlord. Obviously, with falling retail performance, the loading of turnover rate to base rate will have a significant impact for retailers and landlords alike. CBRE predicts that prime Orchard road rates could fall as much as 20 percent in 2009.
New space
With such damaging market conditions, what is the outlook for the new kids on the block; the new supermalls opening just as the retail market slumps? One of the most high profile openings is Ion Orchard, jointly developed by CapitaLand and Sun Hun Kai Properties. With a GFA of close to 950,000 sqf, the mall is one of Orchard Road’s flagship new properties, and may prove a bellwether for the fate of other new retail ventures.
Speaking to RFP Magazine, an Ion Orchard spokesperson was upbeat, saying: “We are still receiving strong interest and as we approach our opening on 21 July we have achieved our targets on many levels: as of 24 June we have 94 percent of leasable space committed; with 70 percent of this being new-to-market retailers, new concept and flagship stores - exceeding our initial target of 60 percent. We continue to select suitable retail concepts for the remaining spaces and we are confident that Ion Orchard is on track.”
Ion Orchard is just one of a number of projects that will shake up the retail landscape in Singapore. Orchard Central, developed by Far East Consortium added 387,988 sqf when it opened in early July 2009, while Lend Lease’s 313@Somerset is another large-scale mall set to open along the strip in late 2009. In addition, the Marina Bay Sands will offer an alternative downtown retail location, albeit one that will rely heavily on its links to Singapore’s first casino. Dr Chua notes that the arrival of new options for retailers has resulted in more movement and relocations, and also the re-emergence of retailers who may have previously had stores in Singapore, but had left the market.
“There has been no new supply for nearly eight years on Orchard Road,” says Dr Chua, “while at the same time cities such as Kuala Lumpur, Jakarta and Bangkok have seen huge expansion in prime retail markets. Singapore was falling behind the pace.” Backing up this assertion, a number of new retailers have entered the Singapore scene, including Japanese brand Uniqlo, and a number of luxury timepiece marques.
Chinese sportswear label Li Ning has also chosen Singapore as its first location outside the Chinese mainland, opening its flagship at Ion Orchard. At the time, Chief Financial Officer Nicholas Chong said “The decision to launch our first Li Ning flagship store out of China, in cosmopolitan Singapore, is an important step of the group’s strategy in sports category differentiation and brand internationalization… it also lays a solid foundation for the group’s expansion into overseas markets.”
Differentiating factors
Coping with diminishing sentiment and a challenging market place, developers have had to find creative methods in order to smooth the launch of new malls. Ion Orchard, for example, took a two-pronged approach by offering opening incentives for tenants as well as incorporating an “arts initiative” to draw in shoppers. As their spokesperson explains: “The initiative includes permanent and changing signature sculptural and media installations positioned throughout the mall, as well as a spectrum of art-based events and exhibitions.”
Far East Organisation has also come up with an innovative plan to foster new retailers, launching a “Rental Space for Equity Programme”. In a first for the Singapore retail market, new start-ups can issue redeemable, convertible, cumulative, preference shares in lieu of their monthly base rent. Far East Organisation’s Executive Director of Investment Properties, Eddie Yong, explains: “We see [the initative] as a proactive partnership by lowering the entry barrier for prospective tenants who have exciting brands or concepts.”
The next 12 months will signal crunch time for Singapore’s retail market and its economy in general. The new malls represent a bold new statement from both developers and retailers, a signal that despite the current market slump, Singapore is ready for the type of premium largescale retailing seen in Hong Kong, Bangkok, and other regional hubs. Most retailers and landlords are pointing to their commitment to a long term plan, which indicates that over the short term, the results may be mixed.
