Retail Traffic

Global Talk: A Retail Design Conversation

What happens when you fill a room with professionals from some of the leading retail-design companies in the country? Very lively discussion. Which is exactly what the SCW staff generated this spring at the GlobalShop conference in Chicago.

As part of an ongoing look at the prominent trends and issues surrounding the design of retail today, SCW invited design firm representatives from Maine to Michigan (see listing, page 82) to discuss the state of their profession and where it's headed in the future. Whether you're a retailer, developer, owner or fellow designer, you'll benefit from eavesdropping on this conversation.

SCW: Are any of you, as store designers, able to focus on design in an architectural sense, or is it all oriented toward the presentation and selling of clients' goods?

Joseph Geoghegan: A lot of my firm's work is with smaller companies and smaller retailers, and it is very important for the product to be the leading issue. Our work often takes the role of making the product fit into a great environment that shouts a little bit, but the product really has to be the main issue.

Renee Ruffolo: First and foremost, our responsibility is to support the retailer's selling strategy. All elements of design need to support the product that's being sold. But by the same token, the two concepts aren't necessarily mutually exclusive. The very best designers I've seen are the ones who can work in a holistic way. As you work with them, you can see the form emerging. It's that kind of a holistic approach that's most successful.

Fidel Miro: In our concepts, the merchandise is the No. 1 star - at the center of the retail stage. We listen to the clients and set our goals based upon a direct line of communication between the client and ourselves. Our design is really a backdrop for the merchandise; it's there to enhance the merchandise.

The retail business is complicated, especially when it comes to large department stores. We have to deal with internal traffic, how the merchandise comes into the store, how it goes out, how the staff traffic and the customer traffic go in and out without interfering with each other. We have to deal with volume and the relationship of the human scale to the space. Large stores and large environments can be tiring, and we take into account all kinds of conceptual elements to arrive at our final solution.

Ponch Herrara: When they're searching for firms, clients come to us for business strategies and goals. All of us in the room today are capable of good design in terms of aesthetics - that's the easy part. I think they're looking for us to figure out ways to help develop their business. The first part of the package is the merchandise, and the rest is the aesthetics.

Michael Bills: The relative size of the clients we all have varies, so there's a bit of confusion in our industry amongst our buying public and our clients about who does what and how we do it. I agree with the comments on the importance of business strategy. RPA was founded 24 years ago with a business-strategy focus in mind. We understand how to combine a retail-strategy firm with a retail-design firm. But truthfully, up until five years ago, when we'd walk into the room and start talking to a client about the importance of brand positioning and understanding consumer-shopping behavior, people's eyes would glaze over. They'd sit back and say, "Just show me your pretty pictures and I'll pick one." Fortunately, that's changed as a result of having clients whose retail stores need to perform in much the same way as their advertising and their marketing - as part of an integrated marketing program. There's still some confusion as to whether it's about architecture or about brand positioning and the consumer. I believe that different disciplines go into each of these categories.

Michael Crosson: If you look at the architecture, advertising, POP, fixturing, graphics and all of the components that make up a store, there are tools or approaches to solve the client's problem, to get to the consumer in the right way and with the right approach and the right attitude. Clients come to all of the firms sitting here at this table with the expectation that we know a good merchandise presentation and that we can deliver. I don't think anyone in this room spends much time saying, "Here's a set of blueprints, don't we do a great job on our blueprints?" - because that's a given. The real issue is how we create a point of differentiation for the consumer and eliminate the blur. Sometimes it's creating a new way to display the same merchandise that everybody else has and thereby creating a point of differentiation. Sometimes it's the other approach - it's graphic or architectural. With the cost pressures and the other pressures that we have today, the creative push is on and the cost keeps coming down. It's like we need to have mobile design offices going everywhere and creating as we go. We're driving and throwing it out the back of the truck, and stuff is emerging as we go along. Then we turn around and start on the track all over again. It's very exciting.

Douglas Van Gundy: My experience is that when we partner with clients, we're also taking on a certain amount of responsibility to our clients' bottom line. We look very closely at their objectives. But I agree with Renee, we still need to take a look at the holistic approach. It's a tough balance to meet, and we feel a tremendous amount of pressure and responsibility to our clients' bottom line. If their bottom line isn't right, chances are they won't be our client next year.

Bart Forbes: The question is whether we spend a lot of time, as we did in past years, creating an architectural facade that's dramatic but doesn't really encourage people to come into the store. All of our clients now are looking at branding themselves, and they have to spend a significant amount of time figuring out where they are today, where they want to go in the future, where they need to be financially and examining their budgets. We all agree that we're challenged with how we can do these things and spend less money doing them. But retailers still want that common thread, that connection between the design elements that we're able to bring to the brand. So whether the retailer is on Michigan Avenue, inside a mall, or in a shop-within-a-shop environment inside a department store, there's this common thread that the consumer can connect with.

When it comes to the economics, I think we're in an era now where there isn't any type of material that we haven't tried to use that's unique and cost-effective, in replacement for another product, in order to cut down costs. As I walked through the show yesterday, I spent time looking at some of these new materials - finishes that aren't typical, traditional-type finishes. We have to ask ourselves if these ma-terials are going to pass some time-period test, because most of our customers nowadays are no longer turning over and redoing new stores like they used to. We used to have clients that would literally redesign their stores every two to three years to stay fresh and on top of things. But now, what's important is picking out products that will last, that are economical and sensible to use and not too trendy.

People are getting tired very quickly of the vanilla box. We're trying to bring a distinctive look and to attach a common thread that firmly connects us as designers to the whole design process and to the consumers. It's challenging, because all of us are creating locations in far less square footage than before. Just about every one of our clients that were in a 3,000 to 5,000 sq. ft. store are now aggressively looking at real estate literally half that size - and intending to put the same amount of SKUs (storekeeping units) back in.

SCW: How do you handle clients' challenging budgets with the high costs of construction?

Michael Crosson: Rarely is the line-item budget the problem. It's the lack of line items that creates the issue. It's failing to understand all that goes into a project from their side, from our side, from the landlord's side. The client must have a complete picture, not just a segmented picture of what we're going to touch but everything that's required for the project. So the problem rarely is that you have the wrong price on a line item for HVAC or electrical; it's that you didn't have a line item for an accent lighting or whatever the line item happens to be.

Michael Malone: Up-front education of the client is critical. Especially when you have a company that used to be a manufacturer but is transitioning to become a retailer, which is a typical nightmare scenario right now. There's a lack of understanding. They talk to people in the marketplace who tell them that store construction should be $125 per sq. ft. or $150 per sq. ft. But then they lease a space on Madison Avenue and they don't realize that after the asbestos abatement is done, if there's $5 left to build the store they'll be lucky.

Twice now in the past few months we've stepped away from projects that were unrealistic. It hurts later when you go back and see that somebody else built it who was able to make the client spend more money, whether the client wanted to or not. It's a dangerous time because construction costs are so volatile and most retailers are on a fixed budget. The challenge, design-wise, to end up with something we can be proud of architecturally - and know that the customer will be proud of - is harder than it has been in a long time.

Bart Forbes: Our firm has some flexibility, being architects as well as construction people. All throughout the process, we've got to be face to face with the client and answer to them on whether we're within budget. We've had to sit down with our clients and survey pieces of real estate before we even begin to talk about a project. We're encouraging them to get us out in the field and on-site. On recent projects, we've participated in discussions with the landlord, through the early negotiations of the lease, to figure out what comes with the property and what doesn't. As we've all agreed, you can't do much to change some of the line costs such as electrical and HVAC that are involved in a budget. The biggest item that you have to address in retail, the one we don't want to get rid of, is the interior - the fixture package, the lighting package, the flooring package - and all the sizzle that we want to maintain.

Fidel Miro: When a client presents a budget, we try to bring them down to a realistic level. We give them the strategy they need to do all the interiors, and of course that involves the architectural sense of the store, not only the merchandising itself. We spend a great deal of time looking for new materials and possibly new options, so nothing is left to chance. The store must satisfy both the client and the consumer, who is also a very important component of the retail business.

As we work with a client, we first look at all the big-ticket items. What is the most expensive package? Is it the lighting, the ceilings, the air-conditioning or the fixturing? And we can always eliminate or diminish the amount of walls, which are very expensive. In doing a series of freestanding elements or short walls with fixtures, we try to invade the area in the center of the store and to create the proper human scale in relationship to the merchandise. We also look very closely at the flooring, ceilings and lighting.

Michael Bills: I hesitate to be too adversarial, but the issue with regard to cost and with regard to budget is really our industry's fault. It's our issue, not our clients'. We've seen the advertising community spend money somewhat irresponsibly - citing their fees as a percentage of increased profitability, productivity and the concepts they create. And as a result, their clients are paying them back. I don't think any of us want that for our industry, because it doesn't necessarily speak to professionalism, the quality of the product, or the intellectual thinking we provide at the outset.

The great thing about this show and other events like it is these forums. But I don't think many of us believe there's honest discussion going on. There was an awards banquet last night from a store-fixturing manufacturer that gave away awards to stores with no fixtures. The past four or five "concepts of the year" from different types of awards banquets are closed - four, five and six of these stores in the past six years.

When we started this discussion we talked about consumer behavior, about branding and about understanding what retailers need in order to sell their products. But I don't think that what we honor in the industry necessarily illustrates these ideals. Instead, we give out awards or "podium presents" to $400 and $500 per sq. ft. concepts and pay lip service to all the others.We need to address how our stores are going to enhance and drive sales.

Joseph Geoghegan: I agree that productivity is an issue. Our company looks at components that can be used in different ways and added to later, that act to extend the life of an environment. You hit the nail on the head that it's an issue we have to grasp as an industry, and we have to get in front of it before it runs over us.

Douglas Van Gundy: It's a question of education and making sure all the line items are accounted for up front. In our firm, even before we present the first conceptual designs, we go through a financial review. The financial review consists of our vice president of construction and our vice president of manufacturing sitting down with the design team, going through the budget and saying if there are certain things that will work and certain things that won't. There's nothing more disappointing to us internally, or to the client, than to present them with this fantastic design that meets all of their needs and then they can't afford it. In that case, our industry loses and our clients lose.

Michael Crosson: It's not only us educating the client; they need to educate us on their issues and we need to pay attention. When I hear someone telling a client something can't be done, I can't tell you the number of people who have proven that statement wrong the following day. Passion, motivation, exposure or a different industry perspective will create a new approach that will blow everybody in this room out of the water if we're not focused. Walk through the fixture show. Look at all the different approaches out there. It's a unilateral educational process and, when it's all said and done, there's the fiscal responsibility to make sure the client is still in business two years from now. That's the ultimate job preservation for us and for our client. Take a look at Warner Bros. or Disney. When Warner Bros. started it was very appropriate, but creating something like that today with sales flattening out the way they are would be inappropriate. More and more, tenants are saying, "Let's not put a lot of money in investing in the landlord's facility; let's invest it in our business."

Michael Malone: What happens if the customer has a retail concept that we develop a store for, but the merchandise doesn't stand over time? This speaks to the issue of performance-based fees or structures for continuing services. You were talking about stores that are no longer business prototypes. There are cases where big-name clients come to a design firm with something that possibly isn't a valid retail concept. We're all very excited about projects like that because they generally have high exposure, great visibility and big budgets. There are a lot of those, and they are the ones that get the Time magazine exposure. But what happens when the merchant doesn't have something to sell, or doesn't have something the customer wants, and we still have to develop a beautiful retail concept?

Michael Bills: That's why our founder established RPA with the retail strategy offer at the front end: to advise clients and to work with them in a strategic nature before putting pen to paper; to determine whether their position is correct; to see if they should have a particular product offering and channel of distribution; and to help decide if they should have a flagship store. I think our industry has to act as a profession, just like medicine or law. I think all of us want to be visible and to know that the work we do, and we do it well, is a business function. But when we, as an industry, don't act like a profession, it creates problems for us and confusion in the minds of the clients who buy our services.

Bart Forbes: I've heard the square footage costs around the table here fluctuate from $150 up to $450. This discrepancy probably hurts us more than anything out in the industry, because when we go sit down with somebody, they're not significantly knowledgeable about the real costs of doing a store. What they do know is what somebody told them about how much they should be spending per square foot. They really don't know what that means or what is involved. So the whole idea of square-footage cost is ridiculous from our company's perception. I think our responsibility is to be part and parcel of helping the retailers survive in what they do, and we would be a lot more responsible in challenging them to go back and tell us what their projected financial goals are for a store, and then having their accounting people work with us in the early stages of investigating the first-line costs and the total costs. Then the retailer can run it by their financial wizards and come back and tell us whether they can support the projected budget of the store. But they don't do that, and they haven't done that historically. To really understand what your cost is going to be, you have to work it backwards. You've got to consider all your hard costs, your rent, your overhead, your people and all those types of things, because a store does not necessarily fail because we wound up spending $300 per sq. ft. A store often fails because the breadth of the line was insufficient to create a store to begin with. What we need to do as an industry is help the client understand. Even you, as a publication, could publish something that tells what all these costs really mean.

Michael Crosson: And the minute you do, there are going to be five exceptions to the rule. If I asked everybody in the room today how much a car costs, everyone would answer differently. It depends on what you want. What's your ego? What's your desire? What's appropriate? I know people who make $20,000 to $25,000 a year who buy a BMW. Why? Because of where their head's at. Every client out there has different priorities.

I defy anyone to say that if someone came up to us and said they were going to pay us $1 million to design a store on Michigan Avenue in Chicago, and we all agreed that the concept wouldn't work, that we would turn it down. We get those questions every day. Depending on the situation, you do the strategy, you point it out to the client, and then you've got a decision to make: Am I going to work with them or not? The test is really going to come when you don't have any work at the moment - then how do you stand on the integrity of what you believe?

Michael Bills: Because it comes back to you. We resigned an account with a major apparel manufacturer because it was a bad idea from a brand-positioning perspective and because it wouldn't be successful. So the manufacturer hired an offshoot of our company, a design-only company, to do a shop concept. Five years later those shops are still sitting in warehouses after we have repositioned the brand, reintroduced it to the United States, lowered the costs here, and now they want the shops. So they pulled them out of the warehouse and dusted them off. It isn't necessarily the responsibility of the design organization or the designer, if that's all they're saying they are. But if they go out on a limb and talk about strategy and brand positioning, they have that responsibility. So they better make sure they have the information, the capabilities and the disciplines to back it up.

What I'd really like to see are the awards or coverage given on the merit of financial results. What percentile increases in sales have we gotten per square foot? In post-testing research, what is the customer perception of the brand as a result of the concept? How much did it cost? What is the ROI and break-even assessment? That's what needs to be told. Aesthetics is only one component.

SCW: Let's talk about retail theming. Do you consider every project you do today to be themed?

Michael Crosson: When theming started about 10 years ago, it was an integrated approach to an idea. Today, it's an application that doesn't necessarily tie in with the aggregate total of the concept. At first, retailers thought it was what you had to do to be successful, but the real issue was the approach of the brand identity and the elements required to support the brand. You can label it whatever you want, but it goes back to the point that we have the tools - visual merchandising, graphics and everything else - that help us create the right position for the brand. And theming or the elements of theming can be a part of that, but it's not where you start. You start with the story. What's the brand identity of the story, what's the interaction with the consumer? And then the rest of it comes to life. But there are many people out there who decide they're going to theme a store. And now we have all these resources we never had before that came out of the theme-park industry. The costs are down now, so everybody can do it. They buy this stuff and stick it in the store and go, "Ta-Dah! I have a themed environment." And the consumer looks at it and goes, "Oh. I don't get it. It's pretty, but what does it have to do with shoes?"

Renee Ruffolo: Many consumers are really tired of theming. The real emphasis, from a consumer standpoint, is on searching for environments that are more convenient for them to shop. They're not searching to be constantly entertained. There really needs to be more emphasis on creating a shopping experience of substance.

Michael Bills: I would say the consumer was never interested in theming. The success of Warner Bros. wasn't that it was themed so much as it had correct brand positioning. Because theming, it's like a prom, people go once and they say, "Yeah, that's cute. OK. Bye," because it really has no relevancy to their experience. Let's look at some really successful brands, maybe some of those clients that aren't any of ours to neutralize it a bit. For example, if you look at Banana Republic and Williams-Sonoma, you could call them themed, perhaps. But really it's about brand positioning.

Joseph Geoghegan: Theming also has a likening to lifestyle. In our discussion we've focused on a couple of the specialty concepts that do very much espouse theming. And you're right about Warner Bros. and some of the others who, early on, were able to grasp upon it and make it an integral part of their strategic presentation.

SCW: Let's take a new direction. As design firms become major players in retail branding and repositioning efforts, there's a wider range of service offerings and more collaborative efforts that are required. How have your firms dealt with this?

Michael Bills: The strategy discipline, along with that of merchandising, lighting, environmental design and graphics - all are separate disciplines within our company. If anything, we've increased and added more people within the retail-strategy discipline of our business to reflect the increased desire for an effective, strategically based solution.

Ponch Herrara: Like anything else, it's a convenience to the client. They want a one-stop shop. We seem to be expanding into all other aspects of the business that weren't really our responsibilities in the past. We were design, but we didn't do graphics. Well, now you need to do graphics. You need to know the strategic point of business. Collaboratively, all these businesses are becoming one with interior design, which is the merchandising, the lighting, the graphics, the whole ball of wax. They're all interrelated.

Michael Crosson: You can answer the question on two levels. One level involves projects that are extremely large and involved, and that require a team or collaborative effort. On these projects we're seeing design firms, architectural firms, the marketing community and in-house staff coming together as team participants. There can be anywhere from four to 10 different companies. These projects require collaborative efforts and a clear understanding of who's leading, who's following and what the individual responsibilities are.

Then there's the other side of it. There's the less complicated, smaller projects - chains, maybe, that may be regional but that aren't hugely complicated projects. These projects are requiring our firms to provide a broader range of in-house services with a single point of contact. The client wants to make one phone call to the organization. They don't want to call 10 people to find out the status of the project. And that puts a big burden on firms because they have to be the best in research, in strategy, in thinking about the design approach - POP, graphics, fixturing, you name it, and then they have to do the construction management. It puts tremendous pressure on an organization. But we see both ends of the spectrum happening at the same time: more internal services to certain clients, and more collaborative efforts on the other end of the spectrum with a gatekeeper or manager that's responsible for it all. They're looking to firms like us to understand the branding, understand the imaging, and to be the gatekeeper of the project's image and direction. Then they look to us to make sure everyone in the collaborative effort is focused in the right direction.

SCW: One last question. What are the roles of the Internet, in-store interactive and Intranet presentations at retail?

Fidel Miro: Today, the Internet is forcing the physical stores of the future to change. Stores are getting smaller. There will need to be more definition in the departments so the customer can get to the store and not have to browse all around to find one particular item. Most people know what they're looking for. The options have to be reduced so the customers will understand exactly where to look and go directly there to buy what they need. In order to do that, stores' strategies will have to change. The cashwraps will have to be more unified, with two or three cashwraps in one area. In addition, kiosks for advanced checkout will become very important.

Michael Crosson: I think the Internet is just another form of access for the consumer. What it really means to retail will be shaken out over the next five to 10 years. It's going to be very exciting to see how we all get creative within this application.

Michael Bills: Electronic retail and e-commerce are a significant part of our business. We probably have a dozen clients that we're currently developing in-store Intranet and websites for, but we differentiate between the two. The Internet tends to be very attitudinal and brand-focused, like advertising, while the Intranet is not unlike buying a product off the shelf. At this red-hot moment, electronic retail does have a ROI and brand-billing component to it.

MICHAEL A. BILLS, Senior Vice President/Account Services Retail Planning Associates (RPA) Columbus, Ohio

MICHAEL CROSSON, CEO JGA Inc. (Jon Greenberg & Associates) Southfield, Mich.

BART FORBES, President/Senior Designer Forbes Shea Freeport, Maine

JOSEPH A. GEOGHEGAN, JR., Principal Robert G. Lyon & Associates Inc. Chicago

PLACIDO "PONCH" HERRARA, Design Administrative Director Pavlik Design Team (PDT) Fort Lauderdale, Fla.

MICHAEL J. MALONE, Principal Michael Malone Architects (MMA) Dallas

FIDEL MIRO, Design Director Horst Design Group New York

RENEE RUFFOLO, Managing Director Image By Design, a division of Dann Dee Display Fixtures Niles, Ill.

DOUGLAS VAN GUNDY, Vice President of Marketing Nomus Interiors King, NC

Shopping Center World Staff:

Carol B. Padgett, Panel Moderator, Ad Supplement Editor

Jon Tuck, Associate Publisher

Elaine DeSimone, Associate Editor

Amie Leibovitz, National Sales Manager

Michelle Koerner, West Coast Sales Manager

Michael Glennon, East Coast Sales Manager

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