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Specialty Retail Grows Up

With its visual diversity and wide assortment of products, specialty retail offers tremendous flexibility with minimal overhead. Even more important, it allows vendors to capitalize on the latest merchandising trend as soon as it comes along.

Specialty retail, by its very nature, offers a variety of attractive benefits. The configuration of carts and RMUs (Retail Merchandising Units), coupled with their prominent location in the center of a mall, allows merchandise to be displayed in such a manner so as to afford maximum visibility from virtually any vantage point.

"In a cart or kiosk, unlike in a store, you are going to have 50-yard line exposure, all across the board. People actually are able to 'reach out and touch' - something you cannot do in a store," says Alison Keele, director of specialty leasing for Aronov Realty in Montgomery, AL.

Carts and kiosks and RMUs, oh my! Developers are not only creating pricey, upscale units consistent with their portfolios, but tenants are customizing them down to the last detail to make them compatible with a center's overall ambience. "Specialty retail is light years away from the old days, when carts were created just so you could have furniture to put in a mall. There is a real effort being made to ensure that carts and kiosks blend seamlessly into the retail environment and make a positive statement that is not intrusive to customers," says Richard Green, president of Westfield America in Los Angeles.

Green likens the carts and RMUs that form a vibrant procession along the center of shopping malls to the bustling vendors one would find on a city street. "There is an enormous amount of energy created by specialty retail. In my mind, there's no question that it brings more people into a center," says Green.

Green thinks it's time that specialty leasing was elevated to the same level as permanent, in-line leasing. "With their prime location and high visibility, as long as (RMUs and carts) are selling good products, there's no reason why people shouldn't buy the heck out of them."

However, with the number of entrepreneurial wannabes out there waiting to jump on the specialty retail bandwagon, developers are concerned. Not only do they want the merchandise to entice mall patrons to buy, they also want to ensure that the sellers themselves are of a high-quality, professional caliber.

As a result, Westfield has developed a list of stringent rules and regulations to which their specialty retail tenants are required to adhere. They provide rules for signage, recommend uniforms or name tags, and say that any specialty retailer who violates the rules will be shut down.

Developers are not the only ones taking specialty retail more seriously. It is gaining acceptance even among department stores - formerly, one of its biggest detractors. "The stores that in the past were critical, now support it. We are seeing them become involved, selling items from carts such as chocolates and coffee that they used to sell in-store," says Green.

Nowadays, even the Avon Lady is coming to call at the mall. "Vendors like Tupperware and Avon are starting to see the benefits of being able to come in and sell direct to the consumer," according to Green.

Leasing Issues For seasoned retailers who thrive on being at the epicenter of a bustling sales environment, specialty retail is made to order. As for would-be entrepreneurs, along with being potentially lucrative, it offers a means by which they can get their feet wet without having to commit immediately to the long-term rent and sizeable inventory of an in-line store.

Whereas some specialty retailers, lured by reduced rents and other similarly enticing inducements, do evolve into in-line tenants, others prefer to stand pat, capitalizing on their prime location and taking advantage of the fact that they are able to change inventory at a moment's notice. "Most of the people who come in small on a kiosk or a cart find that they really do enjoy it. Although some of our specialty retailers do grow into in-line tenants, the larger conversion from temporary to permanent are the people who come in as temporary in-line tenants to begin with," says Jim Allen, vice president of retail development for Simon Property Group.

As part of its Retail Development Program, Simon offers a temporary leasing program, the goal of which is to convince specialty retailers that they can afford to "come in and make a go of it." The company employs 50 specialty representatives whose job is to be constantly 'out there,' scouting the field for prospective tenants in much the same way as other leasing agents. "The only (difference) is that their job is to lease space for a month to a year," Allen says.

Rather than going to a permanent in-line leasing arrangement, many specialty retailers end up opening five or six additional carts in multiple malls. Or, if they are not locked in to one particular product, they may open more in the same mall, but with different merchandise. "As so much of specialty retail is impulse or fad-based, one of the RMUs may be starting to hum, while another is starting to peak - so, they can rotate," Allen says.

As far as selecting which tenants they bring into a center on a temporary basis, Allen says "Whether they (are) cart, kiosk or in-line, we try to be very careful, so that we're not bringing in tenants who will interfere with the core business of our permanent in-line stores. By the same token," he added, "if there is a void, we try to fill it."

What works, what doesn't For unusual novelty items, as well as for those products that lend themselves to a high turnover and a small amount of space,specialty retail is custom-made. The trick is offering products that are appreciably different from what one ordinarily would find at an in-line store. "In the common areas, the kiosks that generate the greatest volume of sales, unquestionably, are the larger national tenants such as Brookstone and Wilson's Leather, along with the ones that open the seasonal outposts during the holidays, such as Hickory Farms...Of course, when the Beanie Babies were really hot, no one could touch them," Allen says.

Along with kiosks and carts selling masks and other items relating to Halloween (reportedly now the second most popular holiday of the year, following Christmas), calendar kiosks also are enjoying their day in the sunshine. For calendar kiosks, "the biggest season is September through the end of December, when people are buying for the following year, " says Elaine Berger, vice president of specialty retail at PREIT.

Aronov, with its portfolio of about 15 mid-market regional malls throughout the southeast, has a strong specialty retail presence. "Our hottest carts are the ones that sell the cellular phones and accessories such as adapters, faces and so forth. Next would have to be the jewelry carts - especially those selling silver, which is really hot right now. The weight-loss products such as Metabolife also are still big - although in some markets, the knockoffs have hurt their sales a little bit," says Alison Keele.

Aronov's choice of specialty tenants is dictated primarily by its customer base, as well as by which products appear to mesh within a particular market. Some will skew more high-end than others will. In a tourist market, for example, "T-shirts with the name of the city and state skew really well - whereas, in a rural market, you're probably going to do better with products such as John Deere and Tupperware," Keele says.

Like most other developers, the company does not hesitate to court potential tenants whom they think would blend nicely with their existing ones. "A lot of times, if there is a local tenant who we feel would be a nice mix, certainly we will offer incentives. For example, we might offer a step-in deal for three months, just so they can come in and become familiar with our tenants, and vice versa," says Keele.

Elaine Berger stresses the importance of establishing the prospective tenant's goals well BEFORE the lease is signed. "Along with their business plan, we take a look at their sales projection. As we are a small company, we are able to work one-on-one to help them learn the retail end. To us, it is less important that they have an established success record, than they have a commitment to their product and a passion about selling it," she says.

As prolific as they have become, the new look of carts and kiosks is anything but generic. No longer the boxy obstructions to foot traffic they once were, today's specialty retail designs run the gamut from sleek, upscale and sophisticated to trendy, fashionable and over-the-top.

Their uses are equally diverse. Once designed almost exclusively for the purpose of providing additional sales venues within a retail environment, many kiosks now function as everything from high-tech tourist centers, concierge and information booths, to ATM's and centers for security systems.

When it comes to the actual design of kiosks and carts, it seems the only predictable thing about them is the unpredictable. "Some of our clients want a more uniform look, while others want something that is more elaborate...In a way, I think, they want it all: designs that are very original, but at the same time are accessible," says Waggon-Cellers graphics designer, Rosa Bragg.

As varied as they now are, and as whimsical as some of their designs can be, carts and kiosks do share certain commonalities. "In the beginning, everyone was using accent colors like fuchsia and teal as a way to draw attention to the merchandise. However, it soon became apparent that the more elements you add to a unit, the more those elements are going to compete with the product.The design needs to be kept simple, to enhance the merchan dise, rather than detract from it," says Rob McCoy, vice president of sales for TL Horton Designs in Dallas..

At TL Horton, designers are doing just that. Its new units incorporate metal and glass with natural woods such as maple, cherry and white oak for a finish that, along with being less flashy, affords greater longevity than ever before, according to McCoy.

Materials are important to specialty retail design, but other factors are crucial as well. "Lighting is really the key to everything we do," says McCoy. "People shop from the eye down, so we try to highlight all the merchandise as much as possible, so that nothing is in shadows," he says. Rather than fluorescent lighting, TL Horton uses halogen, "a more user-friendly bulb that really makes the colors 'pop'."

Pointing out that many kiosks have become "virtual free-standing businesses," McCoy said that designers also have created a stairstep model that is "more user-friendly" than those in the past. To "make it easier for retailers as well as developers," the unit features a base fabricated completely of drawers, and glass shelving that allows it to be illuminated without the lighting having to extend all the way to the top.

When it comes to overall size, "I would hope that we would begin to see carts start to become a little more standardized," says Jim Allen, vice president of retail development at Simon Property Group. "In the current scenario, sizes vary so much that it's hard for retailers to come up with a template or display". To address the problem, Simon has created a 5x5 unit with pull-down security that can be used by specialty retailers at any of its centers. "The best thing about the new unit is that they only have to figure out how to build their display the one time," says Allen.

He also predicts that developers in coming years will begin making more of an effort to control the 'mall sprawl' that results from "installing numerous fixtures, when they could have put in carts, instead."

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