Three years ago, Frank And Oak made some noise by opening shops in several Canadian malls. The Montreal-based digital native apparel retailer which specializes in millennial fashion opened stores at CF Carrefour Laval in Laval, Quebec; and CF Sherway Gardens in Etobicoke, Ontario.
“So, when we look at the Canadian landscape, it’s very hard to not go into the mall. That’s where the customer is [and] when it comes to Frank & Oak, we’re a very democratic brand. Our brand purpose is to be where our customer is.”; “What you’re going to see in our stores is a heavy focus on service and the customer, and a focus on the omni-channel experience,” stated Ethan Song, Frank And Oak’s CEO and co-founder, to Marketing.ca.
Emergent, primarily ecommerce-based companies such as Frank & Oak and Bonlook can be great assets to shopping centres. They attract younger audiences and create a buzz around their business. However, these firms tend to lack brick-and-mortar retail experience and need proper guidance when setting up shop. Let’s explore ways commercial property managers can utilize to attract and help these promising retailers.
Some shopping centres are starting to adopt venture capitalist tactics, investing in high-potential retail startups that could become future tenants.
Simon Ventures (which is sponsored by Simon Property Group, the largest U.S. mall owner) has a stake in Dirty Lemon, a beverage startup which opened its first store in September 2018. Interestingly, the downtown Manhattan location doesn’t have any staff, and shoppers pay via text message.
Beyond the monetary investment, Dirty Lemon certainly benefits from Simon Property Group’s extensive retail experience which spans six decades, and can count on the group’s solid advice.
Short-term leases and other incentives
Most retail landlords understand that startups typically require less space than traditional retailers because many of them don’t carry much inventory (or at all for that matter).
Many property managers have created recruiting teams focused on “digital natives” and are using great deals and benefits that were once reserved for more established brands such as Apple for example.
“It’s extremely competitive,” Jim Ward told Bloomberg, who in February was appointed to a newly created position to head up recruiting digital natives for US-based real estate investment trust CBL. “Every landlord out there is looking for these new, exciting concepts.” he added.
In order to land them, landlords are offering leases as short as a year with extension options. Such flexibility can extend to temporary locations with spaces dedicated to rotating pop-ups so the tenants can test innovative concepts.
To further eliminate risk, they’re often offering to help pay for store remodeling and taking a small percentage of sales in lieu of monthly rent. This mix of incentives can help shield both tenant and landlord from over-commitment.
It will be interesting to observe how the relationship between recent entrants into the “physical” retail sector and established property managers evolve over time.
By Phil Siarri