Retail Development eCommerce & Rightsizing.

Who is the new anchor for the modern retail strip?

by Christopher King

As the new Digital Engagement Director for REDNews I’ve decided to “literally” be engaging and ask a bunch of questions that perhaps might spur you, our wonderful readers, to give us your opinion. Opinions, we all seem to have them. Questions are a good start for me as I am a veteran in the digital marketing world but am just getting my feet wet in CRE. One trending topic that keeps popping up in my inbox regards rightsizing.

Experts have been telling us recently, due to competition with e-commerce and new developments in logistics, retail businesses must change the storefront’s footprint to compete. They must “rightsize” and do things like embrace e-commerce in the store.

What does it mean to rightsize? The concept of rightsizing is catchy but like every other catchy phrase it can only be understood by its application and intent. A simple Google search brings back:

‘rīt sīz/
gerund or present participle: rightsizing
1. convert (something) to an appropriate o
optimum size.
2. “organizations are beginning to rightsiz
computer systems to suit themselves”

So, what is an appropriate or optimum size? Does rightsizing refer to a standard looking strip mall filled with a Mini-Target, Mini-Kroger, StarBucks and a BestBuy the size of a Radio Shack? How small is the right size? As with any true answer to any dumb question it is all relative.

I’m reminded of the Bruce Kirsch article, “Why The Regus Executive Suites Business Model Will Never Work For Retail” wherein Mr. Kirch argues that a multi-tenant variant of pop-up retailing using the same concepts being implemented in shared executive offices would create an unruly, unprofitable flea market of sorts, when developed in a standard retail footprint.

Because, who is coming to the table on this? We’ve seen fast food have great results with putting a Pizza Hut, Taco Bell, Long John Silvers, etc.. all in one building. Will the big boys play ball and stick a rightsized Penny’s, Macy’s and Gap all under one smaller roof? Would they sit beside a mom and pop pizza shop or hair dresser? Or would the “complexity of the mini-leases and the possibly constant re-marketing of the unoccupied spaces” be worth it to the building owner.

The upstart of commercial retail success, in the last decade, has been the dollar store. Stick a dollar store on cheap property and they thrive, hopefully. You can still sell development of a dollar store. They may not epitomize the rightsizing effect but they may be a big source for the kernel of the idea. Dollar stores are popular because they give people quick access to basic necessities closer to their home. They aren’t the consumer’s first choice, and they seem to be having more lasting success in deep suburbia and rural areas than in urban ones.

Is the current state of our strip center occupancy reflecting the consumer’s first choice? An argument can be made for a drug store being able to anchor a strip and encourage higher-end retail to thrive, say a coffee shop, specialty sports store or hair salon. But what happens when the biggest store on the block is a no-credit wireless phone dealer? What if the traffic to that wireless phone center makes the strip less appealing to the soccer moms who were frequenting the little boutique tennis shop? Does the long term success of a dollar store, that fills forty percent of a property, trump the empty space or perhaps less than desirable tenanting in the remaining sixty percent? Can a dollar store share a corner with a dentist’s office or with a rightsized Nordstrom?

From my own experience, I rarely find a single retail center catering to more than one of my needs. I most often drive miles between strip malls to go to one type of store and then another farther down the road. I am often uncomfortable with some of the shops I wind up parking near. If my Taekwondo teacher is housed next to a check cashing place or my barber is between a package store and a head shop, I start to consider different options. But alas, that choice isn’t often available.

So what is my interpretation of rightsized?

I imagine a rightsized clothing store in a small retail space not much bigger than a Subway with a sample of each line in limited sizes. Large flat screens would be available that use virtual technology to let you see yourself wearing the clothing with the ability to change colors or other optional features. Press a button, run your card and come back in a day or two to pick it up. The sales associate could become more of a personal style assistant with the full line always available to them for suggestion. When your purchase arrives you can try it on right there in the store and return it if it doesn’t suit or the size is wrong. Inventories can remain low. Delivery could be free for in-store pickup and having the customer return to the store increases their satisfaction with the products and the opportunity for the vendor’s accessory sales. And of course the neighbor shop would be an Einstein’s and maybe one of those Mini-Bestbuys.

So what would be a perfect store for, say the millennials? Perhaps a half size Whole Foods, a full size coffee shop/juice bar with outside seating and room for a small band, a mini Target and a Sushi place all tied together with asphalt and covered sidewalk? What do you think? Let us know in the comments below or come join the discussion on LinkedIn.