'07 Forecast: retail
From lifestyle mall to online, retail will use more diverse sales channels in 2007
By Phyllis Hanlon
Registers rang irregularly early in 2006, but as the year wore on, energy prices fell and consumer confidence grew, boosting sales across the retail sector.
Central Mass. retailers will see more of the same over the next year. And several new local projects should boost that success in some areas, says Robert Sheehan, vice president for research at KeyPoint Partners.
Sheehan says one of the biggest is Bay State Commons, a new development under construction in Westboro on the site of the former Bay State Abrasive factory. When finished next year, the 23-acre, mixed-use project will combine 44 luxury condominiums with retail stores in spread across 250,000 square feet. Its tenant list includes a Roche Bros. Supermarket, Panera Bread, Ted’s Montana Grill and Ann Taylor.
Although not a mall, open space development such as Bay State Commons will continue to attract more customers. So-called lifestyle malls are a shopping concept that features upscale stores, coffee shops and restaurants in the midst of tree-lined streets, fountains and other amenities.
The Shoppes at Blackstone Valley in Millbury exemplifies a typical lifestyle mall, and its jam-packed parking lot demonstrates its popularity. The model is still evolving, but the success and growth of similar developments seems poised to continue over the next year.
Cross-migration
Another major factor that will continue to alter the retail landscape is "cross-migration," when retailers venture into selling things they normally don’t, such as gas stations that peddle groceries, or vice-versa.
"Now these stations serve as convenience marts," says Sheehan. Wal-Mart super centers, Dollar Stores and convenience stores all chip away food dollars from supermarkets.
Jon Hurst, president of the Retailers Association of Massachusetts, says cross-migration affects competition between major players in a sector, such as a Stop & Shop versus a Wal-Mart, rather than a mom and pop store versus a Wal-Mart.
Joint ventures, where one store locates inside of another, non-competing store, form another strategy likely to gain a wider in the retail segment. Dunkin Donuts is a perfect example. Its coffee shops locate inside supermarkets to offer amenities to both shoppers and workers in the store, gaining exposure, and increasing sales.
Big box stores will continue to be a thorn in small retailers’ sides, grabbing a larger piece of the pie in 2007. Stores like Dick’s Sporting Goods, Home Depot, Lowe’s and Target, and Wal-Mart continue to sprout up across the state.
The best strategy for small sellers is to avoid competing directly, and instead focus on their own corners, Hurst says. "Find a special niche. Increase your level of service and create customer loyalty," he says.
But the price breaks of larger retailers will affect smaller ones, Sheehan says. "Higher end apparel stores near a new Wal-Mart wouldn’t see a significant impact. But the more price conscious stores might be affected. Any retailer has the potential to take business away from another retailer."
Supermarket chains
Could election-year issues affect food retailers? Christopher Flynn, president of the Massachusetts Food Association (MFA), thinks so. He says food retailers should be involved and focused on educating legislative officials and state government about operations.
The MFA, a trade association for more than 600 grocery stores, includes big supermarket chains, mom and pop shops, and food brokers.
Flynn says the industry is still recovering from a number of setbacks in the past year, including elevated fuel prices, and the fallout of Hurricane Katrina, which affected manufacturing facilities in the region where many varieties of foods are packaged.
Another major defeat was rejection by voters in November of the wine bill, which would have allowed alcohol sales at supermarkets. Over the next year, political calculations could continue to affect the food sellers region-wide.
Tax holiday boosts sales |
Christmas came early this year for the third consecutive year, as Massachusetts retailers received a huge boost in sales from the state’s annual tax holiday. Coming at a critical time - the second weekend in August - this summertime selling celebration brought welcome relief to a sagging sales season.
Jon Hurst, president of the Retailers Association of Massachusetts, says energy and inflated housing prices hit the state disproportionately hard. The tax holidays proved the perfect remedy for ailing retailers, allowing them to move merchandise and create more shopping traffic.
"Consumer spending confidence bounced back to a level not seen in two years," he says. That one weekend generated sales figures comparable to those in the weeks leading up to Christmas.
Experts predict a 4.3 percent increase in sales for Massachusetts this November and December slightly below the national average of 5 percent.
Hurst expects the tax holidays to continue. "We would have a lot of disappointed retailers if they don’t. It has proved to be a huge benefit for the industry," he says.
P.H.
The Internet will continue to confound retailers as they invest more heavily in online operations, and worry about digitally-based competition. "The biggest Internet sellers are the biggest retailers," Hurst says. "Big retailers can beat small stores on price in bricks and mortar, but that doesn’t always translate online."
Bernie & Phyl’s Furniture Store is one retailer that anticipates gaining market share in 2007. "The furniture market is not going to get any less competitive than it already is," says CEO Larry Rubin. "But we expect to continue to grow our business and do quite well in the large niche that we’ve carved out in this marketplace."
While following a traditional advertising strategy via broadcast television and print ads, Bernie & Phyl’s has added a technological component, which has boosted sales and customer satisfaction, Rubin says.
In 2001, Bernie & Phyl’s became the first regional retailer to launch an e-commerce website. During the last five years, the company has been in expansion mode, opening three new stores and meeting its 2006 goal of growing its customer base, thanks, in part, to its website.
Recently upgraded, Bernie & Phyl’s Web site features every furniture product it carries, plus expanded search capabilities, including a room planner program that allows customers to see how the furniture will fit in their home. Customers can also now make appointments online with salespeople before coming to the store.
Auto dealers also see signs of big growth in 2007, powered by the Internet. With stable interest rates and leveled off gas prices, Neil Patrick, co-owner of Patrick Motors in Auburn says he expects a 10 to 15 percent increase in business next year.
Patrick says technologically savvy consumers sometimes opt to purchase a car online. To cash in on that business, Patrick has created internet-only specials, as well as the ability to make service appointments and request parts.
Combination marketing strategies
Albert DeLuca, owner of Flor-Al’s Inc. in Worcester, says he wishes he had a crystal ball to make predictions for 2007. But in the flower business, revenue is based on bookings and inquiries, many of which are spur-of-the-moment, he says. Although wedding planning begins months before the big day, DeLuca says other occasions are less predictable. Still, he speculates business will increase in the coming year.
This year was a good one for DeLuca, with a wedding every weekend throughout the summer, as well as steady walk-in business, he says. Some of that success he attributes to his extensive website, which lets customers view his selection before buying.
Adding product lines and services
Bill Cavanagh, owner of CC Lowell art supply store in Worcester, says several strategies he has added over the last year should have big payoffs in 2007. Although he does not sell supplies online, he has greatly increased his online communications with customers.
He’s also added new products line that should help the store better compete with big box competitors, such as wedding invitations and greeting cards. He has also implemented a rewards card program and reduced everyday prices on paints, brushes and papers.
Frank Phelan, store manager of The Living Earth in Worcester, says that the public’s growing appetite for healthier cuisine will drive sales higher next year - especially in the restaurant.
To better focus on that segment of the market, the organic grocer has launched Living Naturally, a quarterly publication focused on health care products, says Celeste Snell, Living Earth’s director of marketing. Snell hopes to create visibility for the store and its products with recipes, health tips and medical information from local professionals.
Phyllis Hanlon is a freelance writer. She can be reached at PolishPen@mac.com
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