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The New Retail Networks

On the heels of Starbucks' declaration that they are, in fact, a network, comes a similar announcement by Starwood prexy Steve Heyer. By defining a distinct brand persona for each of its nine hotel chains -- for example, W is a "flirty escape for hip insiders" -- Heyer plans to reach out to media companies, telecommunications firms, apparel lines and other businesses to help each of Starwood's nine hotel brands stand out from competitors.

He has already targeted urban "central social districts" for Starwood's new "aloft hotel" brand (earlier dubbed "XYZ"), whose own brand persona is reportedly about delivering a "sassy, refreshing oasis" (which might sound oddly familiar to his old Coke associates). In the months ahead, look for traditional tie-ins with companies like Victoria's Secret, as well as less traditional digital downloads from Time Warner's family of media products in your next hotel room.

Link: Transcript of Starbucks annual investor conference

Luxury Knockoffs Create New Ways For Landlords to Differentiate

One downside to globalization is the ever-escalating sophistication of knockoff manufacturers. Today's Wall Street Journal (subscription required, oddly enough, also reprinted in the Pittsburgh Post Gazette for free) describes the growing sophistication:

"...this month, a Hong Kong market was selling copies of Louis Vuitton handbags that had been unveiled in Paris but weren't yet in stores, says Nathalie Moulle-Berteaux, intellectual-property director of LVMH Moet Hennessy Louis Vuitton SA's fashion group...one 2001 Hong Kong shipment nabbed by finance police contained a kit for the forgery of Officine Panerai watches...(including) metal plates and diagrams showing how to attach them to watch faces and how to forge the Panerai logo."

While the Worlds Customs Organization "only" estimates the annual sale of counterfeit luxury goods to be about $27 billion, if you're a city or a mall, the bigger harm comes from damage to the value of retailer rents and leases.  As I've blogged in the past -- if you're a landlord, it's not going to be "just enough" to collect your rents -- if you want the luxury leases, you just may want to show how you work with the local city government to protect the increasingly complex intellectual property interests of your customers.

Link: Anti-Counterfeiting Resources provided by the National Association of Manufacturers

"The Gap" in Percentage Rent

Once upon a time, a certain retailer made the argument that if you had a kiosk in a mall, sales made through that kiosk were different than the normal exchange of money for physical goods. That retailer went on to assert that because of that difference, they should not have to pay percentage rent on goods sold via the kiosk.

Other retailers created separate divisions that operated online exclusively, thinking this would enable them to  avoid paying sales taxes to states where they have no physical presence, pursuant to a 1992 U.S. Supreme Court ruling.

A little-known ruling in California may put a dent in that line of thinking. California's 1st District Court of Appeal in San Francisco ruled against Borders, ruling May 31 that the company's website and retail stores have been too intertwined to call themselves separate companies. The three-judge panel cited in-store advertising for the website, receipts that said, "Visit us online at http://www.borders.com " and the ability of customers to return online goods at retail stores. The judges also noted that the companies had board members in common and shared a similar logo.

Shopping centers have long argued for tax fairness, as opposed to new taxes. As municipalities and others reach their breaking point in budgeting for police, fire, schools, and other critical infrastructure, people need to think harder about what it really takes to fund the places they have chosen to live in.

The 2005 ICSC Spring Convention Blog

I've arrived in Las Vegas, where I'll be blogging the 2005 ICSC Spring Convention. We're working with Retail Traffic Magazine, a unit of Primedia (remember About?) on an SMS service that will return the location if you text 'ICSC' plus the name of the exhibitor to '10958'. Stock symbols work as well. 

News from the convention is starting to pour in. GlobeStreet reports that Urban Retail Properties - a longtime powerhouse specializing in luxury retail and so-called fortress malls - has bought out its former owners General Growth Properties, Simon Property Group and Westfield Group for an undisclosed amount. With the sizzling luxury retail marketplace, look to Urban Retail to quickly regain the luster it had before it was acquired by Netherlands-based shopping center company Rodamco, then later sold for $5.3 billion dollars. In the process a governance problem was created where Urban competed for business with its owners, even in new areas like central business districts, strip centers and mixed-use projects.

General Growth Properties is launching 'America's Premier Shopping Places' at forty of its properties, predominantly tourism-oriented properties it picked up in last year's acquisition of The Rouse Company. This appears to be different from the 'GGPremium' program launched at upscale properties such as the Fashion Show in Las Vegas. GGP VP of Marketing Susan Houck designed the program to connect the travel industry and tourists to top shopping destinations through a single source, similar to Rouse's Premier Marketplaces program. (Cathy Kruzik assisted with the program.)

Link: GGP's America's Shopping Places

Bigger than Time Warner Center? Inside the LA Grand Avenue

Just as Related Urban Development redefined New York architecture with the Time Warner Center, comes the SCT Newswire announcement that it is developing a 10-acre site at Grand Avenue in Los Angeles into an enormous mixed-use complex featuring retail, office space residential units and hotels.

With yesterday's vote to elect Antonio Villaraigosa as the first Latino mayor since 1892, expect a resurgence of interest in downtown Los Angeles as Villaraigosa enacts his REIT-friendly agenda of streamlining permit processes and offering tax breaks to companies that move to the city. Look to Villaraigosa to explore ways to help subsidize highway infrastructure upgrades, whose city hosts some of the most congested highways and spectacular highway accidents imaginable. The Related organization and nine Related executives had donated a total of $18,000 to Villaraigosa's campaign.

This is a big leg up for Related, whose recent work in California had previously been limited to the development of multifamily housing.

Link: Grand Avenue Committee

Simon Accelerates Asset Intensification

ICSC reports Simon is implementing asset intensification at all of its new developments, starting with the South Park Mall in Charlotte, NC. For Simon, they are looking at ways of leveraging their dominant market positions to create additional real estate value.

Asset intensification is a term that had been used to describe the practice of retailers to reinvigorate their growth by getting more out of existing real estate. By rethinking their market approach, retailers redefined the shopping experience by making major overhauls to their product development capabilities and marketing.

Retail consultancy Retail Forward ranked the top 10 retailers practicing asset intensification, whom they dub "Growth Miners", retailers whose median compound annual growth rate was over double that of their peers:

1 Advance Auto Parts, Inc.
2 Chico’s FAS, Inc.
3 Harold’s Stores, Inc.
4 Hot Topic, Inc.
5 Coach, Inc.
6 Christopher & Banks Corp.
7 Sharper Image Corporation
8 Bed Bath & Beyond Inc.
9 Ultimate Electronics
10 Pacific Sunwear of California, Inc.

Retail Traffic magazine reports on other Simon initiatives including the addition of a hotel and/or residential units to the recently opened St. Johns Town Center in Jacksonville, FL, the Domain shopping center in Austin, Texas, and 100,000 square feet of office space at Firewheel Town Center in Dallas, scheduled to open later this year. As these new forms of real estate are completed, look to Simon to follow the example of hotels in finding additional ways to encourage cross-traffic between retailers and local residents and office workers.

Just In Time for ICSC: Inside the Neiman Marcus Deal

Today Neiman Marcus Group announced that its board of directors has approved a sale of the company to an investment group consisting of Texas Pacific Group and Warburg Pincus. The price is $100 per share in cash, for a total of $5.1 billion. Each of the investors will own equal stakes in the company upon completion of the transaction.

"The play for us is a long-term play on the continued spending in the luxury segment. This is more a play on luxury than retail," Kewsong Lee, a Warburg Pincus partner, told The Wall Street Journal. Texas Pacific representatives declined to comment.

People familiar with the private-equity groups' plans say the goal is to build between five and 15 new stores while expanding the company's Internet and catalog operations. The timing of this transaction precedes the major shopping center leasing conference in a few weeks, and will present owners of fortress malls with an alternative to Federated/May brinksmanship or the conversion of existing department store anchor space to Target's retail/grocer concepts, or worse.

By building out their Internet operations, especially its foreign language versions, Neiman Marcus will be able to combine their web server and shopping cart data to identify which emerging regions in China, India and Latin America have the greatest appetite for luxury goods, and therefore where to build and how to merchandise.

Cataloguing is also going through a renaissance with the popularity of luxury city magazines and custom publishing to niche audiences. Even Louis Vuitton has begun publishing local guides that cater to affluent, style-conscious travelers.

Texas Pacific already has retail experience after acquiring 85% of family-owned clothing retailer J.Crew in 1997, as well as less luxury-oriented brands like Pets.com and Burger King. After a major turnaround, J. Crew is expected to seek an initial public offering later this year.

Link: "Retailer Neiman Marcus Agrees to be Acquired" (WSJ subscription required)

Introducing the Central Social District

As real estate companies explore new combinations of retail, hotel, and residential living spaces, a recent ULI study (Adobe Acrobat required) suggests that businesses want to be in places where people can enjoy life, feel safe, and have a good time.

William Hudnutt III, an Urban Land Institute Senior Resident Fellow,  argued there are three new groups of people who want a return to urbanism. Demographically, he said, they can be described as: 'singles, mingles, and jingles.'

"...Singles are, of course, unattached adults; "mingles" are young couples who like the urban lifestyle and have no school-age children; and "jingles" are high-income empty nesters moving downtown for the urban amenities, culture, restaurants, and shopping."

"The new city is a metropolitan mosaic," Hudnutt added. "It is an interconnected network of nodal urban centers. This new pattern can be enhanced by a commitment to mass transit and to transit-oriented development." Developments like The Ghazi Company's Epicentre project (shown above) show how new construction can provide opportunities for redevelopment and revitalization of a community.

As real estate managers mull how to encourage traffic (the same type of issues that media types consider with the so-called Long Tail), they, like Westfield, will need to understand the economics of delivering much higher levels of customer service.

Link: The Future of Cities (Adobe Acrobat required)

Why Bother Monitoring Web Site Content?

Today's WSJ (subscription required) tells the tale of $51 flights to Fiji, $1.86 US Airway flights, and £35 nights at the Lanesborough Hotel, or about US$67, instead of £350.

All of these deals were greedily snapped up by consumers, always online. In the past, sellers took comfort in their ability to rescind offers that were clearly mistakes. Under contract law, a buyer enters a deal with a seller as soon as a seller makes an offer and the buyer accepts it. However, if the offer really isn't to be believed - in other words, if a reasonable person would recognize that it was clearly a mistake - then a court could rule that there was no offer, and therefore no contract.

Yet times are changing. From the same WSJ article:

"It is possible that some judges in a court of law might uphold a consumer's claim to some rock-bottom deals, according to Elizabeth Warren, who specializes in contracts at Harvard Law School. A retailer 'can say he's selling it all off -- and if the customer has reason to believe him, then the sale holds,' she says."

There are efforts to hold the landlord accountable for counterfeit goods sold at their property. Google was successfully sued by Louis Vuitton on similar grounds. If your web site posts information on retailer sales and events - and you make a mistake in the information that was posted - you are increasingly at risk of being held liable for economic damages.

Keywords 101, Courtesy of Snap 2.0

John Battelle pointed out a new feature of the Snap search engine that founder Bill Gross alerted him to: As you type in a term, Snap delivers a list of search responses that include whatever you're typing in. The example to the right produces this list of most popular handbag brands:

1. Coach handbags
2. Louis Vuitton
3. Gucci
4. Chanel
5. Burberry

Louis Vuitton would have outranked Coach had all the variant spellings been counted: "Louis Vuitton handbag", "authentic Louis Vuitton handbags", etc.

Snap also helped identify all of the variant spellings people associate with properties: a quick search for Beverly Center produced "Beverly Center", "The Beverly Center", "Beverly Center Mall", "Beverly Center Los Angeles", "Beverly Hills Mall", and "Beverly Center address".

Interesting stuff, and all in the public domain.