Where’s the loyalty?

Has anyone else noticed that more and more consumers seem to be “cross-shopping” than ever before? I’m talking about those people who shop both the high-end luxury retailers and the discount or even dollar stores. I recently read an article that indicated one-quarter of all Nordstrom shoppers also shop at the Dollar Store. And, I started to ask myself if this trend is here to stay.
 
Two decades ago, shoppers were relatively loyal to one or two high-end retailers and wouldn’t have even thought of shopping anywhere else. Today, though, for any number of reasons, many shoppers (like the ones mentioned above) are buying from a wider variety of retailers. What could be driving this change? I think there are a couple of things: First is the basic economic motivation. People of all income levels are more driven to look for deals when times are tough. So, I think the recession played a major role in starting the trend. But, something else has happened to keep it going. The availability of “fashion-forward” apparel at many/most discount locations has certainly increased. Target offers higher-end goods and specialty lines, Kohl’s has discounted brand-name items, and stores like Zara and H&M have the latest styles at an affordable price. Think about it: There’s a broader range of alternatives for shoppers who are more price-conscious than ever before. Don’t get me wrong. I’m not saying there isn’t a market for Neiman’s and Saks (luxury brands still provide better service, selection and quality). What I am saying is that there’s been a shift in loyalty. People just aren’t as loyal as they once were because they don’t have to be. There are other, often more affordable, options they can turn to.

I also think that retail brands themselves have changed. A few years ago, Macy’s was seen as a high-end brand name known for the occasional good promotion. Now, they are more of a bargain hunter’s venue, with deep and consistent discounting that, in my mind, moves them into a different category altogether. People are also doing more opportunistic buying and looking for that great find at a lower price; less “targeted” shopping in exchange for more browsing. I think Nordstrom has figured out the appeal of this needle-in-a-haystack approach and realized that their Nordstrom shopper is also a Nordstrom Rack shopper, which is why we’re seeing an increase in Nordstrom Rack locations in recent years.

Ultimately, I think this is fundamentally good news for the retail real estate industry. This allows more leasing, programming and design flexibility, making it possible to mix brands in ways that wouldn’t have been possible (or accepted) before. It really opens up the tenant mix and allows for centers to be leased based on what your market is looking for instead of on arbitrary labels, formulas and restrictions. While developers and retailers have been debating this for years, I think we are starting to see more acceptance from the development community. Take Irvine Spectrum Center in Irvine, Calif., for instance. They’ve had great success adding Target to their mix. In their case, Target is right next to Nordstrom—something we would never have seen five years ago. There are also more Costco units going into regional mall environments than ever before. Maybe it’s time for all centers to have their own retail DNA based on market characteristics and market voids. Perhaps it’s time we have “hybrid” centers where shoppers can go from Target to Tiffany’s to Kohl’s and Saks. Maybe this is the start of our industry’s next evolution.

What do you think? Is this a trend that will last? Do you think we’ll see more “hybrid” centers in the future? Please make a public comment below or feel free to e-mail me privately at jeff@jeffgreenpartners.com.


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