Thinking outside the (big) box

Retailers look at smaller spaces, short-term leases, mobile operations [Online-only content]

By Ashley Devick

The retail real estate market, both locally and nationally, unquestionably has changed during the last several years.

For example, electronics businesses such as Best Buy are being forced to reduce the number of locations — or be dissolved ala Circuit City. McDonald’s and Taco Bell are serving fast food fare from buildings that are actually rather attractive. And in Nashville, terms such as “pop-up,” “flexible” (think The Shops at Fatherland) and “collaborative” (visualize The Five Points Collaborative) are no longer foreign.      

No doubt, as the retail market continues to evolve, businesses are finding ways to maintain a consumer shopping experience — and that means thinking outside the box. And particularly outside the big-box mindset.

Wal-Mart, for example, has developed a series of smaller centers that cater to a variety of customers, oftentimes in urban environments (such as the Neighborhood Wal-Mart in East Nashville) where the massive retail store space can’t be physically accommodated.

“At the end of the day, we want to try and have the store format reflect the surrounding community,” says Steven Restivo, spokesperson for Wal-Mart. “In some cases, that means a larger, one-stop-shop store. And in others, it means a smaller format that focuses on a need or want in the community, like fresh food.”

Businesses with less buying power than Wal-Mart are facing a retail market that is finally stabilizing, which means rental rates are strengthening. The massive landlord concessions and months of free rent that were available during the Great Recession are disappearing, forcing retailers to find new ways to save money, while maintaining a positive experience for their customers.

Ben Claybaker, CEO of commercial real estate firm NAI Nashville, has seen Middle Tennessee retailers reduce expenses by both consolidating their locations and by downsizing the total square footage of each site. He says this change typically has only limited impact on the consumers.

“If you reduce the space by 10,000 square feet, it might not be that big of a deal to the customer,” Claybaker says. “But when you look at a major big-box retailer with locations throughout the country, if they reduce the square footage by 10,000 square feet across all of their locations, they are saving a good chunk of change.”

To combat the expense associated with establishing a retail presence in the first place — and to avoid the long-term leases that are typically required — small businesses are finding opportunities courtesy of new trends.

California-based Storefront developed a solution that works for both landlords and tenants: shorter-term leases in retail spaces that offer maximum flexibility.

Tristan Pollock, co-founder and chief operating officer of Storefront, says the model links businesses looking for short-term retail opportunities with landlords and brokers looking to fill vacancies on a short-term basis. The appeal is that businesses have a chance to reach a customer base in person for a shorter period of time, without the overhead of a costly lease commitment. Landlords, in turn, can generate income in an otherwise vacant space.

“With the industry changing, we found all of these pain points people were having — finding the right space, the right broker, the insurance, et cetera,” Pollock says. “We wanted to help solve that problem and make an underutilized resource a little more accessible for those who don’t want to sign a five- to 10-year lease.”

The concept is catching on in San Francisco and New York. But Pollock believes it will continue to pop up in cities around the country — and at this point, any landlord in any state can list properties through the Storefront site.

“Any space with high foot traffic that is turnkey and allows retailers to reach their target demographic, that’s what we try to get onto the site,” Pollock says.

While a physical address is important to some businesses, others are embracing a different route and they are taking their products on the road.

Krista Buckley, co-owner of Charleston, S.C.-based Wanderlust Trading, decided to do something different when it came to selling a collection of eclectic artifacts curated from her journeys around the world. She and her partner purchased a Winnebago and joined the growing wave of mobile-based boutiques. To reach their clients, they have been making their way through America, setting up shop as they go.

After being inspired by international shopping adventures in Morocco and India, Buckley wanted to create a shopping experience that went beyond bricks and mortar and the Internet.

“We wanted to have a similar interaction that was an experience that you don’t get with an online store,” says Buckley, who rolled through Nashville with the Winnebago in late July.

Across the board, no matter the size of the retailer, the customer experience remains the most important aspect of the changing face of retail culture. And that reality isn’t going to change, regardless of space considerations.