2014 state of the shopping center - nielsen...2014 state of the shopping centers cor 2014 te nelen...

12014 STATE OF THE SHOPPING CENTERS Copyright © 2014 The Nielsen Company

2014 S TAT E O F T H E S H O P P I N G C E N T E R

2 2014 STATE OF THE SHOPPING CENTERS

ACTIVATING COMMUNITIES:SHOPPING CENTERS AS ACTIVITY CENTERSIn today’s digital age where consumers can connect with each other

via text in an instant and do their shopping from their couches, people

still crave a physical place to congregate, connect and engage. And

more and more, shopping centers are a big part of fulfilling that need.

So as shopping centers and malls remain prominent in our culture

and consciousness, developers and retailers have big opportunities

to activate communities and benefit from this consumer desire for

gathering space by becoming the center of their communities.

No longer just a place to shop, shopping centers are becoming key

activity centers in the social fabric of communities, elevating their

purpose beyond simply offering an outlet to buy groceries or pick up a

new blouse. This concept is nothing new, but implementation to activate

communities has been rare.

When Victor Gruen designed Southdale (the first enclosed shopping

center in the U.S.) in 1956, located in Edina, Minn., his vision was

that this shopping center would become the center of the community,

surrounded by schools, apartment buildings, offices, medical services,

parks, a lake and community art. Under Gruen’s vision, Southdale would

have become a dense, self-contained alternative downtown to live, work,

play and shop. This vision for Southdale did not come to fruition, but

the concept can be used today for inspiration on activating communities

through shopping centers. Consumers will reward shopping centers that

activate their communities with their shopping and dining dollars and

best of all–their loyalty.

SUCCESSFUL ACTIVATION OF A SHOPPING CENTER INCORPORATES DESIGN AND AMENITIES WHICH REFLECT THE CULTURE AND SENTIMENT OF THE SURROUNDING NEIGHBORHOOD


Keys to community activation include:

• Make private spaces feel public: Shopping centers are private

developments, but consumers will feel more at home if they are

made to feel public and are encouraged to stay a while. Make

consumers feel like they belong and feel like the shopping center is

as much a part of their community as their local park or library.

• Provide the “Main Street” feel: Nothing conjures up the image

of community quite like Main Street, USA. No matter where a

shopping center is located, capitalizing on the best characteristics

of Main Street will make consumers feel at home. Make centers

easily walkable and accessible. Provide places to sit down and

spontaneously run into friends and neighbors. Host community

events and incorporate local tenants for a hometown feel.

• Respect the authenticity and character of a community: Consumers

have made the decision to live in their communities for a reason–

whether it’s an ethnic enclave, strong job opportunities, attractive

housing options or proximity to nature. Pay attention to this local

character and incorporate it into shopping center design and tenant

mix to embed into the community. Shoppers can tell the difference

between true understanding of their communities and faking it.

In 2013, Nielsen examined the trends impacting the shopping center

industry and the implication for capturing the consumer’s shopping

dollars. In this report, Nielsen revisits the trends influencing the size

and shape of the shopping center industry, as well as some of the

shifting consumer factors influencing the strategic direction of this

powerful sector and their ability to capture the consumer’s dollar.

In this report, we examine:

• Shifts in the shopping center landscape: Lifestyle on the rise

• Shifts in retail formats: Think small

• Brick-and-mortar, e-commerce and m-commerce: Frenemies in the

retail space

• Market trends: Young, diverse and urban consumers are the future

of retail

• Consumer deep dive: Hispanic millennials in San Diego

• Location deep dive: Understanding market and retail activity to

make smarter location decisions

• What does it all mean?


S H I F T S I N T H E S H O P P I N G C E N T E R L A N D S C A P E:LIFESTYLE CENTERS ON THE RISEThe shopping center landscape remained stable from 2013 to 2014,

indicating growing stability in development. The number of large

shopping centers (200K+ Gross Leasable Area {GLA}) grew by just

3 percent in the past year. The composition of the large shopping

center landscape has also remained relatively stable over the past year.

Community centers, which feature neighborhood-serving amenities

like grocery stores and dry cleaners, are still the most common type

of shopping center in 2014, comprising 46 percent of centers. In 2013,

Nielsen reported the rise of lifestyle centers and the decline of traditional

malls like regional and super-regional centers. This trend is holding true

in 2014 as consumers continue to be drawn to the shopping experience

offered by lifestyle centers with their mix of retail, restaurants and

entertainment options.

SHOPPING

CENTER TYPESHOPPING CENTER CONCEPT

GLA SIZE

RANGE

2014%

COMP

2013%

COMP

2008%

COMP

Community Centers General Merchandise, Convenience 100K-350K 46% 45% 46%

Power Centers Category-Dominant Anchors, Few Small Tenants 250K-600K 18% 18% 13%

Lifestyle CentersUpscale, National Specialty, Entertainment,

Outdoors150K-500K 15% 15% 9%

Regional Centers General Merchandise, Fashion 400K-800K 11% 11% 18%

Super-Regional

Centers

General Merchandise and Fashion (more variety

than Regional)Over 800K 6% 6% 10%

Value Retail Centers Manufacturer's Outlet Stores 50K-400K 3% 3% 3%

Entertainment

CentersLeisure, Tourist-Oriented, Retail & Service 80K-250K 1% 1% 1%

Source: Directory of Major Malls (DMM) 2014, 2013 and 2008 and Runstad Center, ICSC

* Centers under 200K Gross Leasable Area (GLA) are not included in the Nielsen analysis.


The rise of lifestyle centers is driven in part by their newness.

Consumers are drawn to the excitement of a new concept and a new

shopping experience. Lifestyle centers are, on the whole, newer than

other types of centers with a median year opened date of 2006. In

contrast, traditional mall concepts like regional centers and super-

regional centers are much older with median open dates of 1981 and

1976, respectively.

While many malls have gone through updates and renovations during

their lifespans, they still lack the excitement of a brand new concept.

Older shopping centers can capitalize on the lifestyle center trend

by renovating and rebranding with emphasis on providing diverse

amenities like dining, recreation and gathering space in addition to

retail. No matter what the concept, consumers want a one-stop shop for

retail and entertainment they can’t get through online shopping–from

specialty cafes and wine bars, to concerts and yoga classes.

For example, The Headquarters, located in downtown San Diego, is

a new lifestyle center that opened in 2013 and was developed using

adaptive reuse to capitalize on the former headquarters of the San

Diego Police Department. The historic character, gardens and plazas,

in addition to trendy retailers like Kitson and upscale restaurants like

The Cheesecake Factory, create a shopping experience that consumers

can’t get shopping online. The center also blends into the downtown

landscape, making it a key center of activity within the community.

SHOPPING CENTER TYPE MEDIAN YEAR OPENED

Lifestyle Centers 2006

Power Centers 1999

Entertainment Centers 1999

Value Retail Centers 1995

Community Centers 1987

Regional Centers 1981

Super-Regional Centers 1976

Source: Directory of Major Malls (DMM) 2014


GROCERY

PERCENTAGE OF U.S. STORE EXPANSION IN THE TOP 20 EXPANSION CHAINS 2013 VS. 2007

DOLLAR STORES

MASS MERCHANDISERS

C-STORES DRUG STORES

16,570 NEW

STORES

36%

32%

21%

7% 5%

Source: Nielsen TDLinx, 2013

S H I F T S I N R E TA I L F O R M AT S:THINK SMALLBigger isn’t always better. Since the start of the Great Recession at the

end of 2007, small formats like dollar stores, convenience stores and drug

stores have driven retail chain expansion. Of the nearly 17,000 new stores

that opened between 2007 and 2013, 36 percent were dollar stores,

32 percent were convenience stores and 21 percent were drug stores.


PERCENTAGE OF U.S. STORE EXPANSION IN THE TOP 20 EXPANSION CHAINS 2013 VS. 2007

Larger retailers like Wal-Mart and Target are thinking small as well.

Wal-Mart is betting on its smaller Neighborhood Markets and Wal-Mart

Express concepts for future growth, putting them in a position to blend

in with their host communities and help them compete more directly

with the smaller store concepts. Target launched its smaller, urban

CityTarget concept in 2012 and has since opened eight locations in major

metros across the country.

Wal-Mart and Target are even opening smaller format locations on

college campuses and convenience store concepts to appeal to a

younger customer base that may not need to make big weekly shopping

trips. Wal-Mart has locations on the University of Arkansas-Fayetteville,

Arizona State University-Tempe and Georgia Tech-Atlanta campuses,

while Target is planning to open the first Target Express location near the

University of Minnesota campus in summer 2014 that will be 15 percent

the size of a typical Target location.

Pop-up stores are more prevalent inside shopping centers nationwide.

The number of pop-up stores jumped 16 percent from 2,043 in 2009 to

2,380 in 2012. And, the incentives for retailers to open pop-up locations

are great, particularly to experiment with new concepts or take advantage

of the holiday shopping season, as they can save up to 80 percent by

opening a pop-up location instead of a traditional store. Target opened

pop-up locations to support back-to-school shopping and Toys “R” Us

opened about 200 pop-up locations for the holiday shopping season.i

Not only retailers benefit from pop-up concepts, shopping center

developers benefit from pop-ups as a creative way to filling underutilized

or vacant space with an unexpected yet pleasant variety and diversity

of goods and services. It makes each visit stand out as a distinctive

experience. This is an interesting riff on the “shared economy” concept

where pop-ups are “sharing” underutilized mall space.


BRICK-AND-MORTAR, E-COMMERCE AND M-COMMERCE:FRENEMIES IN THE RETAIL SPACERetail sales have increased over the past year. Total retail and food service

sales increased 2.6 percent from January 2013 to $427.8 billion in January

2014.ii The biggest growth in sales came from non-store retailers at 6.5

percent, which includes e-commerce. While most retail types experienced

sales growth over the past year, not all retailers experienced gains.

Electronics and appliance stores, as well as furniture stores, did not fare

as well with drops in sales over the past year. The growth in e-commerce

compared to brick-and-mortar retailers cannot be ignored in the retail

space. E-commerce and brick-and-mortar are truly frenemies–there is

certainly rivalry, however, a friendship needs to be established to be

successful in the retail space of the future.


PERCENT CHANGE IN RETAIL SALES: JAN. 2014 FROM JAN. 2013

RETAIL SALES SAW GAINS

TOTAL RETAIL & FOOD SERVICES

NONSTORE RETAILERS

FOOD/BEVERAGE STORES

BUILDING MATERIAL/GARDEN EQUIP

MOTOR VEHICLE & PARTS DEALERS

HEALTH/PERSONAL CARE STORES

FOOD SERVICES/DRINKING PLACES

MISC. RETAILERS

CLOTHING STORES

GAS STATIONS

ELECTRONIC/APPLIANCE STORES

-6% 6% 8%-4% 4%-2% 2%0%

FURNITURE/HOME FURN. STORES

GENERAL MERCH. STORES

RETAIL E-COMMERCE SALES

U.S

DO

LLA

RS

(BIL

LIO

NS)

PERC

ENT

% OF TOTAL RETAIL SALESRETAIL E-COMMERCE SALES % CHANGE VS. YEAR AGO

SPORTING GOODS/HOBBY/BOOK/MUSIC STORES

Source: U.S. Census Bureau, Service Sector Statistics Division. February 2014

Source: Retail Indicators Branch, U.S. Census Bureau, Q4 2013

E-COMMERCE IS ON THE RISE; BRICK-AND-MORTAR STILL DOMINATES

70

Q42001

Q42007

Q42004

Q42010

Q42002

Q42008

Q42005

Q42011

Q42003

Q42009

Q42006

Q42012

Q42013

40

30

0

5020

10

6030

20

-10

40

10

0


HOW DO IN-STORE, ONLINE AND MOBILE PURCHASES COMPARE?

IN-STORE PURCHASE ONLINE PC PURCHASE MOBILE PURCHASE

MOST RELIABLE EASIESTOVERALL FAVORITE MOST CONVENIENT SAFEST

With improving mobile technology, the scope of e-commerce is expanding

beyond the PC to mobile devices, or m-commerce. Retail sales on

smartphones accounted for only 3 percent of total e-commerce sales in

2012, but figures are rising steeply.iii The majority (59%) of consumers

indicate that online shopping is their overall favorite way to shop. It’s also

the easiest and most convenient way to make purchases. However, despite

these positive feelings, consumers still indicate that making purchases in-

store continues to be the most reliable and safest means of shopping.iv The

power of touch is a very important part of the in-store shopping experience.

When consumers are able to touch products in the store, their perceived

ownership of those products increases which leads to greater emotional

connections and impulse purchases.v Shoppers seem to still be evaluating

mobile shopping, with 38 percent of shoppers expressing a preference for

mobile purchasing as the most convenient option.

69%

28%

11%

31%

59%

13%20%

68%

27%

13%

68%

38%

77%

22%

7%

PURCHASE PREFERENCE

Source: Nielsen Shopper Sentiment, June 2012


COMPARING ACTIVITIES AMONG MOBILE SHOPPERS

SMARTPHONE

TABLET

Source: Nielsen Mobile Shopping Report, Q3 2013

O M N I-C H A N N E L C O O R D I N AT I O N Despite the competition, brick-and-mortar, online and mobile are not

mutually exclusive in the consumer shopping experience. Retailers

should incorporate all three to create an integrated omni-channel retail

strategy that uses mobile as the glue between online and brick-and-mortar

shopping.

More than four in five (87%) smartphone and tablet owners use a mobile

device for shopping activities.vi Consumers also use mobile alongside in-

store shopping as an extended shelf, using their devices to locate stores,

get purchasing advice from friends and look up prices and product reviews.

This easy access to information has made consumers savvier shoppers.

Shopping centers and brick-and-mortar retailers can help strengthen the

ties between physical and digital shopping by ensuring their locations offer

free Wi-Fi and apps that make the shopping experience more convenient

and informative. And along with increased mobile usage, shopping centers

and retailers gain added insight into the consumer purchase journey, better

understanding consumer activity within the centers.vii

19%49%

65%59%

39%76%

51%66%

14%49%

55%47%

USING STORE LOCATOR TO FIND STORE

USING LISTS WHILE SHOPPING

CHECKING PRICE

USING MOBILE COUPON

RESEARCHING ITEM BEFORE PURCHASE

READING REVIEW OF RECENT/FUTURE PURCHASE


MARKET TRENDSYOUNG, DIVERSE AND URBAN CONSUMERS ARE THE FUTURE OF RETAILMillennials, consumers age 20-37 (born between 1977-1994), are the

most likely to adopt novel omni-channel shopping habits. They are an

ever-growing demographic and currently account for 24 percent of the

U.S. population–on par with Baby Boomers. Their large population size

equates to big buying power. Millennial shoppers spend about $600

billion each year. And as they come of age and establish their own

households, their impact on the retail industry will increase. By 2020,

Millennial shopping spend will increase to roughly $1.4 trillion annually

and represent one-third (30%) of retail sales.viii

Millennials are very different from their parent’s generation. They are

more racially and ethnically diverse than any previous generation.

They’ve been hard hit by the recent turbulence in the economy, but their

high education levels and optimism foreshadow their potential future

success.ix Shopping centers and retailers who cater to this generation’s

preferences will be in good position to capitalize on this growing market.

Millennials are leading a movement back to the cities. For the first

time since the 1920s, cities are the center of economic growth and

vitality. Megacities, those with over 10 million residents, are set to

rise dramatically over the next 25 years.x Millennials value the urban

environment and want to be able to live, work, play and shop all in the

same area.

They are taking longer to buy homes and start families which will keep

them in the cities longer than prior generations. Millennials who live

in the core of the nation’s major metros shop more often than their

suburban and rural counterparts in all types of shopping centers and

stores, making these urbanites even more valuable to retailers. They

are especially likely to shop in department stores, chain apparel stores

and upscale boutiques.xi And, older generations are following suit.

As Baby Boomers become empty nesters, they are likely downsizing

from their suburban McMansions to a smaller footprint. Shopping

center development will need to adjust for this urban preference.


Even shopping centers located in the suburbs can take on urban

characteristics by embracing “hipstubria” with mixed-use, walkability and

transit-oriented development.xii

Along with shifts in urbanicity, a seismic shift in the housing industry

has occurred since 2007, when the home bubble burst, giving way to the

Great Recession. With this shift, understanding the type of communities

consumers live in leads to greater understanding of the way they shop

and spend. The Demand Institute has classified the most prominent

cities, towns and villages into nine community segments. At one end of

the spectrum, communities are organized into “Affluent Metroburbs,”

where residents are within walking distance or close proximity to

commerce. Upscale retailers and luxury homebuilders, will find the

greatest opportunity in these “Affluent Metroburb” communities.

On the other end of the spectrum are “Deflated Bubble Communities,”

where the community conditions demand a focus on affordable housing

options and mass-market retail. Millennials living in different community

types will have different shopping habits and thus different needs from

shopping centers and retailers. In making shopping centers better,

developers, retailers and urban planners must understand the needs of

the community and address those needs in development.xiii

While lifestyle centers are on the rise, they don’t resonate with

Millennials because of their typical tenant mix, which tends to cater to

middle-aged to older women in the much sought after Mass Affluent

group–those with wealth between $250,000 and $1 million. Common

lifestyle centers stores include Chico’s and Coldwater Creek.xiv Yet,

Millennials will visit lifestyle centers for the restaurants. So these types

of centers can expand their Millennial appeal beyond restaurants by

incorporating tenants that cater to this younger generation with apparel

retailers like Old Navy and Victoria’s Secret, unique local boutiques,

movie theaters and gyms.

Two-thirds of Millennials visit big-box stores in power centers at least

once a month. However, e-commerce could have a negative impact

on visits to power centers as these types of retailers tend to offer

commodities like electronics that can easily be purchased online.

TECH-SAVVY MILLENNIALS LOVE TO SHOP ONLINE WITH 45 PERCENT SPENDING AT LEAST AN HOUR ON RETAIL-ORIENTED WEBSITES EACH DAY.XV


HISPANIC POPULATION PROJECTED TO DOUBLE BY 2050

70% 65% 60% 60% 51% 46%

4% 5% 6% 7%8% 9%

13% 14% 14% 14% 15% 15%

13% 16% 19% 23% 27% 30%

2000 2020 20402010 2030 2050

Source: U.S. Census Bureau, 2010

HISPANIC BLACK ASIAN WHITE NON-HISPANIC

Given their small paychecks, Millennials are savvy shoppers always

on the lookout for a good deal and looking to share purchases and

experiences. Millennials are 1.6 times more likely than Boomers to be

influenced by a coupon or promotion. When they want luxury items like

cars, vacations, watches or handbags, they are willing to save to buy

them. Over half (59%) of Millennials plan to save for personal luxury

items in the future, and 28 percent are saving for these items now.xvi

They are social shoppers with 65 percent taking friends or family on their

shopping trips. And for 20 percent of Millennials, a shopping center is

their favorite place to gather with friends. This younger generation puts

a premium on authentic, handmade, locally produced goods–and they’re

willing to pay more for products from companies with social impact

programs.xvii Getting a good deal is a priority, but they won’t compromise

on quality. They want to feel good about what they buy. And, when they

like a product or a brand, they will serve as advocates. Here again,

a thoughtful omni-channel strategy will help keep and capture their

dollars.

Along with the coming of age of Millennials, the U.S. consumer base is

becoming more and more diverse, with Hispanics driving much of that

growth. Hispanic consumers were 16 percent of the population in 2010.

That figure is set to almost double to 30 percent by 2050. Along with

the growth in the Hispanic population comes growth in buying power.

Hispanic consumer buyer power is expected to reach $1.7 trillion by 2017.


HISPANIC CONSUMER BUYING POWER IS RISING

1990 20102000 2012 2015 2017

$1.0 TRILLION

$1.7 TRILLION

$1.5 TRILLION

$1.2 TRILLION

$488 BILLION

$210 BILLION

Source: Selig Center for Economic Growth, University of Georgia, Athens

In order to capture Hispanic shoppers, developers and retailers must

appeal to their distinct shopping needs and preferences. Hispanic

families shop as a unit with Grandma, Mom, Dad and the kids all along

for the ride. Because of this, Hispanic consumers are looking for one

stop that has something for everyone from grocery and medical services

to clothes, entertainment and banking. It’s not just the tenant mix

that’s important in making a shopping center appealing to Hispanic

consumers–these consumers want a place to sit down and relax, a place

for kids to play and a place to attend cultural events.

The Legaspi Company, named one of Fast Company’s most innovative

companies of 2014, has built a reputation by doing just that. It has

successfully revitalized 10 failing shopping centers across the country

by turning them into Hispanic cultural centers, which subsequently

increased foot traffic and income by 30 percent.

One such shopping center is Plaza Fiesta located in Atlanta. The Legaspi

Company filled nearly 240,000 square feet of empty retail space in

the center by addressing the distinct needs of Hispanic consumers.

Boots, quinceañera shops and country-western retailers are popular

tenants in the center. And given the strong religious ties of the Hispanic

community, Easter, Christmas and the Day of the Virgin of Guadalupe

celebrations are held for the community and Sunday sales events don’t

start until 3 pm to avoid conflicting with Mass.xviii Paying attention to

these cultural cues makes Hispanic consumers feel a connection to the

shopping center as an important place within their community, like the

town plazas in their ancestral communities.


C O N S U M E R D E E P D I V EHISPANIC MILLENNIALS IN SAN DIEGONielsen has segmented the Hispanic subset of Millennials living in the

San Diego market for a distinct and localized view of these consumers.

Hispanic Millennials make up 5 percent of the U.S. population–but

they make up 10 percent of the San Diego market. The distinct profile

of this emerging segment of the population is important for shopping

center developers and retailers to pay attention to, in order to effectively

connect with these consumers.

The San Diego market spans many cities that fall into different

community types defined by the Nielsen Demand Institute. In San Diego

proper, the community is much an “Affluent Metroburb,” which tends to

be established, wealthy communities near big cities that offer an ideal

mix of urban and suburban lifestyles. On the other end of the spectrum

are cities like Lemon Grove, El Cajon and Imperial Beach. They are

classified as “Deflated Bubble Communities,” which tend to be ethnically

diverse communities that were hit hard by the real estate bubble and

bust over the last decade. Hispanic Millennials that come from wealthier

households in San Diego proper, Encinitas or Poway, will have different

experiences and expectations than those in less affluent and National

City or Lemon Grove, presenting opportunity to further segment this

generation for a more refined view.

I LOVE THE SMELL OF COMMERCE IN THE MORNING!

– BRODIE, MALLRATS MOVIE


D I F F E R I N G C O M M U N I T Y T Y P E S I N T H E S A N D I E G O D M A

The shopping experience for Hispanic Millennials is epitomized by

the concept of “flaneur”–to value leisure and exploration, they are

connoisseurs of the street–whether actual city streets or shopping

center pathways. They are looking for flaneur when they visit a shopping

center. Instead of dashing in and out of the mall, they enjoy wandering

around stores, looking for new and interesting products to discover.

A day at the mall is a relaxing experience and designing malls and

stores that give Hispanic Millennials the opportunity for leisure and

exploration will ensure that this valuable segment of the population

continues to visit.

When making shopping decisions, Hispanic Millennials care about

their image, and they’re willing to pay extra for products that are

consistent with that image and allow for customization. They are more

likely to consider or purchase products either endorsed or designed by

their favorite celebrities. But they’re not frivolous spenders. Hispanic

Millennials stick to a budget when they shop and get creative by mixing

high and low priced apparel items to stretch their shopping dollars.

Retailers who balance this preference for unique, image-friendly

products with affordability will appeal most to this group.

Transitional City

Place matters. Consumers living in different community types within the San Diego DMA have distinct characteristics that impact their shopping habits.

COMMUNITY TYPE

Vacation + Retirement Destinations

Deflated Bubble Communities

Traditional Suburb

Cosmopolitan Suburb

Affluent Metroburbs

Other


SPEND SHOP DINE

Hispanic Millennials spent roughly

$313 online in the past 12 months,

compared with $500 for San Diego

Millennials as a whole.

Hispanic Millennials spend most of

their shopping dollars on women’s

casual clothes, roughly $122 in the

past 12 months, compared with $114

for San Diego Millennials as a whole.

The general San Diego Millennial

population outspends Hispanic

Millennials in fine jewelry, men’s

casual clothes and men’s business

clothes.

Hispanic Millennials still visit malls to

do their shopping over buying online.

When Hispanic Millennials do shop

online, they tend to buy movie tickets

and used goods.

Top Shopping Centers:

• Las Americas Premium Outlets in

Southeast San Diego

• Westfield Plaza Bonita in National

City

Top Apparel Retailers:

• Victoria’s Secret

• Forever 21

• Wal-Mart

Hispanic Millennials appreciate food–

they enjoy getting creative in their

kitchens and they like to dine out.

Hispanic Millennials have eaten at

quick-service restaurants an average

of five times in the past month and

twice at a sit-down restaurant–on par

with the general San Diego Millennial

population.

Top Sit-Down Restaurants:

• Acapulco

• Sammy’s Woodfire Pizza

• Denny’s

• Round Table Pizza

Top Quick-Service Restaurants:

• Chipotle

• Rubio’s

• El Pollo Loco

• Church’s Chicken

Source: Nielsen Scarborough, R2 2013

H I S PA N I C M I L L E N N I A L S H AV E D I S T I N C T S H O P P I N G H A B I T SH I S PA N I C M I L L E N N I A L S - S A N D I E G O M A R K E T


TAKE THE ELEVATOR TO THE ESCALATOR, RIDE IT DOWN AND START AGAIN! ALL TOGETHERIN THE MALL, I WAS IN THE MALL.NO PLACE BETTER

WEEZER (BAND)– FROM SONG “RADITUDE”


L O C A L M A R K E T D E E P D I V EUNDERSTANDING MARKET AND RETAIL ACTIVITY TO MAKE SMARTER LOCATION DECISIONSGiven the importance of the Millennial generation to the future of

retail, it is imperative that retailers and shopping center developers pay

attention to this young generation in their location decision-making

process. Making location decisions involves significant investments in

time and resources–and missteps are costly. Understanding community

and consumer dynamics is key for retailers and shopping centers to

embed themselves into a community and establish themselves as a key

activity center. However, when this insight is combined with rich location

analytics, retailers and shopping centers can put themselves in an even

stronger position for success. By putting the consumer at the center,

Nielsen can help retailers and shopping center developers make smarter,

more informed location decisions.

Millennials are strong customers for women’s apparel retailers,

especially Hispanic Millennial women. Looking at a women’s apparel

retailer that caters to Millennial shoppers (Apparel Brand Y), Nielsen can

determine the best locations with the best opportunity for success. In

our example, Apparel Brand Y was looking to grow their brick-and-mortar

presence by adding new retail locations within the San Diego market.

With the use of location analytics, Nielsen provided insight into where

within the San Diego market Apparel Brand Y has the best opportunities

for success, while at the same time screening out potentially low

performing spots.


WHERE IS WOMEN’S APPAREL RETAIL ACTIVIT Y IN SAN DIEGO?The first step in understanding locational opportunity is knowing

where retail activity is concentrated within a market. And from all of

the potential places to evaluate, which type of locations or geographies

should be evaluated. Large shopping centers? All shopping centers? Or

street intersections?

Apparel Brand Y had successful locations in storefronts found in

walkable, higher density urban and suburban areas popular with

Millennials, in addition to shopping centers. Because Apparel Brand

Y knew their best locations were not located only in shopping centers,

using block group centroids rather than only shopping centers as a

starting point to evaluate locations was the most relevant option. The

block group centroids were weighted by women’s apparel employment

to provide insight into where this type of retail activity is highly

concentrated. The points on the map below identify where women’s

clothing store employees are located and concentrated.

HIGH DENSIT Y AREAS FOR WOMEN’S CLOTHING STORE EMPLOYEES - SAN DIEGO DMA

STEP 1

Women’s Clothing Store Employees within 1 mile of Block Group Centroid

1 Dot = 10 Employees


WHICH LOCATIONS OFFER THE GREATEST OPPORTUNIT Y?After determining where retail activity for women’s apparel is

concentrated in San Diego, potential locations needed to be prioritized.

Relevant types of locations for Apparel Brand Y were evaluated using

a statistical model that captured the elements most associated with

Apparel Brand Y’s sales history. This model took into account the types

of customers that have shopped at Apparel Brand Y, including Millennial

women, as well as other factors important to the Apparel Brand Y location

strategy including competition, demand, commercial activity, level of

urbanicity and location characteristics (e.g., the visibility of the location).

Taking into account the community context put Apparel Brand Y in a

better position to become an activity center within the community—vital

for activating the surrounding community and driving sales.

This statistical model optimized both the best locations within San Diego

and the expected opportunity score at each location represented by an

index (with 100 being average). The final result gave Apparel Brand Y

the ability to rank order the locations based on the index to help drive

their expansion strategy in San Diego. Locations scoring over 125 were

determined to have the greatest opportunity for Apparel Brand Y and the

map below shows the optimized locations with their indices.

STEP 2

OPTIMIZED PROSPECT LOCATIONS FOR APPAREL BRAND Y - SAN DIEGO DMA

Optimized Prospect Location Store brand Y

Prospect Location125 Model Index Score


A closer look at high-scoring locations showed that they are surrounded

by many Millennial households. As Millennials equate to strong

potential customers for Apparel Brand Y, these prospective locations will

likely drive more Millennial shopping dollars to the retailer.

OPTIMIZED LOCATIONS FOR APPAREL BRAND Y WITH HOT SPOT (HIGH DENSIT Y) AREAS FOR MILLENNIALS - SAN DIEGO DMA


HOW TO TAKE ACTION WITH LOCATION INSIGHTS?Using information about the best prospect locations in the statistical

model (such as the latitude/longitude, information about the

surrounding community and key consumers) Apparel Brand Y was able to

prioritize their search for new locations in San Diego. By having detailed

insights about the locations, and their surrounding neighborhoods

and communities Apparel Brand Y can search for available retail space

around the higher scoring prospect locations that best fit its store type

and strategy, whether it’s in a shopping center nearby, a stand-alone lot

on a major intersection or in a downtown storefront.

STEP 3


W H AT D O E S I T A L L M E A N ?USE SHOPPING CENTERS TO ACTIVATE COMMUNITIES: Despite

advances in technology, consumers still desire a physical place for

communal gathering and shopping centers stand to fill that need.

Shopping centers will be most successful at building engagement and

loyalty among shoppers by respecting the authenticity and character of

the communities where they locate. Make shoppers feel like shopping

centers are a comfortable engaging gathering place and a focal point of

the community.

BRING “LIFE” TO SHOPPING CENTERS AND STORE LOCATIONS: Lifestyle centers have seen the largest shift in share of shopping centers

since 2008, as most of these centers are new developments. Older

shopping centers can capitalize on the lifestyle trend by renovating

and rebranding to emphasize diverse amenities like dining, recreation

and gathering space in addition to retail. No matter what the concept,

consumers want a shopping experience that they cannot get sitting at

home in front of their computer screens.

GROW THE FRIENDSHIP WITH ONLINE AND MOBILE–THINK OMNI-CHANNEL: The consumer shopping experience has transcended reliance

on a single channel. E-commerce and m-commerce are on the rise.

Retailers must have omni-channel strategies that incorporate online,

mobile and brick-and-mortar for a seamless, interconnected shopping

experience for consumers. Examples include, apps that can be used

in-store to check product reviews, online e-commerce sites that allow

consumers to pick up their purchases at their local store, and online on

mobile coupons that can be redeemed across channels.

FOCUS ON EMERGING CONSUMER SEGMENTS: The young, diverse

and urban represent the future of economic growth and thus retail buying

power. Taking a localized, community-based view of these emerging

consumer segments reveals distinct shopping behaviors and attitudes

that should be utilized in designing shopping centers and determining the

appropriate tenant mix. Loyalty here will pay future dividends.

UTILIZE ANALYTICS TO MAKE SMARTER LOCATION DECISIONS: Understanding community and consumer context is key for success,

however, when combined with rich locational analytics, retailers, shopping

centers and even manufacturers are in an even stronger position for

success. Use analytics to make smarter, more informed decisions about

where to locate within a community and succeed with greater sales by

giving shoppers opportunities to connect and engage.


iReuters. “Target among retailers with pop-up outlets for back-to-school.” 2013.

ii U.S. Census Bureau. Service Sector Statistics Division. February 2014.

iii Forrester Research. January 2013

i v Nielsen. “Shopper Sentiment: How Shoppers Feel About Shopping In-Store, Online and Mobile”, June 2012.

v Peck, Joanne and Suzanne B. Shu. “The Effect of Mere Touch on Perceived Ownership”. The Journal of Consumer Research, Vol. 36, No. 3 (October 2009), pp. 434-447

vi Nielsen. “Mobile Shopping Report”. Q3 2013.

vii Nielsen. “An Era of Growth: The Cross-Platform Report” Q1 2014.

viii Accenture. “Who are the Millennial Shoppers? And what do they really want?” 2013.

ix Nielsen. “Millennials: Breaking the Myths” Report. 2014.

x Micheli, Robin. “7 Bold Commercial Real Estate Predictions”. March 24, 2014. http://www.cnbc.com/id/101508251

xi M. Leanne Lachman and Deborah L. Brett. “Generation Y: Shopping and Entertainment in the Digital Age”. 2013. http://uli.org/wp-content/uploads/ULI-Documents/Generation-Y-Shopping-and-Entertainment-in-the-Digital-Age.pdf

xii Nielsen. “Millennials: Breaking the Myths” Report. 2014.

xiii The Demand Institute. “A Tale of 2000 Cities:How the sharp contrast between successful and struggling communities is reshaping America. By Louise Keely and Kathy Bostjancic.” 2014.

xiv Nielsen. “Finding Opportunity Online with the Mass Affluent” Report. 2014

xv M. Leanne Lachman and Deborah L. Brett. “Generation Y: Shopping and Entertainment in the Digital Age”. 2013. http://uli.org/wp-content/uploads/ULI-Documents/Generation-Y-Shopping-and-Entertainment-in-the-Digital-Age.pdf

xvi Nielsen. “Upscale Tech-Savvy Millennials: Saving and Investment Strategies Around the World” Report. 2014.

xvii Nielsen. “Millennials: Breaking the Myths” Report. 2014.

xviii Miller, Jennifer. “The World’s 50 Most Innovative Companies of 2014”. February 10, 2014. http://www.fastcompany.com/most-innovative-companies/2014/the-legaspi-company#6

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http://www.cnbc.com/id/101508251

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http://www.nielsen.com/us/en/reports/2014/finding-opportunity-online-with-the-mass-affluent.html

http://uli.org/wp-content/uploads/ULI-Documents/Generation-Y-Shopping-and-Entertainment-in-the-Digital-Age.pdf

http://www.nielsen.com/us/en/reports/2014/upscale-tech-savvy-millennials-saving-and-investment-strategies-around-the-world.html

http://www.nielsen.com/us/en/reports/2014/upscale-tech-savvy-millennials-saving-and-investment-strategies-around-the-world.html

http://www.fastcompany.com/most-innovative-companies/2014/the-legaspi-company#6


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