New Trends Encourage New Specialty Retailers
Brands and retailers are seeking to meet the needs of a wide range of consumers.
Bruce Katz

Katz

As a large new crop of specialty retail is sprouting up across the country, spin-offs, wholesale brands and new specialty companies are all seeking to address the unmet needs of a wide range of consumers. This is a boon to shopping center developers and owners, affording new opportunities to differentiate, energize and help reposition their properties, particularly those serving Better customers where much of the activity is taking place.

Whether the impetus for the new specialty concepts is top line growth or new distribution channels, each of them has important demographic and lifestyle trends at its core.

We’ve identified six key trends and illustrated how each is showing up in retail.

Trend #1: The Aging Customer

Baby Boomers are the largest and wealthiest generation in the history of the country and their disposable income is at its peak as their offspring move out of the house and they continue to work. Yet this generation, now ages 42 to 60, often can’t find apparel that fits or is age appropriate. When it comes to clothing, the retail industry has been more focused on teens and “twentysomethings” than on these underserved consumers. If you add in the generation that follows the Boomers — called Generation X, many of whom are now in their 30s and early 40s  — and if you consider as well those older than Boomers, you’ve got an enormous customer base, which deserves much more attention than it gets.

A case in point, not lost on specialty retailers and retail developers, is Chico’s, a women’s apparel concept that has seen remarkable success in the past few years by targeting women 35 – 55 and offering a range of sizes and fits for different body types. By recently spinning-off SOMA, a lingerie and foundations concept targeting the same clientele, Chico’s has moved to capture more business from this neglected consumer.

This year, Gap, Inc. has gotten in on the act with Forth & Towne, a new specialty women’s apparel concept that adds to the overall selection of looks and sizes for this customer. Another women’s specialty concept with a range of sizes for the 35+ year old is Sigrid Olsen, a wholesale brand, owned by Liz Claiborne Inc. and planning a 150-store national chain.

In the area of health and beauty products and services, several new concepts that capitalize on the trend to serve more mature consumers have appeared on the scene. Women’s apparel retailer Coldwater Creek (another winning company catering to this customer!) has developed a spa operation called Coldwater Creek Spa, which it started rolling out nationally in lifestyle centers — venues that are already drawing this more established demographic. Other specialty spa chains are adding units regionally in lifestyle centers, street locations and some malls. These include Burke Williams and Amadeus Spa in California and InSpa in the Pacific Northwest.

In a related (but totally new) service category, a massage therapy concept called Massage Envy is opening up around the country and already has more than 350 units, mostly in community centers. The operators underscore the concept’s benefits in the areas of stress reduction, increased circulation and pain management — all of which clearly appeal to more mature customers.

Beauty concepts that serve a grown-up and affluent customer are also proliferating. One of them, bluemercury, which carries a mix of higher-end cosmetics, fragrance and body care brands, as well as offering some spa services, has opened a number of stores on the east coast. Jurlique, a unique, upscale brand from Australia that is currently expanding in the U.S. and internationally, offers natural herbal skincare products designed to revitalize and maintain the skin.

But mature women aren’t the only target. The Art of Shaving is a budding specialty store concept that offers quality, all natural aromatherapy-based skincare and shaving products for men. The company is expanding in upscale shopping centers nationally.

Trend #2: New Families

As Generation X consumers — now ages 24 to 42 — move into new life stages, establish households and have babies, new shopping priorities — besides fashion apparel — are surfacing.

A number of specialty stores are emerging to serve a new generation of American babies, in the footsteps of others that have debuted in the past few years, such as babystyle and Hanna Andersson. These include both spin-offs and new companies, like J. Crew’s crewcuts, its children apparel brand and Scoop Kids, a miniature clothes version of its New York fashion forward women’s apparel parent, Scoop. Innovative baby store giggle, targeting health and style conscious parents, is building a successful online business and opening units on both coasts and Pumpkin Patch is a fashionable children’s catalog, online and brick-n-mortar apparel retailer from New Zealand.

The new “Gen X” families will also want to check out Friends 2B Made, a novel make-and-dress-your-own-doll concept, spun-off from Build-A-Bear Workshop.

New shopping priorities for these soccer  moms and dads, whether in their 20s, 30s or 40s, will likely include apparel and accessories for exercising at the gym, doing yoga, running or just being on the go. Two concepts have recently made strides in this category: lucy, a women’s activewear retailer expanding coast-to-coast and lululemon athletica, a Vancouver-based unisex active wear chain opening shops nationally and internationally. 

Trend #3: The Graduating Customer

Baby Boomers and “Gen Xers” aren’t the only ones getting older, as college kids graduate and move on to the next stage in their lives. These emerging young adults are part of the generational cohort known as Generation Y, now ages 6 to 23, a group nearly as big as the Boomer generation.

As they begin to enter adulthood, some of the more successful teen-oriented retailers, which have furnished their apparel for years, are seeking to maintain their customers’ loyalty through new spin-offs that address these consumers’ evolving needs.

Many of the key players are in on the act. One of the most successful, Abercrombie & Fitch, has launched Ruehl No. 925, a unisex sportswear concept directed at 22- to 30-year-olds with more sophisticated looks and better quality. American Eagle Outfitters has recently opened Martin & Osa, a new unisex sportswear chain focused on a similar demographic. Urban Outfitters has created Free People, a contemporary brand for women in this age group. Aeropostale has been rolling out its new Jimmy’Z stores, which are more fashion-directed and slightly older in appeal than its traditional teen customer base. And PacSun has launched One Thousand Steps, a shoes and accessories concept focusing on the fashion-directed 18- to 25-year-old crowd.

Non-teen oriented retailers also want a slice of this young adult pie, with Polo Ralph Lauren spinning-off its slightly edgier and more reasonably priced Rugby brand and J. Crew introducing Madewell 1937, a hipper and more moderately-priced concept than its flagship brand. 

Though not a spin-off per se, Metropark is a new concept developed by Orv Madden, the founder of Hot Topic, with the goal — like the others — of continuing to serve this large and appealing demographic as they get older. And wholesale brands are also joining in, with a number jean companies — among them True Religion, Replay and G-Star — opening shops around the country.

Trend #4: The Luxury Bonanza

Purveyors of luxury goods continue to reap big profits, thanks in part to international expansion, but also to the ongoing strong demand from American consumers. The success in this sector is having a significant impact at the specialty retail level. Even department stores, such as Barneys New York and Neiman-Marcus are looking for a piece of the specialty shop action with concepts of their own, namely Co-op and Cusp, respectively. Both department store companies are trying to diverge from their posh image with youthful, cutting-edge offerings.

Other new players come from a variety of sources. Several international designers are seeking to broaden their audience by opening specialty concepts of their secondary and more affordable lines. These include Zegna Sport, CH Carolina Herrera, Michael Kors and Just Cavalli. And several bridge-priced contemporary wholesale brands — such as Marc by Marc Jacobs, Elie Tahari, Diane Von Furstenberg and Theory — are also setting up shop.

One new concept, Anne Klein New York, a Jones Apparel Group, Inc. brand, is leveraging its venerable image to get in on the accessories craze with an upscale footwear, handbag and jewelry concept. Other fashionable accessories brands — such as Lambertson Truex, Mulberry, Furla and Sergio Rossi — are also taking the small shop route.

Since jewelry has always been synonymous with luxury, a new crop of jewelry players should come as no surprise. These include wholesale lines, such as David Yurman and Movado, as well as the expansion of regional retailers like Judith Ripka and John Atencio. Even national retailer Tiffany & Co. has gotten into the fray with Iridesse, a niche concept specializing in pearls.

Trend #5: “Cheap & Chic”

The idea of “throw-away fashion” — bought for its look, not its durability — has resonated even with better shoppers and the frenzy surrounding H&M has certainly not gone unnoticed by retailers and developers. As a result, a new set of budget/moderate priced fashion outlets is bursting onto the scene.

With Spanish apparel retailer Zara already ensconced — though still expanding — across the country, its co-national competitor, Mango, has just begun its American invasion. Soon to follow are England’s Topshop, with a mega-store in New York City and UNIQLO, the “Japanese Gap,” which will also make its debut in New York. Lastly, Mexx from the Netherlands, now owned by Liz Claiborne, Inc., is also starting its U.S. expansion.

Trend #6: New Lifestyles, New Food Choices

This last trend embraces all generations, though the growth of food service companies selling prepared, take-away meals (home meal replacement) seems particularly relevant to more mature customers who have the money, but little time or desire, to spend in the kitchen. One such specialty retailer, Eatzi’s, a gourmet prepared food take-out concept, has been successful in a number of markets. Another, Super Suppers, a franchise operation with over 200 stores, offers customers the opportunity to assemble pre-cut and pre-prepared meals to take home and cook.

Natural and organic food service concepts are also growing, as Americans become increasingly interested in healthy lifestyles. O’Naturals, a Maine-based organic light fare fast casual operator is expanding in New England. Le Pain Quotidien, a New York City-based bakery café, serving fair trade coffee with other products from bio-diverse farms, has 20 U.S. locations and at least that many international ones.

Along those lines, fresh juice and nutritional smoothie concepts seem to be popping up everywhere to challenge market leader Jamba Juice. Some of the most enterprising include Juice It Up, with scores of units in California and going into other regions, Smoothie King of New Orleans, with over 300 units in 30 states, Emerald City Smoothies, a quickly growing Washington-based operation and Robek’s Juice, which is California-based and opening up units nationally.

The country’s ever-increasing ethnic diversity is a demographic change leading to new dining concepts with international mixes and exotic tastes. Cheeseburger in Paradise, an Outback Steakhouse spin-off licensed from Jimmy Buffett, is one of them, offering hamburgers with a Key West style. Another, Wahoo’s Fish Taco’s blends Mexican, Brazilian and Asian flavors in a Hawaiian surf-shack environment. And Nothing But Noodles and Mama Fu’s Noodle House are just two of a number of proliferating global noodle dish concepts.

With this large smorgasbord of new specialty retail concepts in all categories — food and non-food — center developers and owners should be able to have a feast.

Bruce Katz is president of Retail Focus, Inc., a San Francisco-based shopping center consultancy, providing tenant mix planning and market analysis to retail real estate developers. The firm has extensive experience in the repositioning of distressed shopping centers and in evaluating the feasibility for new development.