Retail success still hangs on catering to customers

AACI | Vice President, The Regional Group of Companies Inc.
  • Jan. 21, 2015

Canada is the promised land for foreign retailers looking for a new market for expansion.

John ClarkAt least that’s what many indicators keep telling us. Back in August, I wrote about the growing market trend that is spelling the doom of many of the traditional strip malls built 20 or 30 years ago in urban landscapes across North America.

But I also quoted a number of data points that suggest an untapped opportunity in Canada. One report last April from Greystone found that Canada averages only 14 square feet of shopping centre retail space per consumer. Compare this to the industry rule of thumb a single consumer can support 30 to 40 square feet of retail.

And yet, here we are. Target is fleeing Canada, with the confetti from its much-hyped grand opening still fresh on the ground.

What’s going on?

Logistical woes and changing habits

There was an excellent article in the Ottawa Citizen a couple of weeks ago that hit it right. It drew a straight line between the recent flameouts of a number of U.S. retail icons that have attempted to colonize Canada, changing demographics and our country’s lack of focus on dealing with its infrastructure deficits.

Writer Madeline Ashby referenced changing suburban demographics, social media habits that are spelling the demise of the  teenage creature known as the mall rat, and suburban families who no longer have the disposable income they did when most large enclosed malls were built.

In addition, while traditional bricks-and-mortar retail still dominates and sales continue to grow, online retail is steadily growing, and at a faster rate. Target, however, is criticized for failing to take advantage of this trend with a suitable online strategy.

But the key point for me in her article came from Alex Leitch, who laments Canada’s infrastructure gap as a key factor in retail’s woes.

Target, like many other U.S. retailers, appears to have grossly underestimated the supply chain challenges of getting product into Canada and onto their store shelves.

The answer for Leitch isn’t for these retailers to have a better handle on what they are getting into and having an adequate strategy to cope, but instead, for our policy makers to see the economic value in addressing the logistical infrastructure issues exposed by these retail fails, as well as the need for a 21st-century industrial policy.

Don’t forsake one customer for another

For individual retailers, it is my opinion it also boils down to that old axiom, “know your customer.”

I will confess – I have grey hair. This and a few other obvious indicators put me in that group of consumers known as the boomers. We are legion. And while those younger folks who are part of the millennial generation are making a lot of noise, it is we (and many of the Gen Xers who followed) who command the most disposable income.

My generation may be entering retirement, putting many of us on fixed incomes, but we still account for a sizable chunk of consumer spending, and we will judge your business on the level of one-on-one customer service.

Many brands, however, are racing to revamp their look, feel and brand experience to suit the millennial generation, sometimes at the expense of the grey hairs like me who made them what they are.

My most recent beef on this subject is with the clothing retailer I’ve been patronizing for some time. It recently renovated its store to appeal to adolescents with dim mood lighting and the like. But this ignores the grey army of boomers who still need clothes but can’t see the products in such poorly lit places.

Don’t take your existing customers for granted, because it’s all too easy for them to vote with their feet, or perhaps with their fingers on a keyboard.

Harness the power of the grey army

On the other hand, you have retailers like Home Depot, who have had the foresight to recruit their staff from among the grey army, so the customer service reps on the floor actually know what they are doing. Customers like that – it brings them back.

As I have said before, vacant retail space can create redevelopment opportunities for landlords to recapitalize their assets. A little reinvestment, and perhaps a move into mixed-used development, can result in significant lifts in rents and net income.

But it all begins with understanding, and catering to, the consumer segment that keeps the butter on your bread.

To discuss this or any other valuation topic in the context of your property, please contact me at [email protected]. I am also interested in your feedback and suggestions for future articles.

John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

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John Clark is Vice President with The Regional Group of Companies Inc. He has more than 33 years of experience in the real estate appraisal field, is a fully accredited…

Read more

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